In 1996, Stan was living in California, and I was living in Colorado and we were dreaming of what we would do when he retired. We decided to look for land in southern Colorado for our dream retirement home. It seemed undervalued compared to mountain terrain like Summit County, and we found the high-desert landscape of southern Colorado alluring.
I was the “land scout,” and I came across a parcel of land that didn’t seem suitable for our retirement home, but I couldn’t get it out of my mind. It was just outside the City of Walsenburg, in Huerfano County. In fact, it had a contiguous border with the City (that’s significant – more later). It was also adjacent to the Interstate (I-25), with the NE corner actually crossing the interstate. A well-maintained county road bisected the property. It was about 1000 acres, and It was priced at about $185,000 ($185 per acre), which seemed insanely cheap.
An Ideal Parcel of Land
I could smell it, taste it, see it: this parcel was ideal for development. The contiguous border with the City would allow for possible annexation; the proximity to the interstate was a goldmine; the county road was perfect to augment development. And the area was under-resourced in quality affordable housing. If one were going to design a “perfect parcel” for development, this would be it.
Stan had developed numerous pieces of property in the past. I called him with great excitement and described it to him. He agreed: perfect parcel. But, we did not personally have the money to execute on this. I can’t emphasize this enough, because the slant in the newspapers has always been about “wealthy landowners.” I can assure you, we were not rich, the rich were not abusing the system, and the rich were not the only victims – but I’m getting ahead of myself.
Stan suggested that we had enough friends and family that might be interested, and that we should propose a limited partnership to them with a very small investment threshold: $2,000. The limited partnership would buy the property, hold it for a year or so, and sell it. Stan called it “investing in weeds.” Alternatively, we would improve the property slightly and sell it. To us, “improving” the property meant getting it annexed or rezoned (from agriculture to a PUD) and then selling it and a slight profit.
Now, if you are an ordinary person – the average middle-class American – you have frequently heard that you should invest in real estate. But, like many, you may live paycheck to paycheck, and can only tuck a little bit away at a time. You know that a) you will never in a million years have enough cash to just buy real estate outright – especially real estate that isn’t your own home; and b) even if you had enough to make a down payment, you couldn’t tolerate the risk of making subsequent payments on the loan while you waited for a sale, a remodel, or an increase in value.
But what if a trusted and experienced friend or family member comes along and says, “Hey, we’ve got this great parcel, it’s perfect for development, let’s go in together! It will only cost you $2,000.”
$2000 to get into a real estate deal? Who wouldn’t do it?
So, Stan and I put together a limited partnership, put out a “call for funds,” and our friends and family members happily signed up. Ordinary, trusting people just like you. And, just like you, they hoped that a modest investment would reap a modest return.
We were confident that even if all we did was hold it for a few years, it would increase in value, because we could see that eventually everything along the I-25 corridor from Denver to Santa Fe would be built-out and valuable. It made so much sense.© Sharon Cairns Mann