Need A Place To Hunt? Buy It!

Daryl Kirby | April 6, 2006

What does your hunting future hold? For those who love the outdoors, it’s an important question.

The future of hunting in general is cloudy because of a variety of issues. But specifically, the future of your hunting may be cloudy for one primary reason — not having land to hunt. If a lease is where you spend your fall weekends, first count your blessings that you still have that lease, and then you’d be prudent to look ahead to where you expect to hunt five years down the road.

A growing number of hunters in Georgia are putting their hunting futures into their own hands by purchasing land. For most of us, the idea of buying land seems impossible. A big down payment and a monthly note just aren’t in the budget. Others, however, are exploring options that include partnerships, splitting a tract of land, and buying into hunting-based communities — like a country club for outdoorsmen.

Rural Georgia is in the midst of a modern-day land rush, driven largely by investors who buy a tract, keep it for a few years, maybe split it up, then sell the land for what is often a handsome profit. Most of those folks then put their profits right back into another tract of land and repeat the process, taking advantage of the 1031 property exchange tax laws, where taxes on real-estate profits are deferred when the money is reinvested into another property.

Also getting into the land-buying game are hunters. Some are both — hunters and investors — who are parking their money in land instead of other investments. Stock in IBM doesn’t give you a place to plant food plots and apple trees and chase turkeys. According to investment newsletters, the return on land in this state has not only been a safe investment, but with a little savvy and patience, the rising value of the right tract of land would make the best Wall Street stock picker green with envy.

The ads in GON each month are a testament to the market for land in Georgia.

“Just counting up what is advertised in GON, there are 81,000 acres for sale — just what’s listed in the magazine,” said Tom Bell, who owns Town and Country Realty in Sandersville and is one of 28 rural-land realty companies that currently advertise in GON. The reasons that so much rural land is for sale are varied, according to Tom, but timber companies selling out is high on the list.

Dwight Jones of Macon works for The Management Advantage as a consultant in the recreational land and timber business, and he says he saw Georgia’s modern-day land rush coming.

“In my travels relative to the outdoor industry, I started noticing that in a lot of other states the lease rates were going extremely high. I’d been surprised that it wasn’t happening in Georgia, and I’ve been preaching to folks that it’s coming. The Weyerhaeuser sale was the nail in the coffin,” Dwight said.

The loss of tens of thousands of acres of timber land no longer available for lease combined with a bulging population and subsequent development that is gobbling up former hunting tracts means the end of $5-an-acre leases. With fewer tracts available for lease, the prices have naturally gone up. There has been a fear of hunters being priced out of the lease-land market. That’s being replaced — or at least compounded — with a fear that even the folks with money to spend won’t find a lease to spend it on.

“Georgia is now pushing 9 million people, and it won’t be long before we have 15 million. Land values are going to continue going up,” Dwight said.
While that might spell trouble for folks wanting to find a hunting lease, it spells opportunity for those who want to buy their own little piece of heaven for hunting — and then make a tidy profit down the road.
Without a doubt, the least complicated and most profitable way to buy land is on your own. It will also bloody your bank account the most. Some lending institutions are becoming more creative in financing raw land, like the folks Tom Bell uses who offer a 15 percent down payment, but the standard is still 25 percent down and a 15-year note. For a 100-acre tract that sells for $2,500 an acre, that’s a downpayment of $62,500. Yikes! A bit more than most of us have sitting in the old savings account.

Don’t throw up your hands — there are options. The value of timber is a factor. How many years before you can cash in on a managed timber cut? A select cut or even a clearcut might not be what you have in mind, but at least you’ll own the dirt.

An option that I took was to buy a small, 25-acre tract in a rural area, and we built our home on it. We had to float the land note for about 18 months in addition to a construction loan, then we rolled the land note into the mortgage. Do I have a great hunting tract combined with a perfect home?

The tract is full of deer, but it’s small; it is awesome to step off the porch in camo and walk to a stand, but I only have two, maybe three legitimately good locations for a stand. I can put two or three does in the freezer most years, but I’m not going to be successful managing for quality bucks on 25 acres. Seeing wildlife from the kitchen is great, but when you live with wildlife it includes rattlesnakes and armadillos. Everything considered, the pros of combining our homesite with a small hunting tract far outweigh the cons.

If working a deal for your own tract of land, large or small, isn’t an option, then you might want to consider a partnership with one to several like-minded outdoorsmen.

“As land prices go up, it is going to be harder and harder for individuals to get a piece of property,” Dwight said. “The trend is going to move more toward group efforts.”

Many of us have been hunting with the same folks for years, sinking yearly chunks of money into leases — not to mention money on improvements for things like food plots — on land that may or may not be available next hunting season. Why not get your best hunting buddies together and buy a tract of land?

“Joining a group of friends or business associates with a common interest in securing a piece of private hunting land is an option — the buying power of a group like this is larger, and more acreage can be acquired,” said Lindsay Thomas Jr., QDMA’s publication director who wrote the sidebar on page 17. “The disadvantage is that you share ownership and decision-making rights, and it is a rare group of friends who will always see eye-to-eye on questions of use, improvement and management of recreational land. As the old saying goes, ‘a partnership is the hardest ship to float.’’

Dwight has consulted in several partnerships among hunters who bought land.

“In partnerships, things can go awry pretty quickly,” Dwight said. “Everybody is different, chemistry is different, and unfortunately, my experience with partnerships is they are a match made in heaven, or an absolute nightmare. I just don’t see much in between.”

The key, he said, is not to trust friendships or emotions to carry a partnership, but to have a detailed, written, and mutually agreed upon operating agreement — along with professional advice from an attorney and an accountant.

“I’ve seen a good number of partnerships where folks go in on a handshake deal and don’t have an operating agreement. They may have contrary goals, and they can get sideways pretty quickly. That leads to a divorce. A judge is going to tell you how it’s going to be divided, and you may not get what you want. I want to stress that a lot of people go about this emotionally. They have a long-term buddy, and they just feel that’s going to hold over into this tract. People’s circumstances change, people change, and all of a sudden you’re adversaries. If something like this tract is the major asset for an individual outside of their house, that’s a scary place to be. For a nominal amount of money, you can set it up a different way where that’s just not a concern.”

Dwight recommends forming an LLC, or Limited Liability Corporation, which limits your personal risk if there are financial problems in the future, and the LLC should include an operating agreement.

“There are a lot of reasons for an LLC being the No. 1 option. When you look at more traditional partnerships, like a C or S corp — they are not as beneficial from a tax standpoint,” he said.

Dwight said that expenses from land improvements are being claimed by some on LLC tax returns, but he also stressed that a good accountant be consulted.

“I think that reasonable efforts of wildlife management — and this is personal opinion — I think there’s definitely an argument that it increases the marketability of the land. If you take two tracts that are contiguous to each other, both clearcut, and one guy is doing nothing, versus the guy next door that does reforestation, food plots, supplemental feeding, the whole nine yards — from a sales standpoint, that guy’s property is more marketable. I think I could make an argument in tax court that these expenses are reasonable and increase the marketability of the property.
“An LLC is clearly the simplest and cleanest. It’s inexpensive to set up. A qualified attorney will set one up for $500 to $1,000. In the LLC, there’s an operating agreement, and in that you want to cover all the bases of the good, the bad and the ugly,” Dwight said.

The operation agreement should clearly define the goals of the partners, how expenses will be handled, how long everyone expects to keep their holding, how the partnership will be handled if someone wants out — a myriad of details should be considered up front.

“An operating agreement is almost like a prenuptial agreement in a marriage. A good operating agreement and club rules concurrent with that in an LLC agreement keeps everybody above board. Have a general-dispute clause that says, ‘In the event we get sideways, here’s how we’re going to settle it.’

“I would suggest that the group collectively form a vision or mission statement for what they want this property to do. Are they interested in just deer? Do they want to maximize timber management? Whatever it is, come up with a vision or mission statement that everyone can agree on that is what their end result should be.

“They also should qualify up front, what kind of holding period are they looking for? Is this something they want to pass on to their grandchildren, or is it something they want to hold for two years and get out of it. Of course particulars about outs should come with the flexibility that if something catastrophic happens, it’s a new ball game. What kind of circumstances would trigger a sale? For example, if one of the members were disabled and needed to get out… typically what you have is a right of first refusal for the remaining members that they can buy the departing member’s interest.”

There is such a thing as a single-member LLC which is where one member owns 100 percent of the interest. LLC doesn’t have stock like a corporation does, it has percentage of interest. Dwight said individuals who own a single tract of land should at least consider forming an LLC.
“I’m not an attorney, but I would say that any individual that buys a tract and holds it individually — that’s not the most intelligent decision they can make. For a nominal amount of money they could form a one-man LLC.”
If you spend $400 and have an attorney do a one-man LLC, then if something goes wrong, you wouldn’t have liability on everything you own, like your home, but just on the assets of the LLC.

“Get an attorney and a CPA, get professional advice,” Dwight emphasized. “It goes without saying that any individual should seek proper legal and accounting advice.”

An attorney who has worked on just these kinds of land partnerships is L. Andrew (Andy) Smith of Valdosta, and he echoed much of what Dwight has said.

“Folks are either going to do a partnership right, or I don’t fool with them, because there are too many wars that come out of these things,” Andy said. “The biggest mistake is guys get together and want to be buddies in this and be informal. They go out and buy land and never really talk about what the rules are going to be and what they expect to do financially, and then things come up — more money is required than what they thought or somebody abuses the privilege, and that usually causes a split in the friendship and a legal battle over it.”

Andy said to have a written set of rules and expectations, and a financial plan so you know what kind of money you’re talking about going in.
“What you can have a problem with is if you have one guy buying it for investment, and one guy buying it for hunting and fishing. The investment guy is going to pop up some day and say, ‘We need to sell so I can get my money, or y’all need to buy me out.’ That can be a problem. Everybody should go into it knowing if the property is for investment or recreation. The ones I have done have buy/sell clauses in their agreement, so if somebody wants to get out, the only way to get out is for the club to buy them out. They can’t transfer it to just anybody.”

Options other than forming an LLC include splitting the deed on a tract with a partner, or actually surveying a tract and splitting it into two or more separate tracts.

Surveying a tract and dividing it into separate deeds is a better option than an LLC — in theory — but the limiting factor is that there are always some features or a feature in the overall tract that everyone wants.

Greg Grimes of Ball Ground recently went in with one other partner and bought a hunting and investment tract in Kentucky.

“I’m two-thirds owner on the deed, and he’s one-thirds owner,” Greg said.
“We co-signed the loan. That part was pretty easy. The banker and the attorney were easy to work with. My goal is to use the money I make on this tract to buy more land. As long as you can get the right partner, it’s an awesome way to go.”

Greg said to find a realtor that specializes in rural land.

“It’s very, very difficult to do it on your own. You’re trying to find the diamond in the rough. I went on the internet and tried that, and I spent a lot of time and didn’t find anything. Auctions are another possibility. Sit in on a few and get a feel for them, and have a real good idea of what land is going for in that area.

“The key is, make sure you can make some money on it. Don’t think only about hunting. Is it on a county road, or do you have to go through an easement to get to it? Think about things like that.

“Looking back, I’ve been in leased land since I was 13. If we had just been organized, we could have bought that property for all the money we spent,” Greg said.

For some folks, buying land seems out of the question. Before you write off the idea, take a look at the options. There are ways to cut the costs, share the costs, or even generate some income through timber that can help pay the costs.

Or, you may be putting investment money elsewhere that could serve two important purposes — make you money, and in the meantime provide you and your family with your own little piece of heaven.

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