6 ways financial planners are capitalizing on Texas land
In times of a turbulent or uncertain economy, it’s more important than ever for investors to diversify their portfolios. With a fluctuating market in mind, many Texas financial planners and wealth fund managers are using Texas land to help their clients do exactly that.
Whether a financial planning client is interested in starting a new business venture, cashing in on a passive investment, or simply spreading their financial risk, Texas land offers a wealth of opportunity for strong returns.
Here are 6 ways financial planners can help their clients capitalize on Texas land.
While inflation hasn’t shown much sign of stopping any time soon, that might not necessarily be as much of a concern for rural land investors.
Farmland is a low-volatility asset — something whose value isn’t tied to the ups and downs of the market. With this low volatility, rural land typically sees its value hold strong (or even rise) alongside consumer prices.
So in times of inflation, while some might pull back the reins on higher volatility investing, ranchland, farmland, and rural real estate could still be a smart place to put their money.
Diversify portfolio by investing into a scarce, valuable asset
Along those lines, Texas rural land becomes scarcer by the year. With more and more people moving to Texas (the state saw one of the highest growth rates in the country in 2023), acres are being snatched up faster than ever. New land isn’t being created, so the land that does exist can be quite valuable.
For wealthy individuals looking to diversify their investment portfolio, rural land can be a smart place to target those efforts.
Farmland in particular might be a longer term investment. But it does typically see steady returns for years or even decades on end. That stability can be a helpful piece to have in a portfolio, especially if someone has other higher-risk investments in their pocket.
Rural real estate or land loans can be a great option for those who want to diversify their investments in this way.
Profit from a rural land business venture
Rural land in Texas is valuable on its own. But it might be worth even more if the land can be used for purposes like timber harvesting, ranching, or recreation.
For wealth management clients who perhaps want to take on a little more active role in their investments, they could start up an agritourism business, a ranch, or recreational activities (like camping) on their rural land. These options might require some more up-front effort or on-the-ground involvement. But they can also be very lucrative.
For those who prefer more passive investments, there are still options to profit from Texas rural land. Land investors could rent out their acres to other ranchers who need pasture. They could lease out hunting rights. They could even rent out space for infrastructure, like solar panels or wind towers.
The choices are nearly endless, especially in Texas where the landscape is so diverse. Check out other ways to profit from rural land in Texas here.
Earn money from rental or vacation properties
For investors in Texas land, new profits don’t have to depend on just the land itself. Another opportunity for big returns comes from what’s on that land.
Many investors will choose to purchase land with a home or other structure already on it. Others might build one of their own. Regardless, if there’s a house on an investor’s land, that’s a prime chance to earn extra money from renting to vacationers or even longer term residents.
Tourism is increasingly a huge part of the Texas economy. In 2022, travelers to and within Texas were responsible for a $187.5 billion economic impact. Texas can see upwards of 200 million visitors per year — and those visitors need places to stay. Whether you have a beautiful old farmhouse on your land or a small cabin in the woods, these can be excellent options for tourists — and strong opportunities to earn more profits from a land investment.
Depending on where an investor purchases land, there could also be an opportunity to rent out a home to longer-term residents. With so many people choosing to move to Texas over the past couple years, housing can come at a premium. Finding a long-term renter can also mean steadier returns than relying on seasonal or fluctuating returns from short-term travelers.
Earn tax credits
If you’re a wealth manager, your first priority is helping your clients manage their money (and hopefully make more of it). But finding them some handy tax breaks can also be a big bonus.
Depending on the type of rural land your client invests in, they could be eligible for certain tax benefits. For example, they could donate a conservation easement on their land, which would qualify as a tax-deductible charitable donation.
Others who have a home on their rural land might be eligible for a Texas homestead exemption. This exemption could help landowners save money on their property tax bill at the end of the year.
Help clients invest in their own future
While many high-worth individuals will choose to invest in Texas rural land solely for the potential financial benefit, others might see that land as a different kind of opportunity. Some will choose to buy a home there, or maybe even build their own. This might be a permanent move, or simply a second home to enjoy for vacation.
The rural South has experienced significant population growth in the last couple years, and Texas is no stranger to this trend. Twenty thousand people moved out of Houston in 2021 to the rural South (about 1,000 each to Walker County and Polk County, for example).
In other regions of the state, there continues to be movement from urban areas to more rural towns, thanks to the spread of remote work as well as more affordable housing outside of major metro areas. For investors who want to be part of this urban-to-rural trend, they could take out rural home loans or construction/home site loans.
Are you a financial planner with Texas clients?
Reach out to the TFC team to see how we can help.