How to make money with vacant land Part 4 â€“ Green Energy Edit
This coveted lands post is on how I can make money with my vacant land Green Energy. So you're looking to buy some land and you want to make that land have positive cash flow. What can you do to accomplish this goal. Well we've already covered a number of things and posts one through three and this is post four we're going to talk about green energy options. There are lots of green energy options nowadays that weren't even a consideration five or 10 years ago. And that's because the cost to install these operations is substantially lower than it was just a decade ago. And it continues to get lower and lower at an exponential rate. So the cost of providing energy keeps decreasing for these green alternative energies and specifically what are they. Well there's solar energy there's wind energy and there's hydro energy. The first one that's really becoming more and more popular is solar especially for properties that are located in the Sunbelt. So the farther south the property is the more solar radiation it gets. And typically the farther west it is the less cloud cover there is to block the solar radiation. If you look at a solar kilowatthour map you can just google solar kilowatt-hours map and you'll see that you know there's definitely a hotspot in eastern California, Nevada, and parts of Arizona. You get a lot of solar energy just because it's so dry and it's far south so the sun's rays are a little bit more direct there. That makes the area very attractive for investment in solar.
Now a lot of people ask the question can you do solar or is there other places that are economical. And the answer to that is yes actually it is. There are a lot of energy companies that invest in solar projects far north of Arizona. In fact, if you look at Germany if you compared Germany to the solar map of the U.S. Germany receives way less solar energy than most of the continental U.S. does. But they have loads of solar plants and they generate loads of energy from solar. Just because your land is farther north doesn't mean you have to write this off. Now with solar, you want to make sure the property is somewhat close to the population because there is infrastructure that has to be built. I guess that's the case with all of these forms of energy to connect the energy project to the grid. And it's hard to unless having a lot of acreage like thousands of acres.
It's hard to find and negotiate a deal on your own. Oftentimes you have to wait for an energy company to come to you. Or you can reach out and suggest an area that includes where your property is and say hey this would be a great spot for you to invest. I think a lot of the land owners here would be interested in leasing or selling their property for your green energy project but generally, you'll be directly contacted by these companies. And you know with solar it's pretty simple. They're going to lease space. They're going to make sure there isn't vegetation growing overcrowding solar panels. There are a couple of types of solar photovoltaic cells are becoming more popular. A few years back the mirrors were fairly popular especially in desert areas where the mirrors focused light on a giant tank that heats up and power a turbine. And nowadays that's become a little bit less efficient than the photovoltaic cells. So you'll want to check with when you get an offer from a Solar Company or Wind Company. You want to check a few things near the questions to ask them one what does the dollar amount I'll actually receive from this deal and when will I receive it. When they send you the initial agreement you'll want to read over it carefully. Oftentimes they're structured as an option to lease the property where a small payment is made up front and they have a long due diligence period in which they can review the property. Make sure the zoning works make sure they can build all the lines and the infrastructure necessary like substations to use your property as a solar farm and it makes sense. I mean they don't want to know what to invest a ton of money in a project that's not feasible so it takes a while for them to figure out whether or not a project is feasible. But you need to make sure you have realistic expectations and you understand how you're going to get paid. So oftentimes there's a small upfront payment. Sometimes it has continued small annual payments and when they decide to use your property at which point the payments will kick up to a higher number and you'll be getting paid a larger lease amount because they'll actually be using your property. But there they often have clauses that allow them to know if something doesn't look right in their due diligence just into the
project without ever paying you the higher lease amount or to discontinue the lease entirely. So you might not ever get that big payday and you want to make sure you set your expectations accordingly. So the first question. What's the actual dollar amount I'll receive when will I receive it? How certain is it that I will get that amount? The next question to ask is how reputable is this developer and you want to find out if they're actually going to finish the project. Sometimes people go out and they get a bunch of land under contract and then they try to sell it to a larger energy company and the deals fall through. Quite frequently they do it that way. So you want to ask what projects have you finished. How many have you done? How big are they? Do you have any references from landowners you've worked with in the past? And that's important because you want to ask if there was anything funny that happened through the process with other landowners that they've worked with in the past. The next question to ask your self is, should I sell to the green energy company or should I lease the property. This is a great question to ask. Oftentimes the energy companies will offer to buy the property and the offer to buy might look compelling. But you have to remember that to other buyers in the market they might be looking for an income stream. You could be able to sell for a higher price to them. For example, if you were to sell the property to the energy company for ten thousand dollars an acre maybe the property is currently worth seven thousand dollars an acre. So you're getting a 30 percent premium and you're leasing it at 250 dollars an acre a year. Currently for some agricultural use well maybe the energy company has a lease that would pay you 750 dollars a year less three times your current lease rate and it's being paid by utility companies which have historically been viewed as a pretty stable credit and a stable company to receive payments from. So a buyer of your property that's just looking for income might be willing to pay a lot more than the ten thousand dollars per acre that you were offered even though your current property by as many as seven thousand dollars. Once the infrastructure is built in and the green energy operation is up and running you might be able to sell your property for 15 or 20 thousand dollars an acre instead of the seven that it's currently worth. Now of course the risk is that the property doesn't get built and that that green energy project isn't completed. Then you have a situation where your property is still worth seven. That's definitely something to consider. Oftentimes one-stop leases in place in infrastructure is put in your property will be worth a lot more. So it might make sense to hold on and sell later if you have a high degree of confidence that the developer will finish the project they start.
Another question is should I wait to do this deal. Should I hold out and try to get more money later. Typically when these companies put in energy projects they build infrastructure that fits the amount of energy they're building and they'll just buy another parcel next to yours and they'll max out how much the infrastructure can handle. If you come along a couple of years later and say Alright I'm ready to sell. Expecting more money you might get an answer. That is why we don't buy at any price because we'd have to build a whole bunch of more infrastructures. We have to put in new lines and to put in new substations and no longer cost-effective. So it might make sense to take advantage of the deal in hand if you are to take advantage of the deal at all. Those are the questions to ask and I guess those questions also apply to wind projects. The main difference between solar and wind is that wind is much more location specific. Typically wind projects are relevant for properties that are on ridges or near hills or in locations that have very frequent persistent wind currents. So you know if you're ever in an airplane flying over an area you'll notice that oftentimes especially on the East Coast in the Appalachians you'll see on the ridges of the Appalachians that there are lots of wind installments and you won't find wind and wind instruments in the valleys. You have to be kind of location-specific for wind but a lot of the same questions apply to wind projects you want to ask the same hydro is a little bit different. If you have a property that has a small stream or river you might be able to generate hydroelectricity on your own. You can buy mini hydro generators and you need a check with your local planning and zoning. Some locations are very strict about what you can do with waterways and some are very lenient but you might be able to install some of these on a stream on your property and generate some extra electricity that you can sell back to the grid or you can use yourself larger hydro projects typically are not leased situations. Typically the energy company will just buy all the property outright put in a dam and generate electricity that way they're not going to lease the land around the dam. But you can make money with the hydro situation as well if you have flowing water on your property. There is the potential to turn that kinetic energy into electric energy and sell it on the grid or use it on your own. I hope this is helpful.
There'll be more posts on this topic of how to make money with vacant land if you have acreage that's just sitting there. You can use it to get cash flow. You can make money with your acreage and we'll share more ways to do that in future posts. Thanks.
How To Make Money with Vacant Land Series How To Make Money With Vacant Land Part 1 – Rural Leases How To Make Money With Vacant Land Part 2 – Infill Land Leases How to make money with vacant land Part 3 – Residential Rentals How to make money with vacant land Part 4 – Green Energy Part 5 – How To Make Money With Vacant Land – Easements Part 6 How to Make Money with Vacant land – Minerals Part 7 How to Make Money with Vacant Land – Plants
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