The Future of Smart Real Estate Investors

20th June 2015 Facebook Twitter LinkedIn Google+ Real estate Investment

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The entire premise for this post is based upon a rapidly expanding population, all of whom need space in which to exist. Once the population approaches 500 million, major changes must begin to take place if we are to survive.

Yet one thing is certain not to change – the availability of land! It is highly unlikely that humankind will be colonizing other planets in the next 100 years. It is just as unlikely that underwater colonies deep within the bowels of the oceans will become a reality during this period. Therefore, barring a depopulating factor on a catastrophic scale, land will become scarce and of ever-increasing value.

This leads me to firmly believe that owners of land will, as time goes by, become more and more reluctant to sell those lands. Instead of selling land, they will begin leasing it, as is currently the practice in many areas around the world. Nigeria will see the rise of Land Barons – those who own the lands – and the masses who lease them. showcase a list of top land owners in the United States.

In a way, this makes perfect sense. After all, we are all here for just a short time, and then we leave everything behind. So why should we actually have to own the land as long as we can still live on it?

In time, home-buyers will still be able to buy homes, or even build their homes, but it will be on land that is leased from those who own the lands. The landowners will make the rules, and will profit for many generations to come from the leases they have given to others. A steady, perpetual stream of income, without any of the headaches associated with being a landlord. The land owner is responsible only for the land, not the buildings on it. The buildings will be privately and separately owned, either by those who occupy them, or by other landlords who have built or purchased the homes as rental properties. Of course, the land baron could also build such homes on his lands, then either sell or rent those homes to others. But the land will not be sold – only the buildings on it.

The occupants of the homes will have to lease the land from the landowner.

As available lands shrink, it is likely that laws will be passed to protect homeowners from unscrupulous land barons. Land leases will be formulated with some protections built in, by legislative action. But all in all, the masses will still be at the mercy of the owners of the land, much as the masses are currently at the mercy of landlords and employers.

Land leases will vary in length of term, cost of the lease, payment options and the rights the landowner may retain to the land. For example, a landowner might include in his lease agreement that he shall retain the right to harvest timber from some portions of the land, farm certain tracts, or even drill for oil, all of which can be largely be inconvenient for the homeowner. Some may include automatic increases in the lease to account for increasing taxes and expenses. The lease agreement might even specify that in the event the home is destroyed by a disaster (fire, flood, tornado etc.) that the lessee shall have a short period of time to rebuild, and if not done, the lease becomes void. The landlord may then lease to another, at a higher rate.

Furthermore, it would become necessary for the landlord to protect himself from non-payment of lease.

Nowadays, a landlord only needs to evict the tenant. But if that tenant actually owns the house that sits on your land, how can you evict? What recourse does the landlord have?

It is possible the landlord’s lease will include a clause that will allow him to place a mechanic’s lien on the house in the case of non-payment. If this is the case, the tenant could put him off until the tenant eventually sells the house – if ever – at which time the lien would have to be paid off, with interest and late fees. More likely, however, the landlord will include a clause that states any lease payment not made on time will automatically become a second mortgage on the house. When three such payments are included in that mortgage, the homeowner can be charged in default, and the landowner will have the right to force foreclosure. The tenant would then lose his home.

When the mortgage on the house is separate from the land, such protective measures will be necessary. Otherwise, landlords will find themselves never getting paid. On the other hand, the homeowner or tenant will also require certain protections, to insure that lease payments will be reasonable, to assure that land barons will not abuse the lands or violate the tenant’s privacy, and to guarantee that the land baron will not cause a situation that could jeopardize the rights of the tenant. For example, if the landlord makes some bad investments and files bankruptcy, and the lands have to be sold, what will be the rights of the tenant?

In such a case it is reasonably certain that tenants – especially those who own their home – will require certain protections to be written into the lease. A wise tenant would include a clause that gives him first right of refusal in the event the property is ever offered up for sale, for any reason. The tenant might also want to include a clause that would prevent the land baron from using the land as collateral against loans, or to have liens placed on it which could jeopardize the rights of the tenant. While it is unlikely such a clause would be enforceable, it would be possible to restrict the amount of total liens that could be placed on the property. Such restriction could, for example, state that the land owner shall not mortgage the land in excess of 50% of its fair market value. In this way, should the landowner be foreclosed upon, the tenant would require less money to purchase the property, as he would still have first right of refusal if the land is ever to be sold.

As you can see, such changes will require an entirely new set of rules for real estate, whether you are an investor, a landowner, a homeowner or the landlord who rents the homes. It will also mean new rules for (and from) lenders, the government, Realtors and Title Agents.

An early acquisition of such land by you (real estate investor) leaves a greater chance of being a land baron in the near future. Do not wait till you can afford hundreds of acres, you can start with a single plot and watch your investment grow.