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8 Ways to Cover Your Holding Costs on Land

Posted: September 2, 2009 at 12:47 pm No Comment

Timber and Meadowland to Cover Holding Costs on Land While the holding costs associated with bare land are pretty minimal compared to most types of real property, if you gather up enough of it you still may need a good way to cover the holding costs of your land.  Primary costs are typically property taxes, but could also include any principle and interest on a note or mortgage associated with the property, as well as any insurance you have.

  1. Sell Timber – Timber sales on your land can provide great amounts of income on your property, depending on the size of the land and quality of the timber.  Not many people realize it, but you don’t need to clear cut a property just to harvest the trees.  A “residential cut,” for example, involves removing the highest valued trees on the property and thinning out the surrounding forest while keeping the property visually appealing for future or current residents.  If you are living on the land, renting it to a tenant, or if you purchased a large tract of timberland to subdivide and resell, this could be a good option for your situation.  Check out these quality posts on valuating and selling timber at LandThink.com for more information.
  2. Lease to Farmers – If you have quality irrigated farmland this may seem a little obvious, but even property with large fields may have the potential for wheat or other crops that fare well on dry or unimproved land.  If your property is bordered by ranches and is large enough, you could also consider leasing it for grazing land.  Returns on farmland tend to be less than what you’d find with more active investments, like leasing a building or home, however they require much less work in turn.  Be sure to consult a lawyer with experience in farming leases before venturing too far into farm territory.
  3. Lease to Hunters – Plenty of hunters will pay good money for the rights to hunt a property year-round, especially if your land comes with additional hunting rights, such as deer tags.  This can be done on properties as small as a few acres, and on larger pieces of property the acreage can be split into multiple hunting leases to make each lease more affordable to individual hunters.  Also, consider non-monetary options as well for your lease.  You may find a hunter who is also a carpenter, willing to do $1000 worth of labor on your property, where he may have only been willing to pay $500 for the hunting rights.  Creative solutions like these can be mutually beneficial to both parties.  Also, be sure to consider your state’s liability laws when entering into a hunting lease.  No amount of hunting income is worth the potential loss from a lawsuit.
  4. Rent to Vacationers and Hunters – In addition to leasing land to hunters for longer terms, consider renting the land on a shorter term, such as week-long and weekend visits.  This approach requires a bit more marketing and active management, however if you have the time it will also produce the most value from the property.  A property with lakefront access and a two-bedroom home or cabin could be a welcome vacation for a family or hunting party.  Keep some decent furniture and cooking equipment in the cabin, have a lawyer draft a rental agreement for you and advise you on any other considerations, and put up some advertisements online in free locations, and you can probably attract a decent amount of renters.  If you decide to take this path, consider targeting a niche.  A vacation home marketed to both families with small children as well as deer hunters may be a turnoff to both parties.  Each type of renter wants to know your property is great for the activities they’re looking for, and trying to attract every type of renter could produce less results than focusing on one group of potential customers.
  5. Sell Carbon Credits – This may be one of the least lucrative methods of monetizing a property, however on land with environmental restrictions, unimproved land you intend to hold for the long term, or in combination with others sources of income from the land, you may be able to make enough to make it worth your time.  This article at Oregonlive.com presents a good assessment of how carbon credits work and how much they may be worth to you.  Look into the Chicago Climate Exchange for more information on how to get involved; they are the largest market for carbon credits in the U.S. at this time.
  6. Sell Oil or Mineral Rights – There are volumes upon volumes that could be written about the benefits and perils of selling oil and mineral rights on a property, but suffice to say that consulting a lawyer specializing in oil or mineral rights is an absolute must.  To those willing to venture down this path, however, there may be a large payoff depending on how the sale of the rights is structured.
  7. Sell Solar Energy – This one is a little more applicable to larger plots of land, however, if you are in an area with a high cost for energy utilities, you may be able to profit by installing solar panels on your buildings or in an open area, connecting to the power grid, and selling the energy back to the utility company.  While costs will be prohibitive for many properties and different areas, this is certainly something to look into.  The cost of solar panels will continue to drop in the near future, and energy prices in the long term don’t seem to be getting any cheaper.
  8. Rent to a Business or Start Your Own – There could be a local pet-lover wanting to start a dog-sitting business, or perhaps a horse-lover looking for a good place to keep a stable and rent to other horse-owners.  Or, even better, perhaps that person is you.  Leasing your property to another business, or starting a business of your own is a great way to utilize your property.  Though starting your own business is easily the most time consuming of all of the methods mentioned, it also carries the greatest potential payoff.  Be sure to carry proper liability or umbrella insurance coverage on the property, and have a lawyer draft the lease with very clear indications of what is being leased, what is expected of the lessor and lessee, and when, how, and for how long payment will be structured.  If any buildings or personal property will be used on the premises, be sure to clarify whose responsibility it is to purchase and care for this personal property, and who owns it if and when the lease ends.

Hopefully that gives you more than a few options on ways to pay for your land.  On their own, most of these methods will give you a little pocket money to cover some expenses.  However, the real power comes from combining these methods simultaneously.  Be creative and do your due diligence in any situation, and you’re sure to find a money making idea.

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