Part 5 – How To Make Money With Vacant Land – Easements Edit
This coveted lands post is how to make money with vacant land - easements. So you're looking at a property or maybe you own a property and it's just sitting there and there's an annual tax bill on it. It's cash flow negative. How do you turn that negative cash flow into a positive cash flow or how do you turn that negative cash flow into a neutral cash flow. So you cover the costs of taxes every year and you just get to own the property for free. Well, we're going to talk about how to deal with easements. Easements can be put on a property for a number of reasons. And the most common easements that we run into are for roads or access and for utilities. First of all in order to get easements it typically needs to have access itself. So you want to look for properties or if you already own a property if it has access on it and you want to grant access to someone else look around your property boundaries and see if any and your neighbors would benefit from getting an access route to their property through yours. Surprisingly there are a lot of landlocked properties in the U.S. and in order for people to access those properties they have to get permission to use neighboring land to get to their property. And there are lots of agreements you can work up. I mean you can get as creative as you want with this but if you find a neighbor that might benefit from accessing their property from your land even if their property isn't landlocked they might have access to the north side of your property your property is on the south. But maybe there's a reason why they would want to get to the south side of their property from yours like there might be a cliff or a river or something on their property that makes it difficult to
pass from north to south. You can offer them access to the other half their property or maybe they just have a lot of infrastructure on the south side of their property and it'll be easiest to take across your property. Well, it's a good situation where you can reach out to your neighbor and say hey you know if you're willing to pay a little bit per year I'll give you an easement to your property. You can also do an upfront easement where they just pay a lump sum amount and you get some cash out upfront from your neighbor to put an easement and they get access to their property. There are a lot of other entities that will pay money for easements. Neighbors tend to pay the least surprisingly a lot of times infrastructure and energy companies will pay a lot of money for easements through a property. Sometimes though almost pay enough to buy the property or to buy a substantial portion of your property. And I've seen situations about a property in Colorado, there was a green energy company that was installing a large windmill farm not on the property but a distance from the property and they needed to get that electricity from the location they were building the windmills into the civilization nearby the town nearby. So they offered all the landowners that were in the path of the electricity generation to the electricity use and a lease agreement to lease an easement on those properties and you can reach out to local power companies see if there are any opportunities like that in your area where they'd want to cross your property. The problem is they typically need to negotiate with a number of property owners because they have to bring those lines for long distances so you won't be the only person they are negotiating with and we'll have to talk to several owners along the way The same goes for other utilities. So national gas lines oil lines water lines sewer lines all of those are opportunities to get an upfront fee for an easement or to just have an annual easement rate built in. Now a few things to consider are whether you should do an upfront fee or an annual fee. And in looking at this you want to ask yourself how long is this entity. Who wants that easement going to be around if you're dealing with an energy company. Maybe you have a lot of faith that there are going to be there's going to be a need for electricity lines for a long time. So you feel confident they're going to continue paying for that easement for a long period of time. Just make sure you write in your contract that if they stop paying they have to have some sort of a reserve fund that would be used to take their equipment off of your property and clean it up. And the same goes for other forms of energy natural gas oil other things where that be building pipelines to your property. You want to make sure there's a reserve fund where they will clean up any messes and take it out if they stop using it. If you don't think that company or your neighbor is going to want to pay for a long time for that easement you might just want to do in a lump sum fee upfront. And the reason for that is you'll be able to extract more value doing that than you will have an on-going payment and you may not have to worry as much about the headache of them leaving stuff behind because you don't build the costs of clean that up into your upfront payment sometimes easements can be quite beneficial. They can in the case of road easements provide another access route. If you stipulate that you can also use that easement that's already on the land. You can have more access route to other parts of your property if your neighbor is willing to build the road or maybe you share the cost of the road. Likewise when putting in power lines or gas lines companies will often clear an area and you might be able to use that clearing to your advantage for grazing or for other activities that wouldn't work very well in a densely wooded area. So your easements can also improve the quality of your property in addition to providing income. Sometimes they detract from the value of the property. Just kind of depends on what the easement is where it's placed and whether it's going to potentially reduce the use of your property or improve the use of your property. Another question people ask is How much should I request for the easement. Well you could shop around and ask different companies but usually with easements, you don't have the opportunity to shop around there's one person that wants to use your property and you just have to negotiate with them. You know hopefully you can cover your tax bill sometimes if it's just a very small portion of your property that's being used. That will give you some cash flow but it's not going to cover your tax bill. Sometimes it will cover more than your tax bill. So it is dependent on what the easement is for and what the other party is willing to pay. You might want to ask around just to see if you know ask local power companies if they could use your property. Ask your neighbours and you might find someone who's willing to pay you just to use your land. And that way your land isn't sitting there empty not being used and if you're lucky these people will actually improve the quality of your land by building and roads or other infrastructure that you can also use as the owner of the property. So there you have it it's possible to make money by just leasing out a very small portion of your property not even the whole thing and you can still use the rest of your property for other purposes or even lease the rest of your
property for other purposes. So you can make money in a variety of ways with your vacant land that's just sitting up there. Stay tuned for more information on how to make money with vacant land in this series.
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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