Monday, January 8, 2007
So you’ve got your eyes on a piece of land...
It’s cheap, located in a sleepy suburb near the intersection of two major interstates. Even better, one of the interstates passes through a particularly wealthy neighboring county where land prices have already exploded.
It’s a beautiful location, the kind of place where wealthy people would enjoy living. And you think it could be prime real estate in the next ten to 15 years. In your head, you’re already picturing developments springing up as folks flock to your nearby, cheaper real estate.
Should you buy?
Depends on the nearest sewage treatment plant.
The most important aspect of land development has nothing to do with the view or the lot size. Nope, it’s sewage. As in, does the area have access to mainline sewage? Many unthinking developers have ponied up a ton of cash only to be stopped dead in their tracks by a lack of sewage.
“As the old saying goes, crap doesn’t run uphill,” says Pat McAlister. “Most sewer lines run along creek beds, rivers, or drainages. Not because we’re dumping waste there, but because you’re trying to find the path of least resistance, and naturally occurring waterways are a great blueprint for that. After all, what’s better at finding the path of least resistance than water?
“For most of the 20th century, you either had two options with sewage: 1) connect up to a major sewage line, or 2) get your own septic tank. However, 25 years ago, a guy named Jack Sheaffer designed an alternate sewer system. It’s not well known, but basically it allows you to develop anywhere. And it costs roughly the same amount to install as standard sewage.”
Jack Sheaffer co-authored the original Clean Water Act in 1972. Sheaffer was concerned that standard sewage treatment wasn’t effective enough. Consequently, he designed an alternate sewage system called the Sheaffer system. In it, rather than channeling wastewater into a sewage treatment plant, you instead dump it nearby into a series of deep aerated ponds, where it is quickly filtered and disinfected by microbes. The microbes also take care of the smell. And once the water is treated, it’s used in irrigation.
Basically, the whole system treats, filters, and recycles wastewater. It’s clean, efficient, and environmentally sound. And it can be done anywhere.
How safe is it? Well, the U.S. Environmental Protection Agency employed the first Sheaffer system in the U.S. for Muskegon, Michigan back in 1972. Since then, Sheaffer systems have been popping up all over the place.
And lest you think a Sheaffer system ruins property value: In 1986, the Fields of Long Grove development in Lake County, Illinois received the “Best in American Living” by the National Association of Home Builders, Better Homes and Gardens, and Professional Builder. Since then, Sheaffer systems have been popping up all over America... and none of these areas are what you’d call “the low end” of the market.
Currently, Sheaffer systems are employed in Virginia ― the North Fork Sheaffer System serves two towns and two poultry plants there. Wynstone, a Jack Nicklaus signature golf community, used one. Pat even pointed me to Tollgate, a new mid- to high-end development outside of Nashville that uses a Sheaffer system.
“You can install one of these at $2,000 to $4,000 per house. That’s roughly what it’s going to cost you to hook up a development to standard sewage.” Pat commented. “However, because Sheaffer systems are still relatively unheard of by most builders/developers, land that isn’t near normal sewage sells at a massive discount compared to land with normal sewage nearby.”
Pat continues, “In other words, all across this country are chunks of land that could easily become an edge city... and developers are sitting on their hands cause they think they need standard sewage. Those in the know are making a killing on land development deals. I personally know someone who bought 60 acres in Franklin (outside of Nashville) for $7,500 an acre, years ago. He’s about to start selling it for $50,000 an acre. With Sheaffer systems you can turn land into gold.”
Six times your money in 10 years is no joke. But it’s nothing compared making $500,000 on property every two years, tax-free. Pat explained to me exactly how to do this. I'll cover it in my next column.
Friday’s soggy trading produces shortest new highs list in months.
New lows list full of energy and mortgage companies: Doral Financial, New Century Financial, Bronco Drilling, Jed Oil, BJ Services, and James River Coal.
Crude oil, copper, and gold all take a beating. Crude now down 9% in 2007.Rough Friday for foreign markets... China, Russia, and Israel ETFs each decline over 5%.