The Real Return on Investment

THE REAL RETURN ON INVESTMENT

WHY LAND OWNERSHIP SHOULD BE A SHORT-TERM GOAL

STORY BY BLAKE FARRAR, WHITETAIL PROPERTIES | PHOTOS BY WHITETAIL PROPERTIES

If I’ve heard it once, I’ve heard it a thousand times, “When I hit the lottery, I’ll be calling you.” Because many folks don’t think land investment is a real possibility for them, they don’t give it enough thought or start considering it soon enough. If land ownership does not have a place among your short-term personal goals, it should. Land gives us far more than a return on financial investment.

Land ownership offers different benefits to different people and there is no one-size-fits-all prescription. Every individual has different hopes and dreams related to land ownership, and every property offers something unique. Some people are motivated strictly by the financial benefits of land ownership, while others are motivated by the personal-use benefits.

I think many people may miss the boat by viewing land ownership and investment too narrowly. Their perspective makes perfect sense. Land ownership may seem so daunting financially that many people perceive it as dream and never add it to their list of practical goals.

But what most don’t realize is that by viewing land ownership through that narrow lens, they may be unknowingly sacrificing many of their personal goals along the way. Maybe the most unique and rewarding aspect of land ownership is that it doesn’t fit into one box. Ultimately, it aligns with both personal and financial goals, creating an extremely rewarding return on investment. When land ownership is viewed within that framework, it becomes far more important financially and personally—and worth strategically planning for in the here and now.

One of the biggest privileges we have at Whitetail Properties is helping our clients identify and achieve their individual goals. Unlike most investments, land ownership is much more than a simple financial transaction and comes loaded with a multitude of additional personal benefits beyond any financial return. One of the most tangible benefits is that landowners can see their investment appreciate over time and enjoy using it, for outdoor recreation, such as hunting, fishing, or for a getaway where they create memories with family and friends.

“Time spent in the outdoors with family and friends is truly priceless and the return cannot be calculated,” said Justin Glass, Northeast Texas agent for Whitetail Properties. “The memories made as a family, the lessons learned and taught through working the land, and the peaceful seclusion that land offers far outlasts any financial return, in my mind.”

Next time you check on your investment account, evaluate how that experience makes you feel. It can be quite a rollercoaster. When our clients go check on their land investment, I suspect they feel quite differently.

As East Texas Land Specialist Aaron Ablondi said, "Instead of an account balance you can look at on a computer screen, land is an asset you can actually physically enjoy using."

I had one client tell me something years ago that I’ll never forget. While I was helping him work cattle on his ranch, he said, “You know why I like land and working cattle?” After a dramatic pause, he said, “…because they talk back less than people!”

I bet we all can relate to that statement. And I share it because it makes the point that every person experiences and achieves different personal goals by owning land.

Day-to-day fluctuations in the market don't change how you can use and enjoy the land every day

—AARON ABLONDI

For me, a ranch has always been more than just a destination to enjoy. It’s the epicenter of our family’s life. It’s where our extended family gathers for holidays. It’s the place I can better experience God’s creation with my wife and kids and savor the adventure of the hunt. Our ranch is a training ground for all kinds of life lessons that are better learned and taught through experience instead of theory. I can’t really quantify these benefits, but they certainly mean more than words can describe or money can buy.

From a purely financial perspective, owning land is less susceptible to market volatility than any traditional investments in your portfolio, as demonstrated by 2022’s stock market roller coaster driven by inflation, interest rate hikes and recession fears. In contrast to the volatility of equities, land prices have steadily appreciated over time, said Ronnie Strong, Whitetail Properties chief operating officer.

"Day-to-day fluctuations in the market don't change how you can use and enjoy the land every day," he said. "The lower volatility and long-term appreciation of land can provide greater comfort from a psychological standpoint and avoid a common motivation with financial investments to sell when there is a downturn in the market."

Ablondi added that land values tend to hold fairly steady even in a perceived market downturn. "You don't typically see big swings in value, so if you had to sell due to a market downturn, you are less likely to experience your asset being worth significantly less," he said.

Land ownership also offers the opportunity to improve and thereby increase a property's value. This could include clearing some brush and installing hunting blinds and feeders, developing lake sites, timber management, installing an attractive gate to provide a positive first impression, or simply cleaning up the acreage to make it more appealing to a future buyer.

"You can increase the value by spending relatively little money," said Dan Perez, a founding partner of Whitetail Properties. "Traditional financial investments are totally dependent on the market. You can cross your fingers, but that won't help. There is nothing you can do to improve the value of that investment."

Along with the many advantages of owning land, spreading risk by having a balanced portfolio is a sound long-term strategy.

"When you buy stocks and bonds, you're buying a piece of American business," Strong said. "While stocks can give strong average returns over long periods, when you blend land and traditional financial investments, you get less volatility and higher potential return over time."

Calculating for your total return on investment with land must not be limited to dollar-for-dollar financial returns, you must also factor in the experiences and memories that are created by owning land. When you can achieve wins in both personal and financial categories with one investment decision, I believe it’s safe to say that investing in Texas land has more potential total return than any alternative.

As you are considering your financial and your personal goals, land should move higher and higher on the list, much earlier in life. Everyone can dream of that “lottery” ranch, but a 50-acre slice of heaven may just meet your needs right where you are—and give you the jumping off point to start aligning personal and financial goals much sooner.