Frank O’Brien, Western Investor, June 2, 2007
Rudy Nielsen, considered the largest individual owner and developer of recreational land in British Columbia, has been choppering above the province this year searching for prime real estate deals.
While the legendary investor remains bullish on the future of BC’s recreational real estate, he said research is more important today than ever.
The founder and president of NIHO Land & Cattle Company and a real estate analyst and president of Landcor Data Corporation, which has the largest property bank in the province, Nielsen spends 60 per cent of his time researching the market and 40 per cent buying and selling property.
“I am only interested in the one, two and three top deals,” he said.
His search engines are huge and unique. When zeroing in on property, he uses a helicopter and a powerful digital camera that feeds images back to the Landcor computers. The feed allows him to create individual aerial maps showing elevations, roads and timber stands, for example, and can even break properties and buildings down to square-foot calculations. Nielsen also relies on a much more low-tech network of offices and agents across the province to provide an on-the-ground heads up on local opportunities.
With exclusive access to every property listing and sale in the province- the company owns the entire BC Assessment data- Landcor gets immediate updates on every real estate title transaction, even telling where buyers are coming from. In all of BC, he noted, there are only 250,000 titles that could be considered recreational property. “The demand is way above the supply.”
Nielsen has been in the game for 40 years, and he was doing pretty well before the fancy technology came along. One example: 30 years ago he bought a huge swath of waterfront property in the Queen Charlottes for cheap. This year, he has been selling off five-acre waterfront lots there for $395,000 each.
While dramatic, such an increase parallels the residential market, he noted. In 1990, total residential sales in BC were worth $19 billion. Last year they hit $54 billion.
He notes the recreational market follows the residential market by about six months, which is why sales of vacation property slowed in the first half of this year.
Nielsen, 66, still relies on his gut feelings when buying recreational real estate, and his senses tell him that this is a year for being careful.
Still, “we are buying heavily right now,” Nielsen said. A large map in his office is pinned with NIHO purchases, and most of them are across the north and into the West Kootenays, with a scattering in the Okanagan and the north coast.
His top pick for waterfront recreational is the northern B.C. lake country, from Burns Lake to Prince George. The reason, he said, is a shift in Alberta buyers, with a large concentration now coming from Edmonton and Fort McMurray, rather than from Calgary. As well, many Lower Mainland buyers are priced out of the Okanagan and the coast.
Investors can find two or three acre drive in lakefront lots in the north, he said, for from $50,000 to $100,000. One example: NIHO will start selling road and power serviced five acre lots on Francois Lake in the Cariboo this summer from $55,000 to $95,000.
There are also large riverfront parcels available for even less, he added. One example: 30.6 acres, with about 1,650 feet of frontage on the fish-heavy Kitwanga river, 60 miles west of Smithers for $89,000.
Nielsen’s other hot picks this year includes the rural Kamloops area, Penticton, Powell River- “a great place to buy right now”- Vancouver Island north of Nanaimo, and lakefront lots in the Queen Charlottes. He believes most of the East Kootenays, which he has studied closely, is overpriced, but said West Kootenay parcels offer good value.
In a major about face, Nielsen said he is now convinced that some fractional purchases can be a good buy with the right property. As an example he pointed to the Galiano Inn and Spa in the Gulf Islands, where a quarter-share in a waterfront studio condo starts at $79,800, and the rental occupancy levels are high. (The second phase at Galiano offers larger one-bedroom waterfront suites with quarter-shares from $169,900.)
In another contrarian stance for most investors, Nielsen sees great opportunities in working with First Nations, explaining that Native lands now represent some of the best recreational property in the province. “Long-term Native leases don’t bother me at all,” he said.
Nielsen, who said the current recreational market is the hottest ever seen in the province, had advice and warnings for the novice “flippers” now thick in the action.
First, he urged investors to personally check out the property. Some buyers, for instance, may rely on a developer’s web page and realtor information to make a buy decision on recreational property miles from where they live. “Always walk the property yourself,” he said.
Some resort recreational developments are over priced, he added, noted that buyers must be realistic in balancing the cost against what is being offered.
He also cautioned that, when buying raw land for development, investors should prepare to spend at least two years getting all the permits in order, because of new government restrictions on setbacks, access, septic services and other items.
Nielsen’s bird’s eye view has also alerted him to potential long- and short- term economic and environmental shocks in BC’s interior.
“People don’t’ realize how big the pine beetle infestation is,” he said, “We can fly for half-an-hour and there is nothing but dead trees beneath us.
A wake up call could come this spring for owners of rural waterfront property, he said, because the millions of pine trees killed and clearcut could unleash massive flooding.
As well, the giant sawmills across the north could be idle within a decade as the last of the useable pine trees run out, he said, which could hammer local investors.
But the future of BC, he said, is no longer in the forestry sector, it is in becoming an international recreational destination.
Buyers of recreational land get a twofold return, Nielsen said, and it has nothing to do with monthly cash flow. The owners can use the property for vacations over years, and then sell for a hefty profit.
He said purchases by US buyers of BC recreational land are down about 30% from two years ago- a reflection of a slump in the US housing market- but Alberta buyers are becoming stronger and there are also more buyers from Europe, and more recently, from Korea and other parts of Asia.
Nielsen notes that, despite the hype, recreational sales last year dipped about four percent across BC compared to 2005, but he sees the market turning up sharply this summer and into the fall.
BC buyers dominate recreational property sales in the province, accounting for about 94 per cent of all title transaction, and the combination of a robust housing market and retiring baby boomers point to huge demand over the next few years, he explained.
If you can afford it, though, virtually any BC recreational land will rise in value.
“Don’t wait to buy land,” Nielsen said, “buy land and then wait”