More than 40 years ago, Henry S. Miller Jr. allowed me the honor of associating as a broker with the then predominant brokerage firm within Dallas-Fort Worth. The only opening was as an associate in a new group within its land division, working for Buddy Archer, a brilliant technician who was very creative in new types of financing land joint ventures.
Having just separated from the Air Force, I appeared daily in my BX-purchased, lime green, polyester, bell-bottom suit. I had the good fortune to observe Buddy, the best in his field, and to occupy a desk in the hall next to a rookie quarterback for our local pro football team.
The market’s desire for speculatively financed land deals was strong. A total of 10 years prepaid interest was deductible and desirable to many sellers. Young, naive, hungry, I dove in and was bountifully rewarded. I bought a Jim Kienest house, had a baby boy (well, Jeri, my wife, did), and got the first Datsun 240 Z. The Rolex would come in a later up cycle. Life was good, working with the now back-up QB for that same local sports team.
In 1974, the tax laws inexplicably changed, retroactively invalidating all those wonderful tax shelters we had grown to love. I mean, who could have known? The desire for land approached the level of contracting West Nile. During the next three years we restructured our holdings, converting interest to principal where possible or returning the title to the sellers, neither of which produced any minor form of living expense. The nice house was exchanged for more humble living quarters, the boy forfeited daycare, and posting for adoption was not remote, and the Z was converted to an older Mercury Station Wagon.
The professional athlete had moved on to office buildings, a move I tried to tell him was a huge mistake. I mean, really, who could have known?
The next 35 years went on to produce similar cycles, some higher, some lower, particularly the late 1980s, which I like to refer to as the “F”ing years. You remember: “F”DIC, “F”SLIC, “F”ADA, and, of course, the “F”ing RTC. (Oh, sorry, no “F.”)
One common observation, however, has never been violated. If a land investor applied good judgment in acquisition price, location, and was well financed, he would enjoy a profitable experience over time. That investor will only be successful when he sells to someone who wants his asset more than he does. If his financial situation dictates he must sell, his opportunities dissolve. Expect and be prepared for your land investment to finance your yet-to-be-born grandchild’s college education, and wait to be pleasantly surprised in the interim. (Note: Review Mr. Perot’s purchase of 20,000+ acres at Alliance and 2,000+ acres in Legacy, then check his ranking on Forbes’ annual list.)
If the Fed is even close to its predictions, Dallas-Fort Worth will grow by more than 2 million people over the next 20 years. These people must have a place to live, shop, play, work, and drive their Datsuns. Despite what most developers think, they cannot all move to Uptown, West Village, or Sundance Square. Job growth will transition to economically attractive areas, and employees will follow.
The 10,000 or 20,000 thousand acres this growth will absorb will not be inside LBJ or I-820. As an early mentor used to say, “Under all lies the land.”
The real estate market will cycle again and again. Be patient and perceptive. Just because it is cheap doesn’t mean it is a good value—unless it is in Uptown, of course. “Buy land and go west young man; they aren’t making any more of it.” (OK, mixed metaphors, but applicable.)
Robert Grunnah is president of the Investments Division at Henry S. Miller Brokerage LLC. Contact him at firstname.lastname@example.org.