It all makes sense
Want to know why billionaires like hedge fund manager John Paulson are buying building lots left and right? Is it because they want to give the builders a private bailout, is it because their targets in Arizona, Colorado and Nevada are performing well and they’re betting on those areas?
Nope. There is a rush to buy land because if the investors hold all the prime/desirable land that homebuilders will eventually need in order to make their comeback in these poorly performing areas, builders will have to come to them. Builders are counting on snatching up land at distressed prices and guess who they’ll have to go through? The investors that are betting on the future.
Connie Madon of BloggingStocks.com said, “What this indicates it that even in the midst of a brutal housing downturn, some companies are willing to step up and take a risk on the future. If new home building picks up this year, we could see the bottom in the housing debacle.”
So, is this a dumb bet or is this a genius move?
Brandie Young
March 2, 2010 at 2:18 am
There’s a saying “Buy land—they’re not making any more of it” I think attributed to Will Rogers. At any rate, it’s the long game and IMHO a wise move.
Coy Davidson
March 2, 2010 at 3:16 am
There will be great wealth created in the next few years for those with the cash and resources to buy key residential land assemblages at distressed prices and the staying power to hang on until the market has fully recovered.
I remember back in 1990 selling a RTC listing that was a 332 acres parcel fully improved with roads and utilities for 2,500 per acre. All the buyer had to do was wait for the housing market to return and then start selling lots for builders.
That buyer’s office is in my office complex and I still run in to him at lunch every month or so….He smiles big every time he sees me….He won big on that deal! At the time I brokered that sale, I was a green 2 year veteran of CRE. I see a deal like that again and I will be putting the deal together for myself.
Joe
March 2, 2010 at 8:57 am
I would say “madness” unless of course a person has a strong financial position. We own land and there is no cash coming in until it sells. Purely speculative.
Justin Boland
March 2, 2010 at 9:56 am
As a long-term move, clearly genius. As petroleum winds down, arable land will be gold by the acre. These guys have the capital AND liquidity to just freeze up money in land for decades, so it’s a great move on their behalf.
Would I be advising middle-class, small-change investors to follow their lead? Not for a second.
Al Lorenz
March 2, 2010 at 2:51 pm
The answer to your question won’t be known until the investors sell. I’m happy to see some folks, and these are folks used to evaluating risk, see the promise of profits in buying today.
Nashville Grant
March 2, 2010 at 5:17 pm
That and the fact that John Paulson is ex-treasury secretary Henry Paulson’s brother who handed him IndyMac on a silver platter!
Joshua Dorkin
March 3, 2010 at 1:58 pm
From dictionary.com:
Speculation = engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price.
This would certainly constitute speculation, and if you’re not familiar with land investments, or if you don’t have the ability to hold for the long term (that’s L O N G), then I’d say to stay away. Like other types of property investments, investing in land is not for the novice or uninformed.
Khary Reynolds
March 3, 2010 at 11:46 pm
I think this is a genius move. Granted, it is a long term, “capital appreciation” play, but if you have the excess cash to buy and hold land, I truly believe it will give a better return in the next 5-10 years than most speculative “capital appreciation” investments.
Rick Kimber
August 4, 2010 at 9:49 pm
I own several hundred acres in Nevada that I would love to sell. Please tell these Investors to e-mail me. I have some great deals!