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How to value offgrid / permaculture property  RSS feed

 
Julie Horton
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We are thinking of selling & I have no idea how to evaluate the property.

I know what I paid for it undeveloped, how much I put into the house & water development... But what is the pasture worth after years of managed grazing? What about the fact that it is designed so things mostly run themselves? What about the amazing abundance from the compost- fed gardens?

There are many benefits an appraiser will overlook...
 
Tyler Ludens
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I think a lot depends on if you are trying to maximize profit, or if you are trying to find a permaculturist buyer.  Many permaculturists do not have a lot of money, so for me, personally, I would tend to sell at or slightly below appraised value.  But for maximum profit, you may want to value the improvements more than the appraiser does.  Only you can know the value of the property to you.
 
Julie Horton
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Thanks for your thoughts, Tyler.
I am not trying to gouge anyone, I am talking intrinsic value.

Do I pay myself & family for our blood, sweat, and tears building these systems?

Even going with the idea of replacement value, do I factor in the fact that in rebuilding the same thing at a new location, I am 10 years older & working w only a 3 yo now instead of a handful of teens in the home like last time round?

It's not so simple. I think only a permie would appreciate the systems, tho.
 
Mike Jay
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Location: Northern WI (zone 4)
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I would value it at whatever you believe the going rate would be for developed permaculture properties in your area.  Good luck figuring that out but I wouldn't set the price low and give away the blood sweat and tears you put into it.  Unless you're "motivated"...

A new permaculturist without much money will probably be looking for a blank slate to improve anyway.  Your market may be the folks that love the idea of permaculture, have more money than time and want to just buy into the dream (or take over as stewards, etc).

The sticking point may be loans and appraised value.  I sold a property that was cute, gorgeous and perfect for just the right buyer.  That buyer needed to want a one bedroom cabin on 20 acres that was too nice for a "deer camp" and too small for a family get away.  We priced it lower than what we put into it but higher than appraised and were lucky to find a cash buyer who didn't need a loan.  Apparently it's hard to borrow $70K for a property that is appraised to only be worth $55K...

People buying hunting properties have a similar issue.  They buy raw land, build a cabin, put in trails, add food plots, hunting blinds, dig a duck pond, etc.  Then when they sell it the appraiser says it's 40 acres at X per acre plus a cheap cabin at $10K.  Unless there's harvestable timber they rarely care about the improvements or utility of the land.
 
Travis Johnson
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This problem also applies to farms too, and more than one seller and buyer has had their dreams dashed of a:

Nice selling price: seller
High appraisal: buyer

Due to a poor farm appraisal.

One problem is with barns. A barely standing barn with a rusted metal roof and barely amounts to storage might appraise for $10 a square foot, where as a nice looking horse table with hayloft, lights and functional stalls might appraise for $10 a square foot. YES you read that right. That is the crazy way appraisals work. It sucks for the seller because they might have invested $20,000 into a barn and it be appraised for $10,000, and it might suck for the buyer because the seller refuses to budge on price, and yet the bank will not finance because the asking price is too high.

The real issue is the crazy way properties are evaluated. An outbuilding is an outbuilding is an outbuilding.

It gets even worse on larger farms. When I calculate up all the tangible items I have on my farm like the sawmills, the gravel pit, the forest resources...really tangible things there is not disputing the commercial value of, the appraisers shrug their shoulders even though they are about 500% off.

I am currently writing a book on taking farms to the next stage, and one of the things I address right off the bat is the idea of selling. It is one of the first things farmers/homesteaders/Permiculturist's think of because they see all the deficiencies of their current place, and think only of all the glorious potential of a new place, but it really is misguided thinking. It is 3/4 of the way into the book before the topic of buying or leasing additional land is brought up, because of one very important reason. Has a farm really reached its full potential? With today's technology, including hoop houses and even urban gardening, I think few places really have. I know on my own farm, I figure I am running around 75%, meaning 25% of the land is actually being under utilized, and that means paying property taxes on acreage I am not getting anything from. I used to think...if only I had my neighbor's land, but the reality is, before this acres is 100% utilized, I cannot morally expect more. Besides the new place has deficiencies as well, and serious developmental costs...in both time and money.

Disclaimer:
I say all this without bias. I bought my farm from my father so he could enjoy retirement, BUT there was no shopping around. This place was all I ever would have; the good and bad. I have to be content with it. Far better to be content with a place now, then sell it, start afresh and be discontent with the new place 5 years from now in my opinion.
 
James Freyr
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Location: Middle Tennessee
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My wife and I are on the other side of the table and we’re looking to buy, and we, like Julie, have no idea how to evaluate a property. I mean, what sort of training and education to appraisers go through to determine a value of a property? It seems like there’s too much grey area for subjective opinions to influence a number. And I could totally be wrong on my thinking this way. Maybe there are standard guidelines, but when it comes to things like comps that have sold recently, what if they were over or underpaid for, thus skewing the data to establish a reasonable value?

We’ve found so far in our search for our forever land to spend the rest of our lives homesteading on that a parcel of nothing but woods is way cheaper than any land that has pasture and/or “tillable” land on it. We’ve also discovered that buying raw land then building a gravel driveway, drilling a well, excavating and building a walk out basement, building a home, installing solar equipment, fencing the land for animals, and building some sort of barn costs substantially more than a property that already has all those things on it. Granted the house on it may be some work, but I see the value in all those other things like the well and the fencing that I imagine the seller will never realize the added value of it. Perhaps that’s just part of it, that things like fencing and the well already drilled will be a cost that the seller eats, maybe not, I don’t know.

I think also the region plays a big part of the valuation. We live just outside of Nashville, and Nashville is a booming economy with substantially more demand than housing supply and anyone currently selling a house here will receive top dollar. The national trend still seems to be that most people are still moving into cities where jobs are plenty and to make a living. I don’t think many people are looking to move out into very rural areas (but we are), and I see that reflected in the properties we’ve looked at, many of them being on the market for 1-3 years or more with no sale.
 
Mike Jay
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We put a well in when we built our last cabin.  It was supposed to cost $2500 but ended up being over $10K.  Of course that didn't affect the appraisal when we sold the place

I guess it's a double edged sword.  With the current lack of appraised value for improved properties, it means you make out when you buy an established property and then lose when you sell it.  Kind of like a perpetual buyer's market.
 
Julie Horton
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Thanks for the great thoughts and commiseration.
Come on over, James, we'll talk!

I bought it for cash & hopefully can sell for cash as well.
 
Travis Johnson
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Here is another good example: fencing.

I have sheep so I have page wire fencing with pressure treated posts, but I figure it has cost me around $50,000 dollars for all of it. That is a lot of money for just some steel wire and tiny stakes in the ground, but that is what it costs. That is in no way reflected upon the appraisal of my farm though.

Here, tillable land appraises for more then woodlot or even house lots; commanding up to $2500 per acre!! The Amish have started moving in though, and any field, they are all over. Anyone who has over 100 acres they have approached looking for them to sell. For regular farmers to cope here, we have resorted to clearing land, and that is one of the reasons I have cleared so much of my own forest back into field (20 acres so far and working on 40 more as I speak). That is one area of my book that I spent a lot of time with because it will inevitably be the next step for farmers; permiculturists, homesteaders, small farmers and large farmers alike. Wood for sawmills and paper mills are being imported into the country now, so the value of woodlots is very low. In fact I calculate my woodlots to grow $25 worth of wood, per acre, per year; yet my property taxes are $28 per acre per year. That is NOT sustainable, but I can raise 10 sheep per acre, per year and sell them for a lot more then $25 in profit, hence the reason my forest is being cleared. In fact, in our area a lot of forest is being cleared. I do not see that changing; here or across this country. The USDA-NRCS just lost three major federal court cases that held up land clearing so that mediocre land can be put into growing food.

In all honesty though, a farmer can make out on an appraisal, but it is like everything in a capitalist society; buy low and apprise high. I have a vast forest and sawmills, so I can convert logs into lumber and build barns for $6.18 a square foot, so it is possible to get ahead on this game, but only if all the stars are aligned just right. It is the same for putting in my septic system. I did that myself, from products from my on-farm gravel pit, so what would have cost me $7000, was only $1500. It can be done, but farming today takes the mindset of, "how can I do this without spending one penny more than I have too." And I do mean penny's, because with farming, it comes down to pennies, not dollars that make or break a decision.

A farmer has to be shrewd for sure.
 
Tj Jefferson
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All prior posters, I really appreciate this thread!

I think there are three kinds of permies in the real estate market. One is probably looking pretty far out of metro areas, has more time to shop around, and is likely looking at sweat equity as the main improvement factor going forward. I am going to call them homesteaders. The second is the hobby permie, looking closer in to a city/large town, with disposable income being the driver. This person may (but not always) be in more of a hurry. I am the second category (unfortunately). Travis would be the conversion permie, who already has a place and is working on changing the farming style. My heroes are these guys, Gabe Brown if you are reading this you are a legend. I renamed my kids after you. But they are generally not looking in a new area, and looking maybe for an adjacent place to expand if it fits economically.
I am currently writing a book on taking farms to the next stage
I want an autographed copy as soon as it is available. I would be willing to edit or assist in any way.

If I was selling to a homesteader, I would assume I would be more likely to get someone to steward the property better and value my prior sweat equity, but would expect to get less than with a traditional buyer. If you have the time to be picky you might be able to find someone who has a track record that suggests they will carry on your work.

If I was selling to a hobby permie, if you have time you may be able to find someone who is willing to pay some premium for prior work. I have friends who are selling far away and moving to the east, and they are paying a small premium over the normal land prices because it has been rotationally grazed for years, and much of the infrastructure is in place. But they are paying cash, and it is a small premium.

Conversion permies might be interested but they would have to be your current neighbors, this seems unlikely.

When we bought this place, we did so because it already had improvements we value. I would calculate the improvements alone are worth 120k. However, the appraisal says they are worth about 18k (for outbuildings, in excellent shape, that cost the original builder 50k). They do not value the geothermal, greenhouse, or energy efficient construction at even $1. However we chose this property specifically despite other desires because of these factors, because we effectively got them for free! I feel bad actually for the original builder because he lost a modest fortune (in my book anyhow). If we had to sell this place, I would expect to lose money because the further improvements that I have done don't show up on an assessment either. I am assuming the fencing is a complete loss at sale, most people don't have any idea how much that costs, I know that was the first thing I looked at, along with the soil. My wife (who made the final call with me in full equity) always looked at the kitchen first, then bathrooms, etc. She didn't even remember which places were fenced!

So your improvements are unfortunately unlikely to bring in much at sale, but they may sell it faster to a hobby permie. Selling to a homesteader probably would be financially the lowest return but has some potential moral payback.  
 
Julie Horton
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I like the distinctions in permie buyers. A conversion far-neighbor made an offer last year when I was not selling (drat the irony!)

The fact is, we are selling bc this geographic and socio-cultural area has become a deal breaker for my family. We ARE leaving. I guess that makes me a "motivated" seller, hah!

Didn't remember which were fenced?! She would if she spent Saturdays w a teenage son and a post hole digger!
 
Gail Gardner
Posts: 114
Location: SE Oklahoma
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Travis Johnson wrote:Here is another good example: fencing.

I have a vast forest and sawmills, so I can convert logs into lumber and build barns for $6.18 a square foot, so it is possible to get ahead on this game, but only if all the stars are aligned just right. It is the same for putting in my septic system. I did that myself, from products from my on-farm gravel pit, so what would have cost me $7000, was only $1500. It can be done, but farming today takes the mindset of, "how can I do this without spending one penny more than I have too." And I do mean penny's, because with farming, it comes down to pennies, not dollars that make or break a decision.

A farmer has to be shrewd for sure.


The same thing is true for horse properties and real estate agents never seem to know the answer to any question you really need answered like what kind of soil, how many rocks, what type of fencing, etc.

Hunters are driving up the price of land in SE Oklahoma. They're paying $1500-$2000/acre for a hillside covered in trees with no fences, ponds, utilities - sometimes not even any access. Strangely, that type of land seems to sell faster than places with houses on them. Hard to figure.

The real question is how to find a man like you who could use someone to help do the work.
 
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