Friday, September 30, 2011

Investing in Texas Hill Country Ranches

There is no better investment than a Texas Hill Country ranch. Data from the Texas A&M Real Estate Center for rural land in the Hill Country counties Bandera, Blanco, Kendall and Kerr reflects an inflation-adjusted 588% increase in the past 40 years, we have data for (1969-2009) which averages nearly 15% per year with values doubling every 6-7 years. With that interest rate, not including inflation, investing $150,000 would be worth over a million dollars of today's money 50 years later. Even in the past ten years that we have data for (1999-2009) with the dot com bubble and the current recession, there's been an over 90% increase and a 50% increase in the past five years (2004-2009) in rural land values in these Hill Country counties. Compare that with today's 30-year treasury bonds yielding around 4% per annum, 1 year bank cd's at around 1% and 0% inflation-adjusted treasury bonds issued for the first time ever in 2009 and you come to fully appreciate the incredible investment ranch land is for the smart investor.

Now take into account tax rates. Tax rates for Texas Hill Country ranches are very low in comparison to other tax rates. Taxes on Texas Hill Country ranches can range from a tenth of a percent to half of a percent. That's compared with ~2.5-3% tax rates for nearby cities. The rural land rates in these areas are roughly 1.5%, however, agriculture and wildlife exemptions (commonly referred to as exemptions but are really property appraisal valuations whereby the tax basis is reduced to a fraction of the true value because of agricultural or wildlife use) knock the tax basis down so significantly that the actual taxes are these mere fractions of a percent. As an example, a $1,000,000 ranch with wildlife management or having cattle graze part of the year may get reappraised at $10,000 because of such use, then taxed 1.5% for a total tax payment of $150.

Many owners own simply because they love the recreational aspects but there's nothing more American than avoiding the taxman with a smart investment! Save money and have fun by getting into the Texas Hill Country ranch real estate market! Ridiculously low taxes and a historically consistent upswing are just the beginning of many perks Texas Hill Country ranches have to offer, take advantage of the current low-volume ranch real estate market and get in the game because you won't find a better investment.

John Nisbet is a third generation ranch ranch broker with Nisbet Ranch Sales, LLC living in San Antonio, Texas and specializing in Texas Hill Country ranches.


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