The Next Great Real Estate Investment...

As we hit record gas prices... again...for another excuse (they never seem to end), the use of Hybrid technology has been one of our investment interests since 2002. Let's face it, unless something is done the American Consumer is just going to go through this year in and year out with each year prices going higher and higher due to one excuse or another. Like any commodity, high demand with a dwindling supply equals higher prices. Economics 101.

On Wednesday, The Senate Energy and Natural Resources Committee on a 20-3 vote moved ahead with legislation to replace one-quarter of the nation's gasoline with ethanol and set a goal of cutting gas consumption nearly in half by 2030 That's a very lofty goal. If you are into investing in commodity futures then you already know this if you are a savvy investor.  Ethanol's main ingredient at this time is corn and there is heavy debate on it's true benefits from both sides.  You can decide for yourself if there are any benefits or not because the topic is going to start heating up.

Ok... so what's this got to do with real estate? Read on...

Easy... in 2006 and going into 2007 with many people complaining about how bad their real estate market is and rookie investors handing over the keys on their investments in areas such as Las Vegas, would you expect land prices in Iowa to exceed 10% for 2006? This is a study performed by the University of Iowa concerning land prices in Iowa for 2006 ---> http://www.extension.iastate.edu/Publications/FM1825.pdf

If you are a true real estate investor... read that report carefully. It tells you exactly why land prices in Iowa have gone up over 10% in 2006 and it tells you about the grain industry and the recent increases in prices for a bushel of corn. The lawmakers of Iowa have already taken a progressive stance for alternative energy resources and it shows in their economy.

The average price of an acre of land in Iowa is only $3,204 an acre. High rise condo developers would like you to think that a $650,000 one bedroom condo in Las Vegas (built by somebody with a TV show) is a good investment in a city with over 20,000 hotel rooms. (Let's not forget the monthly association fees that go along with that $650,000 one bedroom condo.)

According to my calculations, that same $650,000 will purchase almost 203 acres of farmland in Iowa and it certainly will buy some nice acreage in Illinois... another state that grows a lot of corn.

The Ethanol push is the first major energy initiative from the new Congress. Anybody who has had to fill up with gas in the past week should appreciate it as much as we do.  At least somebody is trying to do something here to counter the excuses for higher gas prices. 

If the bill above passes (and it should unless lawmakers are too heavily influenced by the usual suspects) we predict that land in the midwest will only increase in price. 

Like any Midwest city, builders keep purchasing land on the outskirts of major urban areas to build houses at a cheaper price and Chicago is certainly no exception.  We've visited plenty of suburbs visiting new Chicago homes where builders bought land that was obviously corn fields and converted then to shiny new subdivisions.

Obviously with the higher demand for corn if the new proposed legislation becomes law, there is going to be a demand for corn.... and you have to grow corn somewhere.

Paul Francis, ABR,CRS is licensed as a Broker in Illinois. 

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