A few weeks ago I purchases 1 acre of farmland, not because I was actively looking for land to purchase, but because I stumbled upon an opportunity.
Years ago I wrote an article titled, “The Best Financial Advice I Received and How I Use it Practically” and in the article I said that my number one financial advice is “to convert an opportunity into results”.
The 1 acre of land that I purchased is just a few blocks from my house. The owner purchased the land several years ago with the adjacent house. About two years ago the owner moved to Washington and sold the house.
Knowing this history, I called the realtor last summer and asked how much the land was selling for. At the time, the owner wanted $20k with an unknown assessment for a new road project bordering the property. At the time I told the realtor that the unknown assessment could be up to $50k and that the owner should consider selling me the property for $5k. He declined my offer.
Then, about a year later after the new road project was completed, the owner who has now been living out of state for over two years had become motivated to sell. The realtor sent a letter to the neighboring houses saying that the price has dropped to $5k.
Within a week I got a hold of the letter and called the realtor to verify. It turns out that the new road assessment was $7.7k and financed by the city on a 15 year loan at 5.5%. The realtor said that a few of the neighbors were considering but none had yet made a commitment. I spend some time and did some research to understand the requirements of the standing water on part of the land along with the city taxes. The city tax is $134 per year, because it is not homesteaded. That is very low.
Everything checked out and with a few weeks I purchased the land. This is a great investment that will someday be sold for much more than I paid.
Until then I have many uses for this land, primarily to expand my garden, which I have calculated to be worth $7.85 per square foot.
A 420sq garden, like the one I currently have in my yard, is worth 420sq x $7.85 = $3300. In two years a will have gained more than I paid for the property - minus the road assessment.
Real-estate is a great investment option, but it’s all about timing. I’ve read the ‘Rich-Dad Poor-Dad’ books and I understand the secret is in finding good deals or desperate sellers, but most of the time that is a job in itself.
Five years ago, when I considered investing in real-estate, I looked at the housing market and saw a major bubble, which is why I stayed away. But now that the housing market is clearly in a double-dip and desperate sellers are beginning to find me rather than me having the find them, I’m reconsidering.
Over the next few years I will continue to look for good deals like this one that I stumbled upon. The critical factor in being able to quickly take advantage of a good deal by having the cash in hand and that takes a willingness to save rather than spend everything on consumption.
This is a great time for the frugal to take advantage of a massive wealth transfer as the financial collapse continues to unfold. My investments in the next few years will likely be of historical importance over my lifetime.