The Landowner's Cash ContingencyBy: Amos S. Eno
This is a continuation of my interview with Bart Weisenfluh of Plimsoll Mark Capital.
“To assess what you have in property value, first separate your residence from your investment properties. You have to live somewhere!” says Bart. “The rule of thumb for folks who are retired is that they should have three to five years of expenses socked away in cash or cash-like safe investments, such as CDs or short-term treasuries.
The Cash Contingency
“People forget how they felt when the stock market hit 6500 in 2009! This contingency fund means they don’t have to worry about getting through a few difficult years. We encourage people to think in terms of dollars and annual expenses rather than percentages.
“Land rich people can’t rely on their land to get them out of a cash flow pinch in most cases. Once you’ve got your contingency fund in place, then we can take a little more risk with additional assets. If you have an IRA or 401K, this, generally speaking, is the last money you should ever spend and therefore if you’re looking to be somewhat aggressive (investing in equities for instance) this is the place to do it.
“If you’re land rich, in most cases, you don’t want to take any big risks with your after-tax dollars. You have to be careful of these cash assets because that’s your backstop that is most accessible. If you lose a job or need to sell when the economy is tight and no one wants land, you’ll have to take fire sale prices. That’s another thing we do: help landowners foresee as many situations as possible to avoid a forced sale, and part of that is building the contingency.”
Land is Living and Living Things Need Care
Bart and others like him tend to work closely with land management consultants, as needed. Whether a landowner wants to keep his property or give it away; whether she wants to make it break even or maximize her income; if they want to ensure its financial and environmental sustainability for the next generation - they will need land management experts. Foresters, wildlife biologists, or management consultants provide ideas and solutions for land stewardship - depending on the landowner’s wishes.
“Most of the time, we are the primary advisors to our clients,” says Bart. “If something goes well or badly, we are usually a family’s first phone call. However, we will always bring in area specific experts who can discuss land stewardship practices and help provide solutions to whatever challenges clients are facing. It’s our responsibility to remain focused on the long-term financial picture.”
We hope these brief blogs have helped you think a little more about how the long-term future of your property fits in with your own long-term future!