Investing in Land

Last August 1 in Financial Planning magazine, Morningstar Investment Services director of research William Harding encouraged advisors to design a different mix in their individual investors’ portfolios.  In confronting a difficult stock market, he suggested, it was time to give thought to alternative investments that, in Morningstar’s world,  “includes nontraditional asset classes such as commodities, real estate, infrastructure, private equity and venture capital”

Good advice and well in advance of what became a deeper market trough.

In Harding’s view, real estate “can include raw land, commercial real estate and residential real estate…”  And there is no better, long-term investment than raw land.  Fact on the ground have shown him to be right.

One to look at is the payout just announced by Walton International on one of its Canadian properties.  In any market, a better than 13 percent annual compound rate of return is worth notice.

A “Special Investor’s Issue” of Fortune Magazine is out this week with a word about land from Lord Jacob Rothschild.  He says:

“If you look at the macro picture today,” says Rothschild, “we have an extraordinary situation. If you take governments’ printing money as fast as they are, borrowing as fast as they are, and bailing out white-elephant corporations, we’re surely going to have an inflationary situation fairly soon.” In that kind of environment, owning a hard asset like land is a good hedge.”

Here is a link to the full story.

In any new venture, like this blog, it is important to find allies — or at least people who are thinking along the same lines.  It is one thing to be on the leading edge, but quite another to be out there along on what cynics might call the “bleeding edge.”

As media and analysis moves from print to the web, there is a growing universe of information and advice to be found.  On a recent trip, I found this.

In an article on the link between land and financial returns, it says, in part: “Investing in raw land brings its best return when the land lies along a path of expanding economic growth and prosperity. But such expansion is not guaranteed, and its path can often change directions. Increases in land value are virtually always dependent upon the land’s future use, economic growth, and demographics, which all boil down to the fundamental law of supply and demand.”

So, while every one can see the land spread out before them, the best partners are those who best forecast its “future use.”  A company with which I am affiliated has a pretty good model and track record for such foresight.   Who would you nominate?