Beginning the year 2014, life styles which many of us have become accustomed to may change dramatically for the foreseeable future. Maybe your long range plans or dreams include a second home, kind of a get-a-way of sorts, a place that will provide you with an alternative lifestyle environment. Changes everyone has experienced over the past five years often make it difficult to chart a course, particularly one which may include the accumulation of wealth, plans for retirement or relocation to a more desirable climate/environment. For many, the stock market with its reputation for volatility, a newly acquired dependence on major news events for direction, appears to be a high-stakes adventure over the near term. Other less volatile investments such as certificates of deposit or treasury bonds currently don’t offer much in the way of a return when you adjust for inflation.
For many of us, leaving the comfort of the nest is a life-changing experience, something we are not familiar with. Read on as we adjust the crosshairs to home in on the challenges we face in today’s world. Every day, various media outlets provide us with continuous news as it relates to our economy. With the number of paradigm shifts now taking place, affecting us both individually and our society as a whole, one might ask, “why would anyone suggest that now is a good time to buy Smith Lake property?”
A great number of people who saved or invested for the future are now looking for a “safe haven”, a place where they can protect the value of their assets. Investing in lakefront property is an option worthy of your consideration. Keep in mind that a wise investment in lakefront real estate reduces your risk of sudden or violent valuation swings. Wealth accumulation involving lakefront property investments can be realized with both short as well as long term participation. The key to successfully investing in lakefront property is to determine your investment goal and then acquire a detailed understanding of how to achieve that goal. Many people never understand how important acquiring the “how to” is. Anyone can buy a piece of lake property, but the successful investor knows “where and how” to locate property which meets the criteria for the purpose of wealth accumulation.
Our central point with this article is to provide prospective buyers with a sound foundation as it relates to the investment in lake property. In the following paragraphs we will make the case as to why people just like you, should consider lake property investment as a viable alternative to more traditional forms of wealth accumulation. Everyone’s situation is a little different, but for many people, there can be a distinct advantage when comparing investment in Smith Lake property and that of stocks and bonds. There are many perceptions associated with the investment in lakefront real estate. Times have changed, as is often the case, the perceptions we maintain regarding lake property may no longer prove to be accurate or even valid. We want to share with you the knowledge we have acquired, separating fact from fiction, and finally, provide you with updated information which can be used to evaluate lake property for fun and profit.
Building a foundation for the purpose of investing in lake property requires one to understand why people select a particular piece of lake property over that of another. For most of us, our immediate thought might be that a majority of people buy lake property for recreational uses such as, boating, fishing, or swimming. Think about this, there are some who invest in lake property for the purpose of maintaining for themselves, a private environment. These people want a place, free from their daily routines and responsibilities, where they can escape. Another group of individuals will purchase lake property for the simple reason they want to enjoy the panorama and serenity of areas which are less traveled. Looking out on the lake while visiting can be a restful pass time for those with limited movement capability. Our point here is that people will purchase lake property for all kinds of reasons.
When contemplating investment in Smith Lake property, your first concern should be to determine or establish a primary objective. For many, we might have in mind a well defined primary objective, but there is always the possibility one or more secondary objectives will require consideration as well. Keep in mind that no two objectives should be of equal weight. A word of caution here, clearly define your expectations. Don’t make things complicated. Purchasing property for producing income, whether it’s for rental or resale, requires the use of different criteria from that used to evaluate property where appreciation is the objective. When you purchase lake property for rental or resale, your list of criteria should focus on those features and amenities which appeal to your target market, not your personal desires. An overwhelming majority of people who will rent or own lake property have a well defined list of “must haves” when it comes to available features and amenities.
Are you seeking a Smith Lake property investment which you intend to use and maintain for the foreseeable future? Is your primary focus to invest in a piece of improved lakefront property with appreciation as your primary objective? The criteria we use when acquiring lake property with this objective in mind, is different from the preceding example. When acquiring lakefront property for appreciation purposes, allocate plenty of time to identify the features and amenities which you and/or other users determine are “must haves”. Once you have completed your list, prioritize.
When you have your investment object(s) clearly defined, it is time to engage the services of a professional realtor. For most of us, purchasing lake property is a balancing act of sorts, that is, we must reach an agreement between what features and amenities we want, and what we are willing to invest dollar wise in a piece of Smith Lake property. A qualified realtor specializing in lakefront property can provide you with information about various property options on the lake. When conversing with a realtor about your needs, be very specific. A good realtor will have first hand knowledge and can advise you as to what’s available that will meet your needs. If you’re not familiar with waterfront property, make sure you ask the realtor to explain how lake property is valued. At this time, a thorough understanding of lake property pricing is worth its weight in gold. Don’t make the mistake of waiting until you are well into your search for property, only to discover that waterfront property is priced differently from than of urban areas. Lake property is valued using several factors, some of which you may not be aware of. Waterfront property receives a portion of its value based on the number of running feet of shore line. Your realtor can provide a current range per running foot, as an example: shoreline prices may vary between 550.00 and 850.00 per running foot. For a number of reasons, some areas of the lake will be more desirable than others. As a consequence, the valuation for these highly desirable shoreline areas will command a greater price per running foot.
The next step in the process is to accumulate information and knowledge about the conditions of the lake, uses of the waterway, and future development plans which might involve the lake. The best way to acquire this information is to speak with local people who frequent the lake. A list of free information sources might include: fishing guides, realtors, marina operators, lake related contractors, local merchants located on or near the lake and a chamber of commerce, if it is in close proximity to the lake. These sources of information will be invaluable when you begin asking specific questions. Over the course of gathering information, you will have the means to corroborate what is factual and forget the rest. If you have items which are of particular interest to you, make sure you research them carefully. A word of caution here, invest the amount of time necessary to verify the facts. Here is an example of what can happen when we don’t do our homework. Many people have taken the word of others that a particular piece of property is located on “deep water” only to find out after its too late, the purported deep water exists only during the winter/spring rainy season.
Here is a list of several important factors that you might want to check out.
What can I do with my shoreline regarding landscaping? Does the water muddy up after a hard rain? Does anyone monitor water quality levels, if so, who? Is there industry located on the lake? Are there size and horsepower limits for all watercraft on this lake? Are there any marine patrols on the lake? Does this lake allow houseboats, if so, are there permitted waste dumping stations? How many marina facilities are on the lake? Who services and provides dock repairs/installation? Is it safe for people to use kayaks or wind powered boats on the lake? What about fishing? Do we need to get permits for anything?
Let’s look at the various aspects which exist between investing in stocks, mutual funds etc., and that of Smith Lake property. Simply stated, the advantages of investing in stocks or funds; there is always the potential for rapid appreciation, one has the ability to change investment strategy at will, and the liquidation of holdings can be accomplished in a minimal amount of time. The downside; the potential exists for rapid fluctuations in value, the inability of most investors to “time” the market, and long term, the value of investments is always subject to outside influences beyond the control of the investor. For those inclined to invest in stocks, it requires that someone monitor market conditions, assume a custodial responsibility, and make appropriate buy and sell decisions.
Investing in lake property has the following advantages; one has the ability to “evaluate” the market as prevailing conditions change slowly and with less frequency, there is minimal downside risk when assessing valuation/appreciation potential associated with a piece of Smith Lake property and investors retain full control of their investment with little outside influence. Under certain conditions, future capital gains can be deferred or will not be applicable. And last, lake property is a tangible asset. Investor’s in most cases will have the ability to borrow against their equity. The downside; the ability to liquidate holdings is conditional and dependant upon the actions of others, routine maintenance and other fixed costs (taxes and mortgage interest) must be allocated, these items will be a reoccurring expense.
From January 2000 to date, compare the rate of return for Smith lake property investments with that of the S&P 500. A portfolio investment strategy aligned with the S&P 500 between March 2002 and December 2009 was essentially a break even event. Will the stock market regroup and begin to post some earnings longterm? Might an investment strategy that includes Smith Lake property, become a new paradigm for wealth accumulation? No one can predict what the future holds. Today, as you read this article, conditions remain favorable for building and/or accumulating wealth by wisely investing in lake property real estate.
Smith Lake’s improved properties, unlike those located in Las Vegas, the Florida coast, or Southern California have not experienced a major loss in valuation. While recent buyer traffic has slowed, Smith Lake property continues to hold most of its value. A significant percentage of property owners (over sixty percent) with improved property at Smith Lake maintain a full equity position. Because a majority of these owners do not use their property as a primary residence, circumstances and conditions that currently exist with a typical urban development, where a significant number of properties are mortgaged, does not exist. Although our economy may continue to meander along for the next several months, it is unlikely during this time that improved properties at Smith Lake will experience a loss in value.
Purchasing lake property following a major change in market conditions, where there is potential for appreciation and where little downside risk exists, doesn’t present itself often. If you implement the suggestions that we have provided, continue to seek advice and guidance from a qualified Realtor® specializing in lake property, and complete the necessary due diligence, you will have prepared yourself to take advantage of the extraordinary opportunities currently available for the accumulation of wealth that comes with “timing” our Smith Lake property market.
Sharon Miller – RE/MAX Platinum has provided specialized real estate services for buyers and sellers of Smith Lake property over the past twenty years.
Copyright © 2008 by Sharon Miller – Revised August 2011, October 2012, September 2013, March 2014
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