How I Buy Farms and Ranches
When I was twelve years old, I had bought and sold many shares
of stock on the NYSE. I was a motor mouth even then. I always
was eager to talk to anyone who liked to invest and discuss
stock picks. One of my fathers friends John was such a person.
John only had a 3rd grade education. His mother was a prostitute
and his first job was collecting and selling leaches to whores
in Trenton to be used to remove hickies on their...Well, you got
the picture?
John could hardly speak, he studderd so bad that it was a labor
to talk to him. But John was no dummy. He had gone on to become
a noted designer of transformers and had built up a large
company. He lived on a large estate that overlooked a huge pond
which to a twelve year old was an eye opener. What ever John
would say or do had to be noteworthy.
John would also talk of the lastest electronic gadgets, hottest
stock picks, Trees, hunting stories, and about real estate. Just
what I was interest in. One day John came to our house. He was
so excited that he could hardly talk to us. He handed me a book
and said," Re...re...re..re...re...read this. "It was a book on
stock options. The book detailed about puts and calls and how
powerful they are in investing. At the time there were few
options offered. I read this book. I reread this book over and
over. I was amazed at how powerful an option could be. I did not
buy or sell any as I did not have the funds to risk on them but
I said to myself , "This is something that I am going to do some
day."
Most options on stocks or commodities expire as worthless. Some
estimates are that 80% expire as worthless. Not a very good
track record for an investor. Now for every option buyer there
is a seller. Someone is making money, not just the brokers.
Option buyers aquire what can be called leverage. An occasional
winner can make up for a bunch of losers. The option sellers
don't necessarly lose unless they trade options naked, ( they
don't own the underlining security) they just don't have
potential gains that they would have had.
Options clearly define an investors loss liabilities. When you
buy an option it defines the price of the asset, the time you
have to excerise the option, and the capital that you risk. If
the value of theoption cotract goes down the most you lose is
your inital investment.
There are two basic options, a put and a call. A call allows the
buyer of the option to buy the asset a established price for an
established peroid of time. A put allows the buyer to force the
right to force the seller to buy the asset at and establihed
price for an established peroid of time.
What I decided to do when I purchased real estate is to acquire
real estate options for farms which had long term contracts. I
sought contacts that went out 5-10 years. If I could put
together a contract that would run long enough, the rising real
estate market would make the contract price a bargain price in
afew years. I would offer yearly option renewal payments to the
sellers. I made those payments applicable to the purchase price
so as time flies the property becomes cheaper.
Now I know that your thinking that this can't work. I know it
does for I have done many of these contracts. Most people who
have sold me these contracts want just what this contract
offers. They can remain on their property and have the option
payment which suppliments their income. They just don't own any
appreciation in the property which they would not have if they
sold it. There are also great tax reasons for selling an option.
When an option is written it is considered an opening
transaction. Taxes are assesed on completed transactions. If a
option is not closed revenue is generally not taxed. (see your
investment advisor and make sure the contract is properly
formed.)
Once this contract is in place one could lease the fields from
the owners. This could be known as a lease purchase contract.
Now you have ground on which you can plant trees. In many
instances I have aquired land this way for less than the cost of
the taxes on a yearly cash flow basis.
You can see Bill's web sit at http://www.seedlingsrus.com
Read on about Me:
There are a few people, very exceptional people, who are so
singularly special that the complimentary joke is made; after
they were born, the mold to make them got broken. In other
words, there's no chance for posterity to make any more of the
likes of Michelangelo, George Washington Carver, Franklin Delano
Roosevelt, etc. In my case, they threw out the "mold," but I
fooled 'em and grew back!
Seriously speaking, the first lesson I learned while very young
is that in order to sell successfully you must be relentless.
You have to be downright incredible to be able to keep your
integrity and successfully sell something like, "ice in the
wintertime to Eskimos." However, As John Paul Ghetty, the
oil-marketing billionaire, observed, if you have a high quality
product you know people both need and want, repeatedly, it will
almost sell itself." Like the nursery stock we grow at Highland
Hill Farm.
I have learned these lessons. There are basic concepts that are
important to understand. Starting when I was very young, I've
always had "business." My first business was making and selling
potholders when I was 5-years old. My parents had bought me a
small potholder-making contraption. Rather than just make a few
for the sake of "arts and crafts," developing my fingers and
hands, I made hundreds and hundreds. I got real good at making
real good potholders, you could say. Whenever I met someone I
tried to sell them potholders at 25 cents each. As I earned more
and more money, I started an account at the savings bank in
Lambertville, always carrying with me lots of differently
colored potholders when I walked into town to make my deposits.
On the sidewalk and inside the bank, grownups would inevitably
say, "What a cute little boy," and then, "Why are you carrying
all those pretty potholders?" They sold themselves. The
potholder sold themselves. The customers "sold" themselves.
I sold enough potholders for me to buy 2 shares of General
Electric stock and 2 shares of the Atlas Corporation, upon the
advice of my great-uncle Bill. (See My Uncle Bill's Story, Part
I of my life and my lessons learned). I got these shares of
stock when I was 7-years old. My small beginning business
venture then expanded to include looking for Helgermites, or
Hellgrammites, they're like Redworms, which I'd sell out along
the road (leading to the Delaware River, of course). I picked
wild blackberries and sold them along the road too. I bought
fishing lures and took them to sell along the Delaware River's
east bank, our side of the river. There were "hot spots" where
Shad fishermen would gather during the intense "fish runs." It
seemed like a good idea to bring along some blackberries too.
The fisherman needed a snack. I did too.
I parlayed my growing savings and bought 144 chickens. A
"gross" of chickens came at a discounted unit price. I didn't
quite realize it at the time, but I was "leveraging" my money
and buying in bulk, "wholesale." So, here are two more valuable
lessons for us all. Buy as cheaply as you reasonably can. (Did
you notice I didn't buy a dozen gross of chickens? That's 1,728
chickens. The price per chicken would have been cheaper, but I
would never have been able to handle them all!) Also, make your
money work for you. Make your money work just like a transistor
works, use a little power to control a lot. My father, who
coincidentally worked in electronics engineering, had a
wonderful friend who bought me a book about stock options. John
stuttered so terribly he could barely speak, but I will always
be grateful to him for teaching me about the greatest investment
vehicle of all in the stock market: Options. What a great way to
make money work, investing a small amount of money to "own"
rights to shares worth far more money.
With my 144 chickens, I created an "egg route," using the
experience from my potholder business. I had "saturated" the
market. Just how many potholders can people buy? John Paul
Ghetty was right. It is best to sell something people need
repeatedly, like fuel, and like food. I sold eggs in the two
towns nearest to our little farm, Lambertville and Titusville,
New Jersey.
I joined the 4H club and started to raise bees for their honey.
Again, not realizing it, I was selling food, something people
needed over and over, like John Paul Ghetty said. As I sold
honey along with my eggs, I noticed that unlike some of my
friends, I never got an allowance. Then again, I didn't need one.
There was a great lesson in another book my father gave me, The
ABC's of Beekeeping. It mentioned that if you wanted more bees,
just put an advertisement, an "ad," in the newspaper. Just have
the "ad" say "Wanted Bee Swarms," with your phone number below
it. Well stupid me, I believed everything I read and I therefore
I did just what it said in the book. Within a few days a woman
called me from Lambertville and said she had a bee swarm, could
I come and get it? I followed the guidelines my father taught me
and from the book. I captured that first swarm, and many, many
more. Bees at the greatest price discount possible, free, were
available for my to use to make honey and make money.
The above paragraphs contain a number of more unmentioned, as
yet, valuable lessons. First, it's important to find parents who
are supportive of your efforts. I was lucky, but if you're not
as blessed, find "mentors" as so many other successful people
have. Second, it is important to read books. Give books as gifts
too. Don't believe everything in 'em, do believe most of what is
in 'em. Especially when you use at least two sources for your
information. Reporters call this "corroboration," and
"confirmation." Third, the best way to find things or market
things is through advertising.
With all these money making ventures going on, I was spending a
tremendous amount of time outdoors. I developed a love of
hunting and fishing. I loved the woods and being out in nature
while "harvesting" the wild blackberries, collecting worms,
tending the bees, walking my egg-and-honey delivery route etc.
As I got older, I became an adolescent and then a teenager.
Really, you ask? No fooling? I say this because like practically
every other teenage boy, I got interested in cars. I started to
collect junk cars and trucks. As I began to tinker with one of
them, my mother came outside to talk with me. (There's that
lesson about the importance of finding supportive parents. Boy I
was lucky with both!) My mother said, "Bill you don't want to be
a farmer. They don't make money. You have to study. Go to
college and get a respectable job. If you don't, you will be a
farmer working too many long hours worrying about weather and
crop diseases and such. Or, you'll be a trash collector. I love
you." Then, she walked back into the house. I guess she saw the
junk cars and trucks I had collected as trash.
Listen to your mother. That's a lesson you probably already
knew before reading this. I picked out a college in the
not-too-far from home backwoods of Pennsylvania. I graduated
from Juniata College, near Huntingdon, in 1973 with a B. S. in
Chemistry. My wife, Marjorie, also a Juniata graduate, is a
teacher. We were married in 1977. We settled in Dublin, Pa. I
worked for a small chemical plant. One weekend we had a yard
sale. The first item that sold was the bunch of flowers that I
removed from my wife's window box. Here's another valuable
lesson that I have learned. Be observant. This eye opener was
telling us that there is a market for plants here. If people
will buy them from your window box, plants "will sell
themselves." I always had a desire to raise trees and plants and
own a farm, though not be a farmer like my mother warned me, so
we decided to "go for it." Another valuable lesson: It is good
to have a plan...
We purchased a small farm near Doylestown, in the well-to-do
and growing heart of Bucks County, Pennsylvania. We began our
"tree farm," our nursery. The local newspaper, The Doylestown
Intelligencer, became our "store." Placing small "ads" in the
paper under the classifieds was our method of advertising. A
small, cheap 2 line ad such as, "Pine trees delivered. Planted
and mulched, $8. Guaranteed. Call 215-345-0946," were awfully
economical and phenomenally successful. We tried many ads. We
found that just about anything can be sold or bought using
classified advertising. Would it have been better to place
quarter-page or full-page sales ads? Would it have made sense to
spend money we didn't have yet? I believe the answer is no. "Buy
as cheaply as you can," I said above is an important lesson.
http://seedlingsrus.com/MilanHirst.html Now, besides trees, we
market anything at our consignment store in Milan, Pa.
A few years later, we learned another lesson. Friends, Walter
and Paul, who make Christmas Tree ball kits, had us over for
dinner. They had years of marketing experience and told us that
you have to test your market. Their suggestion was to run ads
for what you want to do or sell and see the response, see if the
market "likes" what you offer. Duh! This seems so obvious. They
were right, though primitive and simple, isn't this similar to
what Marjorie and I had been doing naturally with our flowers
and ads for pine trees? Most people don't test out their markets
before they invest. We were lucky we did. So take this valuable
lesson and "test."
My final lesson is, always ask questions when you can't find the
answers yourself. I've asked thousands of questions. Then,
listen to the answers. See Bill's web site at
http://www.seedlingsrus.com