Ranch Investor Podcast

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Episode 8 | The Dark Side of Q3: The Imperfections in the Market


Over the past five years, the ranching industry has been through a whirlwind of changes. Want to know how it’s changed? We’ve got you covered in this episode of our podcast featuring ranching expert Andy Rahn from Montana Land Source.

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Colter DeVries: 0:01
I’m Colter DeVries, owner of Ranch Investor Advisory and Brokerage Services. As a former commercial nag banker, my main reason for doing this podcast is to simply gauge the market’s appetite for crowdsourcing investment in a Ranch real estate fund.

Stock Voice: 0:15
The Ranch Investor podcast, curated by subject matter experts, to give you immense benefit, because we believe your time is valuable.

Colter DeVries: 0:25
Well, Andy Rahn, welcome back to the Ranch Investor podcast.

Andy Rahn: 0:30
Thanks, it’s good to be here, it’s been a while. It has. It has.

Colter DeVries: 0:33
I think we all have a bone to pick with you. Uh-oh, I had a client call me this week.

Andy Rahn: 0:40
Did I screw up another deal?

Colter DeVries: 0:42
Yeah, you’re always doing that, but he called me and he has roughly $12 million worth of property, ranch real estate that he would consider selling. He’s also been adding to it, looking for opportunistic deals. You know he’s got about $2 million to play with. And for the last, what has it been now? Almost two years, definitely a year and a half, definitely a year. I’ve been telling him. We talk like once a week and he’s heavily invested in the stock market and commercial real estate. So he’s putting in touch with what’s going on. And I’ve been telling him hey, with rising interest rates, definitely a slow in demand, we’re going to see an increase in supply. With rising supply, prices should come down. And he called me this week to say Kulture, I think you need to eat crow, I think you’ve been wrong. For too long now You’ve been telling me that rising interest rates and rising supply means prices are going to come down, and yet it seems like prices continue to climb. And if you look at the case Schiller index for homes, which homes may or may not be correlated to rural and ranch real estate- but the. Schiller is back up and there’s been this like I mean Kulture here. I want to call it a dead cat bounce, but we’re in this crazy place. It must be inflation.

Andy Rahn: 2:20
I mean there’s low supply relative to three, four years ago that’s what I was going to say is supply hasn’t bounced back yet. I mean it’s inching backup, but inching is the word. Why inching. I mean it’s just so slow, I mean it’s just not. I mean I’m looking right now. I’m looking at my website, looking at Montana Land Source. Today there’s 359 properties on the market and pre COVID, you know, six or 700 was the norm. So we’re still at half.

Colter DeVries: 2:51
We’re still at half.

Andy Rahn: 2:52
Yeah, we got down to a low of just below 300. I think last December was two in the in the high of two nineties. That’s the lowest I’ve ever seen it. And so we’re, we’re inching back up, but just a little, not, not where’s. We’re not back, we’re not rebuilt.

Colter DeVries: 3:10
I’ve heard it explained that we’re inching back up and this is I’m going to correlate rural residential partner-inch to home or sorry, residential, which I you know. I’m definitely no expert there with homes. But I’m going to, I’m going to say that they are correlated to a certain extent.

Andy Rahn: 3:31
Yeah, I actually am shocked how often they sort of follow each other. Yeah, it’s pretty interesting since they’re such different, vastly different classes, I would agree. Vastly different entry points, price wise.

Colter DeVries: 3:44
Well in the rebound of home supply. Granted, home supply because of developers can be far more volatile than rural farm ranch Right Because you can actually create home supply, but I would. I would assume the majority of home supply comes from active participants in the market sellers yeah. And with with that, some someone was saying that you’re not seeing an increase in supply drastically because today’s interest rates 7, 8% is too expensive to get out of your current mortgage. If you were to sell today and your current mortgage is 3.5%, you’re you’re not gaining, you’re going backwards because when you 1031, or if you downsize, upsize, go horizontally, whatever you’re going to do, your new money is double that.

Andy Rahn: 4:38
And doesn’t residential have the same problem as land? As what’s your replacement going to be Right? Aren’t you, now you know, essentially stepping into a seller’s market? You know so fine, you can sell and do pretty well argue. You know, presumably. But now you’re. Now you’re a buyer in a seller’s market. If you want to replace, Correct yeah, so you’re not.

Colter DeVries: 5:01
You’re not gaining, you’re not working yourself up the economic class, social ladder.

Andy Rahn: 5:05
So my question as soon as you start talking about a guy who’s thinking now about entering the market, my question is always what took him so long? Like why you know it’s? It’s to me it’s funny to think about because you’ve heard me say this, I’ve said it over and over 2021 was a record breaking year. It’s a year I’m not sure we’ll see again in our lifetime, as far as just market activity and market growth. So it’s interesting to me these sellers that are, you know, considering entering the market now like why you know they waited for the. They waited for the bubble to pass.

Colter DeVries: 5:42
So your question was why enter now? And my belief is I still don’t think it’s I mean in granted. People are going to be like, well, you’re a salesman, yeah.

Andy Rahn: 5:54
You need volume, yeah, you need inventory, of course you’re trying to get me to sell.

Colter DeVries: 6:02
It’s still not a bad time because inflation is still happening. That’s why we’re still seeing these. Hopefully you get into this a little more today. Some crazy things going on and that craziness is driven by the uncertainty I think it’s not just driven by, it’s not monobarriot, it’s multivariot. But one of them is the uncertainty of this inflation. It’s still happening.

Andy Rahn: 6:25
Well, my question for you is it seems to me like a lot of these sellers they hold, they say you know they watch this market. They hold, they don’t enter the market as a seller tell the bubble passes, then they want to enter the market and they damn sure want to ask the price that was expected during the peak. So don’t you come along as the broker, you know, a year or two later and sit down at the kitchen table and have to have that discussion about pricing and having to be competitive.

Colter DeVries: 6:58
And you know, it’s just, it’s not a, or someone else comes in behind me and lists it out of the price that I recommended.

Andy Rahn: 7:06
Well, remember it wasn’t at Jim Toth on this podcast a couple of years ago, said you want to be the first or the second? Well, it was the firstborn, second marriage and third realtor.

Colter DeVries: 7:15
That’s right. Firstborn, second wife and third broker, yeah, yeah.

Andy Rahn: 7:21
Well, I’ve said this before, I think on this podcast. I’ve threatened to do this. I’ve never I haven’t followed through yet but sometimes I get the impression that my biggest value proposition for broker clients of Montana LandSource is ammunition for sitting down at the kitchen table to bring sellers realistic. And I’ve threatened to produce a sheet, you know, like a white sheet or like a printable PDF that you could slide across the table and the kitchen table. You know we’re sitting down with the seller. Why not? To overprice your ranch. Some stats from the market, some you know, because that’s that seems to be where a lot of brokers lean into the data I produce.

Colter DeVries: 8:03
Well, we, we had one of those when I was with Clark and Associates Land Brokers and it’s actually supported by university studies, and I forget which university it was. I could pull that that initial. It’s kind of like an initial sales pitch, right? So we, we had why you don’t overprice is, and maybe, maybe things are different after COVID, I don’t know. But because we know that the, the allocation value of prior of residences has changed post COVID. So maybe this, this quote, unquote overpricing, which many I shouldn’t say many, but there’s, there’s several brokers and brokers firms known for for doing that. Maybe that’s changed, but no, it can be. So far it can be supported by research studies. I’ll show you that when we’re done here.

Andy Rahn: 9:03
Don’t you think there’s a market cycle about every seven years or so, where they look like? They go from looking like geniuses to looking like fools?

Colter DeVries: 9:10
Yeah, it’s kind of like farmers and ranchers get a big win Right so every seven to 10 years, and those overpriced brokers get a big win once every seven to 10 years.

Andy Rahn: 9:21
Right, right. Well, I remember 2005,. You know things were blowing up in Southwest Montana. I was living in Bozeman at the time and a broker told me something along the lines of your if you don’t price twice what you think the property is worth, are you an idiot or are you serving your client? Well, because at that time you’d you’d double the price you think it was worth, and in two years he’d be right the market would catch it.

Colter DeVries: 9:44
If you, I mean if time, value of money and opportunity cost are no factor to you which they don’t seem like they often are to land sellers.

Andy Rahn: 9:55
Correct, that does not seem to be part of the calculus?

Colter DeVries: 9:59
Definitely not. No, I can be here another 55 years. I’m not worried about it. Exactly Well, what is today and what’s going on at the market? Give me a summary.

Andy Rahn: 10:12
Well, we were talking a little bit before we turned the microphones on. I got a message yesterday from a broker who was looking at the. You know I’ve got live stats in Montana land source every day of the market. You know we update and publish these live stats and she was double checking. Couldn’t believe it. She said is it true that we are down? You know, 80, 90% in volume of sales from a year ago and, sure enough, today, 86% down in number of sales. So the sales that have happened so far in 2023 are 86% down from the sales in 2022, 164% down from 2021.

Colter DeVries: 10:52
We are just we’re in the third quarter here, august 1st 2023.

Andy Rahn: 10:59
And I will say I will qualify that. I mean some of that is a rise in off market transactions. You know, we’ve seen it, we’ve seen an increase in that. So that is part of the story. But nonetheless, even with that in the in play volume has just come to a standstill. Almost. We’ve 92 sales so far in 2023, as opposed to 171, 2022.

Colter DeVries: 11:25
And I think we have once covered off market transactions that maybe it’s privately, but I’m not afraid to go over it again. Obviously it’s happening because there’s an incentive to do it.

Andy Rahn: 11:37
Yeah, it seems like there’s less of that. I mean, we’re definitely, you know, we saw some of the tends to be the big brokerages that do it with the big ranches. I mean there’s always off market transaction, you know neighbor to neighbor kind of stuff of course. But as far as like big ranches that you’re thinking gosh, why would that not be exposed to the market? Wouldn’t that, you know, garner the most you know possible buyers in the market kind of deal? I think I’ve seen a decrease in that actually and I think that’s part of the softening of demand. I think that during the peak of demand, you know these brokers could place buyers, you know with a couple phone calls kind of deal, didn’t need to hit the market. But I see that changing. And, by the way, just addressing that off market thing we do usually in Montana, do find out about those eventually. I mean, we might not always know about them in real time and it’s part of the frustration of putting stats together is, you know the stats improve as you get further out in time and the hardest stat to have accurate is the current today because you know if you have everything that’s on the market, that kind of stuff, like just yesterday, I think, I found out about two sales, you know like a year ago kind of stuff, and got it added to the database. So, especially, you know, once you get a half a year out or something, you know we tend to get those sales anyway and it still shows these results. You know, this difference is not entirely. Some people lean into me on that as, like, well isn’t, isn’t the volume the same, it’s just all happening off market. But it’s not. There’s not that much off market activity.

Colter DeVries: 13:08
Kind of be no, no, no, we are. Are we in one of the most exciting times that you’ve experienced as an appraiser?

Andy Rahn: 13:16
I would say we were. You know that I and from a broker’s perspective this is distinctly unexciting Not getting commissioned checks is not very hard, it’s not exciting. I keep calling it correction. It feels like a correction market, you know, certainly not a crash. You know, like you said at the beginning, well, values are still pretty high. I mean they are down. You know the stats across the board show them down. But what’s tough about that, though, is it’s not equal across the board. I mean, if you have an A plus property, you know, if you have, if you have trout and elk and exclusivity, you’re gonna, you’re gonna sell just fine, maybe even top, maybe even record breaking right. So the, the upper bracket, is doing just fine in this market. But I think the and the correction is the most dramatic. As you go down the ladder and I think that’s what happens in times of real hot markets is the C property, d plus and C properties and B properties are the ones that really get lifted right.

Colter DeVries: 14:21
So would they be the mo? So going back to 06, western Montana well, there’s called that neighborhood A plus, that was the most volatile.

Andy Rahn: 14:33
Yeah, absolutely.

Colter DeVries: 14:34
While Eastern Montana, no offense was C, c grade neighborhood Right. That was less volatile, there’s less variance, but now we have some. We have some elk properties, some river properties popping up in Eastern Montana so new, honest markets, highly localized markets of recreation and highly desirable for trophy bowl. World-class bowl elk. Right right? Do you think that those are, now that it’s flipped, that A plus Western Montana is insulated and the further you get from A, so BCD that they are now more volatile.

Andy Rahn: 15:18
Yeah, I wonder if the market’s bifurcated a little bit, because when I look at the buyers of Eastern Montana properties, some of them prefer the open Eastern, more ag. You know the Western Montana you might argue what would be the term. You know it’s, it’s more like Colorado, it’s more, it’s gotten crowded, it’s gotten. You know it’s expensive, it’s crowded, and a lot of these guys like give me Eastern Montana open space, right. So a little bit of a different motivation maybe. Maybe you know Western Montana, maybe smaller acreage got to be close to a, not only an airport but a ski resort and, and you know, a fancy restaurant for the wife and that kind of that little more upscale community. I guess you’d say bozeman whitefish, you know that kind of thing. But the buyers in Eastern Montana, you know, want the distance, want the maybe, want more of a legitimate ag operation kind of thing. So I wonder if there’s a bifurcation. And you’re right, I think that’s become more, you know, especially if you are truly looking for some isolation, which I think COVID kind of kicked in a little bit right, put a little more of a premium, if that’s the right word, on, you know, a couple hours from a decent airport and I’m truly out there riding my horses, running my cows, can build. You know the place I want and hell with Western Montana and all the trees and neighbors and expense Planning zoning counting regulations yeah. Not to mention political, not to mention political environment. So you’re in a. You know your neighbors are all kind of red, like you are, whereas Western Montana it’s now a lot more mixed. As far as right, you got people coming in from all kinds of places with different political views and stuff. It’s not maybe a way to say Western Montana you can necessarily pee off, pee and shoot off your porch.

Colter DeVries: 17:13

Andy Rahn: 17:14

Colter DeVries: 17:16
Yeah, there was a time that you could, but now it might get to put in the papers.

Andy Rahn: 17:21
So if you want to pee and shoot off your porch, eastern Montana might be your well that you know that 8,500 acre place that I sold in Southeast Montana that had it had terrain, timber, trophy, bowl, elk. It had water, it had everything views, just no national park or ski resort or a wine bar nearby.

Colter DeVries: 17:43
No, no, none of that. I did have a Baker Montana, fallon County, 45 miles away. You could land a jet. So I mean that helps. But the buyer said I’m getting a Western Montana ranch in Eastern Montana, eastern Montana values and that that can’t be beat. He said I’ve got everything I wanted in a Western Montana ranch I have here and obviously he felt like he was getting a huge win.

Andy Rahn: 18:17
Yeah, yeah I agree with him.

Colter DeVries: 18:19
I think he is getting a huge win.

Andy Rahn: 18:21
Yeah, yeah, I’ve heard other stories about, like a similar buyer situation of a trophy, pretty trophy ranch and the broker kind of described the guy as a bit redneck. You know so some of the some of the issues with that trophy ranch. It wasn’t as exclusive as one might like you know. I think that harmed the ranch I’m thinking about, but you know, kind of a redneck buyer, so to speak.

Colter DeVries: 18:46
So so this would be. I mean, I think you and I plus him, three people, two people make a market. I think this is a new trend. I think this demand for Eastern Montana, eastern Wyoming, if it’s got some trees, some recreation water, western South Dakota. Yeah. I think that’s going to continue and in these what we call like islands, you know these pockets of interest. I think the demand there is going to continue that they’re no longer a hidden gem.

Andy Rahn: 19:21
Yeah, and I really do. Like I said, I think there’s kind of a bifurcation in the market. I think Western Montana is, you know it’s going to, it’s going to stay strong because you know it’s beautiful and there’s lots of amenities, but I think it’s going to appeal more to the out of state, not that Eastern Montana is not going to appeal to out of state, but again there’s kind of a cultural bifurcation. You know the big sky ski, you know the more skiing oriented or the more. You know what I mean Absolutely, and you know the other way you could talk about it is kind of an authenticity divide. I mean, I think Western Montana by some standards has, you know, lost some authenticity. It’s not quite Montana as we recognize it, having grown up here, eastern Montana very much still is. It hasn’t. You know that switch hasn’t flipped and that’s that has its own appeal to you know. I’ll just throw this in. This is more about towns than rural, but I think it kind of exemplifies this and I think I’ve told you this. You know I’d move. I lived in Bozeman for 17 years, as you know, grew up here in Billings, lived in Bozeman for 17 years, moved back. It’s only been five years and I can’t tell you, at the time I moved, how many people, especially in Bozeman, were just like wait a minute, you’re doing what? You’re moving to Bozeman or Billings, why? And you know it was completely voluntary, I didn’t come here for a job or a relationship or anything like that. And people could, from Bozeman absolutely could not wrap their brain around why somebody would voluntarily move to Billings. Four or five years later, whole different deal. I can’t tell you how many people have changed their tune and said, oh, I mean Bozeman especially, but maybe by extension all of Western Montana is impacted. It’s things have changed fast, certainly.

Colter DeVries: 21:13
And you need to use air quotes when you say from Quote, quote, quote, quote, quote from. Air quotes. Quote. Quote from Bozeman yeah.

Andy Rahn: 21:22
Well, nobody’s from Bozeman. It’s kind of like you’re it’s.

Colter DeVries: 21:27
I mean it’s nothing close to your multinational cities, but in my opinion you take your Sydney, australia, melbourne, australia, auckland, new Zealand, San Francisco, la, seattle, those are like they’re all the same. It’s they are city states right. They don’t have their own culture, their culture of multination, which is just I’m not putting a value judgment on that. There’s, I don’t seem to be wrong with that, but they’re not uniquely their own, in my opinion, and you know the people quote unquote from there would disagree and they would go up in arms like, oh, seattle has its own culture and you don’t know what the hell you’re talking about.

Andy Rahn: 22:07
You are absolutely right. Bozeman is a town of immigrants and you know, I was doing appraisal live in there and part of what made it a good place for me is I got out of there a lot. I was traveling all over Montana and the funny thing is I’d come back and I’d be all kind of charged up from cool people in places I got to see and work with, you know, and nobody knew what I was talking about in Bozeman, like I could find somebody in Bozeman that had, you know, been to Argentina quicker than someone who had been to two dot. Right, you know, and I talk about the landscape, I talk about the culture because you know, that’s why I do what I do, and I would come home legitimately charged up and nobody got it. And that’s part of why I moved to Billings. I moved back to Billings and it’s funny, I’ll just sneak into the pub station or you know, to get a, to get a bite, on my way into town and I was out. So, oh, yeah, yeah, my uncle. And so you know, right, yeah, right, everyone has ties Five hours away your one degree of separation from everyone. Right, right. I actually hope that Billings and Western or Eastern Montana as a whole embraces that and doesn’t rush to sell out its culture like I. You could argue, maybe Bozeman and Western Montana has.

Colter DeVries: 23:25
Well, the the folks in Eastern Montana are already pointing to fingers that a sleazy brokers are selling them out.

Andy Rahn: 23:35
So we need to export you to. Maybe there needs to be a surtax, a special tax on brokers. Everybody hates you until they want to sell and get top price.

Colter DeVries: 23:52
Right, yes, so what are? What do you see going forward here?

Andy Rahn: 23:57
I just think we’re in this correction period, which is which is very, very slowed down. You know, obviously, volume and we, you know we saw this post 2008 as well, especially you know I mentioned this earlier like the, the optics get really clear the further out in time you get. You know you get more data in and stuff like that, and you know 2008 seemed so dramatic at the time but now it looks like just kind of a blip and in the market, and you know, there were definitely some extremes on an individual property basis at that time. I mean I remember, like I remember, for example, there was an auction and this family was in a desperate situation. That’s why they had to go to auction and they had turned down an offer for twice what they got a year later at auction, oh my gosh. Yeah, so we saw some of that, but but very little foreclosures actually. I mean, despite nationally, that being the story in land in Montana, it was shocking how few of that there was. But anyway, post 2008,. You know we just saw this slow down, this correction period. That’s just kind of let things sort out. I think that’s where we are now demand according to brokers, and you tell me if you know any different. You know demand brokers still say they got buyers stacked up. You know with interest, but I also call it the pencil sharpening. The brokers are the buyers of sharpened their pencils. They’re not desperate and anxious, they’re not, they’re patient, they’re. So this whole patience has hit the market and that’s you know. That’s the opposite of what we saw in 2021.

Colter DeVries: 25:35
Are the buyers today buying options? Because I’ve noticed a few, quite a few ranches falling out of contract going back on the market, yeah, Are these buyers tying them up with contingencies, maybe getting an appraisal, not being happy with the appraisal or or just kicking out their due diligence period and saying, oh, let’s, let’s buy some time here. I think we have refundable earnest money and let’s see what else happens the next four months while it shakes out?

Andy Rahn: 26:04
I think some of them, I think a big part of it still is replacement property, or so selling what they have.

Colter DeVries: 26:14
So, contingencies.

Andy Rahn: 26:15
Yeah, I think that’s happened, that I’ve heard of a few times. Someone you know enters into contract to buy something but it’s contingent on selling and presumably in that situation they’re overpriced back home. I mean I can’t think of what else would write. Why else would their place not move, right, you know? But I haven’t seen a whole lot of like in your question. I hear like kind of game playing, like oh, just tie this up, without being all that serious, I you know just to tie it up and keep my options open, kind of. I haven’t heard anything along those lines and it seems kind of counter to the overall mood which is not real aggressive, not real. You know, buyers to me don’t seem like they’re aggressive, even if supposedly they’re motivated and interested and in the market as players they’re, they’re super cautious and sharpen their pencils and waiting for what they want and wire properties coming back on the market. Well, that was a contract. Like I said, I think sometimes contingency on their own property. I think interest rates have played in. I mean the ag. I’ve heard of ag properties. You know interest so much. You know our markets dominated by cash, so you’d think that interest rates didn’t matter. But there are ag buyers that are using loans, you know well calves are doing really good right now.

Colter DeVries: 27:39
So yeah, part of that is I wouldn’t. I would not expect to see foreclosures being a big part of supply not until the cattle market drops back down to 700 bucks a head. Did I say that out loud? But that’s gonna happen.

Andy Rahn: 27:53
Am. I on record.

Colter DeVries: 27:56
No, I’m just speaking from experience. You, you buy in right now and things are good and $1,500 calves, 16, $1,700 calves and yeah, you can in your mind, you can buy a lot of things with that. But yeah, when they when they drop down to 750, like I incurred my first, first calf crop. It don’t look too good, yeah.

Andy Rahn: 28:19
So again, I just think this is a big correction market. I’ve gotten a little bit of criticism for saying that. Somebody another appraiser said isn’t the correction usually mean when it’s going from low backup, right? Isn’t that traditionally what correction means? And I’ve thought a lot about that as like well, as an appraiser. I think her correction just means it’s correcting from either a high or a low Correct and I, as an appraiser, I don’t like the extremes either way. I mean, I know brokers and at the participating in the markets it’s a lot funner when it’s hot than when it’s cold, I know, but yeah ideally you look at that trend line going back to home home prices from.

Colter DeVries: 28:59
I think, what was it like? 20, about 2012 to 2020, it was cyclical, seasonal, so it just was a steady increase. It was only cyclical around seasonality. That was nice. That was very predictable. Interest rates were fine. That was a real nice period.

Andy Rahn: 29:25
Well, and you know this has been, it’s a bit of a mantra of mine, but the land market in Montana is a highly imperfect market. Sometimes they even choke on the word market. Sometimes I long for a different term because I think it’s a little misleading. I mean, it’s just it’s not calves, it’s not houses, it’s not cars, it’s not corn, doesn’t resemble. You know it functions so much. We’ve talked about this on here. It’s more like fine art or antique cars or something like that. It’s just a very, very imperfect market and yeah, when it it’s sloppy at almost all times, but during the extremes and the volatility times it’s just a mess. And you know that creates some opportunities for some folks, although I sometimes I think that opportunity is really just dumb luck, depending on you know where you’re at in the market. But it sure creates a lot of problems. And especially, I mean you just think about operators. You know actually actual ag operators and people doing dealing with the state transitions and stuff like that and trying to make smart decisions with their asset and stuff.

Colter DeVries: 30:29
It’s, it’s a flip and mess and they call people like me and it’s you know yeah, yeah, Well, it’s, I’m gonna, I’m gonna think this one out loud, think it throughout loud. It’s like there’s a market within a market. So you take a let’s take an Eastern Montana, the thing that’s kind of trending right now Eastern Montana elk. You have these properties that were historically like 650 an acre and now they’re 1200 bucks an acre. Right and that’s the buyer pool, buyer set for that is high net worth individuals out of state. Let’s, let’s throw some more love to Texas, as we do every episode. Texas, high net worth Texans, or hunters. I’ve heard of some Midwest, big time Midwest hunters buying these properties. They’re high net worth. Their opportunity cost is pretty low. They can get into these at a 1% gross annual yield. That doesn’t matter to them. If they were to fall out, if they were no longer the market, it would probably become more regionalized to other higher net worth. So now we dropped down to doctors and lawyers. So there’s always going to be a subset of wealth, national or regional, that’s going to kind of insulate, I believe. Let me just say I believe disclosure, the opinions represented here are solely.

Andy Rahn: 32:06

Colter DeVries: 32:08
You can wipe your butt with them.

Andy Rahn: 32:11
They’re worth what you’re paying.

Colter DeVries: 32:15
So then you drop down to that next level business owners, doctors, lawyers, probably within, let’s say, four hours of the property. If they fall out for some reason, whatever their opportunity cost is goes higher, that they’re no longer interested in these type of luxury assets. Then you get more local and I would say you have more regional. Call it within two hours. You have engineers and business owners again, maybe some family wealth, but we’re not ever going to drop down to where it’s like oh the rancher.

Andy Rahn: 32:53
I’ve been waiting. I was like when does the rancher hit into this metric? No, no, no.

Colter DeVries: 32:58
And the FSA beginning farmer doesn’t have a shot in hell. So FSA beginning farmer shouldn’t even be thinking about buying land. But now they are that group, the local farmer rancher, is such a long ways from being in the market, being a participant. But if things were ever to get to a point where these opportunity costs for the high networks and the doctors, lawyers, they would be market, the ranchers would be, but we’re so far from that.

Andy Rahn: 33:30
Don’t farmers and ranchers? I mean, I’ve wondered this and I’ve been meaning to ask. I’ve got lots of friends and clients that are in lending shout out to Ag West Farm, credit their clients and supporters Montana Land Source and the industry pretty strongly in general, but just land value. Say you’re an owner operator and you’re squeaking by, say you’re doing all right, you’re covering your butt and you got a reasonable business and stuff, but a great piece of ground is available joining you. That would really enhance your operation. You can’t really pencil it, but it’s a good investment in its own right. Does that play in? Can you get financing from a lender based on the appreciation potential of that asset rather than the production potential?

Colter DeVries: 34:18
We’re definitely getting there. I think Farmers Business Network has a lending product that is based on appreciation. I would suspect more private capital is going to respond to that demand, that problem, that need.

Andy Rahn: 34:35
Because that’s the source of value. That’s just what you outlined. Basically is its appreciation. It’s not production.

Colter DeVries: 34:42
And you said integrals their operation. I would argue I’m not going to get into farming because I don’t know farming that well, but for ranching an expansion is rarely ever essential to an operation. Maybe better off cross fencing and developing water. At 300 bucks an acre that’s an astronomical value. But increase your own productivity rather than buying productivity.

Andy Rahn: 35:16
Yeah, are they tapping you for their consulting on ranch management?

Colter DeVries: 35:22
No, I don’t know why that’s a foreign concept. People think they got to grow by expansion, grow internally.

Andy Rahn: 35:31
Don’t you think that’s been baked into the culture and the system for bigger, bigger, bigger, bigger, bigger, yeah, and economy scale and you got to get bigger to survive.

Colter DeVries: 35:42
The big operators. There is pride of ownership, pride in land and pride in assets. The old saying I don’t want to own all the land, I just want to own what’s next to me.

Andy Rahn: 35:56
Yeah, I was thinking about this heading into this podcast actually. Obviously, it’s no new news that the divergence of production value from real estate value has been going on for decades. You could argue that that started at least 40, 50 years ago. Probably right, but it just gets more and more extreme. Where does it end? Because production value has basically essentially been frozen in time. I mean, accounting for inflation and dollar value of money and stuff, it’s production value. Commodity prices are static and land value just skyrockets, not to mention inputs.

Colter DeVries: 36:39
Well to get into. Are there lending products that take into account appreciation rather than cash flow? Robo Agrifinance, who I worked for. They’re the largest ag lender in the world, based in the Netherlands. A lot of their products in Australia and New Zealand were interest only because they realized the land value was not going to. You couldn’t cash flow the entire principle, land value. So you just make your interest only payment for 25 years and then you’re going to sell it to a larger, probably more corporate operation.

Andy Rahn: 37:18
Yeah, yeah. It’s just interesting where this goes, where this ends up, do we just? I mean, is land value just going to never stop?

Colter DeVries: 37:33
Which is a plug for my direct participation. If we see this as a problem, this lack of ability to cash flow. That risk needs to be put on someone else with a lower opportunity cost. The operator needs to do what the operator does best. The investors get what they want out of an investment. I think that plays well into what I’m doing. I think that plays well into a pooled fund per se, a SPV, where you have long-term ownership at today’s market cap rates that do not need to be cash flowed principle and interest debt payments from cattle. And now I think hunting is becoming a real enterprise too.

Andy Rahn: 38:22
Yeah, so the land is held for its own investment, correct, separate from production in a sense? Yes, yeah, which is reality.

Colter DeVries: 38:33
Yeah, I mean there’s. Think about, even within land, all the enterprises you can have. So you have gravel hunting, tourism ag. You could have a government programs enterprise. So Carbon Carbon, I think working. I don’t see a future where we in my generation, hopefully some this is a personal statement hopefully some drastic reforms come to government spending. But I don’t see a time where we do cut the farm bill in PRF, lrp, crp, csp, equip. I mean that alphabet soup grows every year.

Andy Rahn: 39:17
Yeah, yeah, right, and you’re talking about the government spending the programs. Yeah.

Colter DeVries: 39:23
Yeah, and what’s beautiful about that within my DPP is it used to be that these government programs, they did try to slight them in favor of the small mom and pop rancher, the small owner operator. But that was when we had direct payments and subsidies, market relief type subsidies. Now everything’s being tied to conservation. And when you tie it to conservation, well, theoretically it’s really подc偷 the idea that it was always someone with lots of Tob legs. If you’re gonna have a bigger impact with say that the subsidy is like 30 bucks an acre and that’s just a example number for pasture. Why wouldn’t? If you are creating all this positive externalities, if you’re creating a common good with conservation, you wouldn’t wanna leave out the corporate owners. You would want them taking up your program because they are improving whatever it is watershed, habitat right there, well, those program administrators.

Andy Rahn: 40:27
if they get a handful of large corporate participants, that moves the needle on their program, they can document success versus a whole bunch of small mom and pops that probably half of them follow through, and you know.

Colter DeVries: 40:42
And yes, and that’s yet another issue is that these government contracts are not really contracts. People don’t even have to follow through with them.

Andy Rahn: 40:52
Well, I’ve always been surprised. You know I’ll show up on a place and it’ll be the most hardcore anti-government. You know this and that, but sure enough, there’s an equip.

Colter DeVries: 41:04
You know water development program, you’re talking to that person.

Andy Rahn: 41:10
And I mean, I guess at times I thought, well, I guess maybe this is all as it should be, like I don’t know. I remember one place, you know, equip money getting cattle off the creek and it was a pretty, it was a pretty ugly cattle on the creek scenario, you know, just demolishing this pretty nice creek, actually right, and it’s like, and it’s like I don’t see this happening any other way.

Colter DeVries: 41:29
No, certainly not.

Andy Rahn: 41:31
Because you know generations right Like that’s been there and they’re not moving that for nothing. I guess you could do stick rather than carrot at some point, but that has its problem.

Colter DeVries: 41:42
So, as we know, yeah, and that’s Eric Belasco, the econ professor from my last podcast. He kind of laid it out that on both sides of the aisle it’s more favorable to go with the carrot and to wrap in conservation, that that is politically palatable for both conservatives and I don’t want to call it Democrats, liberals, because they’re becoming leftists in my mind.

Andy Rahn: 42:10
But liberal is too soft a term at this point.

Colter DeVries: 42:14
Well, and yeah, I have my own beliefs about. You know the values of liberalism, but no, it’s. It is getting to a point where conservation is a win for both representatives. They can go celebrate that with their constituency. Right, right yeah. So as we get to this, where you know, we said land, land values are on you can’t pencil them. They’re out of reach. They’re never coming back. Yeah. So I’m creating a new product for that.

Andy Rahn: 42:45
You know it is interesting to think about conservation becoming I mean, you just touched on it being a large, broad political entity element in the political sphere and thinking about land value, land management. Now that we’re talking about this, I mean that has really grown. I’m just thinking about my, you know I’m knocking on 20 years of direct experience in this industry, in this market, and you know it’s a I. As you know I did conservation easement appraisals and stuff like that. So I’ve always been kind of involved. But it definitely has grown. And you know we’ve talked, we’ve had guests on the podcast about the carbon markets. I actually had a lengthy call with a Bloomberg journalist last week and it was pretty interesting. You know New York city Bloomberg journalist who was pretty blown away by some of the aspects of the Montana land market and particularly the decoupling from production value to land value. But you know we talked about she asked a lot about the carbon markets and my stock answer with that is that it’s just still really, you know, market, that’s in its infancy. We just it’s not really an established market out here yet, but clearly on the horizon, right, and you just think of. Anyway, back to the point of conservation initiatives, conservation programs becoming more of a core feature of land value, land management. I mean it’s really and I mean it makes me think of. I mean farming programs has been that’s been around a long time, for, especially in the farm sector, right Grain and hay guys have been farming programs as deeply as the ground for a long time. But the conservation program quote, unquote. Farming is you brought.

Colter DeVries: 44:38
I mean, you just hit on. What my belief is is, if carbon comes via a carrot and I hope I think it will I’m not all that worried that it’s gonna come via a stick, but it’s another crop. Farming. I mean if you’re in Eastern Montana you have two crops livestock or three livestock small grains and hay. Yeah. Why not add diversity to your portfolio and farm?

Andy Rahn: 45:05
carbon. So I remember talking to my dad about this a couple years ago it was actually when Chris Mayhuse was coming on the program, as he’s been a guest here and is helping develop this market in Montana and I went to school with Chris and Chris’s grandfather and my father were pretty close, I think. So I was telling dad about it and he’s, and then talking about carbon program. He said so now we’re gonna pay ranchers for doing what they already do.

Colter DeVries: 45:35
Has been the model since the 50s. I was gonna say this is different.

Andy Rahn: 45:38
Now this is how is this? Which is kind of funny, because he was actually a pretty staunch, you know, egg supporter, ranch supporter, but he was certainly fiscal and political conservative. So he was like what’s this bullshit? We’re paying somebody to do what they’re already doing.

Colter DeVries: 45:58
Well, I wanna ask you a question as I get into this DPP direct participation program pool syndication of ranch real estate. I do want to consider conservation easement properties because they are sexy. They’re usually, I mean, the ones that you want are mountain foothills.

Andy Rahn: 46:19
Some of the best properties available are under conservation easement.

Colter DeVries: 46:22
Yes, absolutely, and my longtime mentor, denver Gilbert, one of the owners of Clark Nisos, who loves them. I’m not gonna speak on Denver’s behalf. We were discussing this yesterday and today. You rarely see a difference in value for the sexy mountain foothills with water and elk. As you get further into the prairie you’re gonna see that diminution of value. But our belief is that today is kind of the front end of in 30 years. Are we gonna see any difference at all?

Andy Rahn: 47:07
You know it’s funny about that. When I started off about 20 years ago doing conservation easement appraisals and they’re tough because you have to find comps. Conservation easement appraisal is two appraisals you appraise it as is and then you appraise it with this potential easement that’s gonna be on it. And then in that second scenario you have to find comps. And 20 years ago that was pretty tough and the big mantra in the conservation easement appraisal community is that we don’t have enough sales, don’t have enough sales, don’t have enough sales. And that’s the big problem Now, 20 years later, depending on the area, and you have the sales and they’re not that helpful because of what you’re saying.

Colter DeVries: 47:45
And that is such a change in consumer taste and preferences. Yeah. I’m personally in that camp and you know me as the anti-government libertarian Henry David Thoreau living out at Walden Pond type. I don’t like the idea of having an unwanted partner who’s on the title and covering what I can do, right, but it seems like I’m becoming the exception.

Andy Rahn: 48:18
Yeah, and I guess just along the lines of, like you know, you’re talking about conservation programs becoming perhaps more inherent in land ownership. Land value, land trust and conservation easements are one aspect of that and less obscure, less unusual, less, and you know, on some avenues they can be a resource. I mean, it’s a double-edged sword, without a doubt. You know you have your in bed with somebody on your land and that’s a bit counter to the historic idea of land ownership in the West. You know the whole premise is it’s yours and no one else’s and you can do it, you damn well, please and right. But now you’re in bed with somebody and if you wanna, you know some simple, potentially simple things. You know you gotta run them by another entity. I push back. I mean, you know, I know all those guys pretty well and I push back that they’re difficult to work with. I’ve found very, very few examples of that, in fact the opposite, and I think their motivation is to be easy to work with and help stuff get done. But the terms of the easement are the terms of the easement and their role is to enforce that. So, and there have been some issues, in fact I think there might be some litigation going on right now and on a property you know and the classic scenario is it’s a new owner, it’s not the person that put the easement on. You know someone comes in and buys it and either doesn’t understand, doesn’t read it carefully, has a cavalier attitude and they have to go pretty hard against the terms of the easement. You know we’re not talking about tilling at the wrong time. Or you know selective logging or something we’re talking about flat out building where you’re not supposed to. Or you know yes, no-transcript To your point though you’re in bed with somebody. But maybe that’s a sort of a shift from what was a pretty isolationist independence kind of thing to more of a collaborative collaboration. And you know those guys are pretty plugged into all these programs. I mean sometimes when somebody calls me asking in general about conservation programs, I’ll point them to a land trust because some of those staffers know more about all those programs I would. Sometimes I’d send someone there than I would before I’d send them to FSA or something, because a lot of times those guys are so siloed. You know they know their programs, but the land trust some of the staffers I’ve known at the land trust, you know work pretty hard at kind of knowing the whole environment of programs. And you know easements have changed a little bit. I mean just getting into the weeds on that. You know used to be all about the tax deduction for doing an easement, but I think that’s diminished a little bit and more of the getting paid first through some program to do an easement. Sagegauss, really initiative, really opened that up in Eastern Montana for sure. But you know you can call up those guys and they’ll they’ll be able to survey pretty quick whether there’s any programs out there to help you purchase an easement. That’s their job.

Colter DeVries: 51:26
Yeah, there’s salesmen yeah, like sleazy brokers, everyone’s looking for their.

Andy Rahn: 51:31
No, no, no, no, no no no.

Colter DeVries: 51:32
Those sons of bitches are selling property rights without a real estate license. I should, I should file a complaint with the department of labor there. Yeah, they’re competing and entering into my business without agency.

Andy Rahn: 51:46
I’ve heard that criticism for sure.

Colter DeVries: 51:49
If someone out there is an accredited investor and has a ranch in mind that they would like to invest in as a limited partner, as a LP. Passive investor tax as a passive investor. Let me know. Give me a call, set up a zoom meeting on my Calon Lee link and let’s let’s talk. I’d like to hear what the market wants for for DPPs of branches. Is it Southeast Montana trophy elk or does it have to be within two hours of bozeman? I mean, that’s kind of the big question for me.

Andy Rahn: 52:29

Colter DeVries: 52:30
So reach out. You can also hit me up on social media. I, we, those are not my pronouns, that’s how I refer to our team them day.

Andy Rahn: 52:46
My team is everywhere on social media online.

Colter DeVries: 52:49
So give us your five cents and it’ll be greatly appreciated.

Andy Rahn: 52:53
While I go get a coffee and you want to give your plug, yeah, well, I’d like to plug Montana land source, closest thing to an MLS for farms and ranches across Montana, and we map and track every listing and every sale in the state and have lots of content on the website at MT land source dot com, including live market stats. Every day we’re combing the market, updating listings, updating sales, and those are reflected in our stats online. We make our money by selling subscriptions, but there’s lots of free content to get started on to see if the product is of value to you. So check out MT land source dot com.

Colter DeVries: 53:34
All right, let’s, let’s get into hot button issue hot button subjective, opinionated, non data driven, maybe hyperbolic. I love all the things I love.

Andy Rahn: 53:51
All the reasons I became an appraiser.

Colter DeVries: 53:55
All the reasons I have a podcast Fact check me, I don’t care.

Andy Rahn: 54:00
Is this the fact, the fact? Free venue.

Colter DeVries: 54:03
This is my show. I pay for the hosting. I get to say what I want. So you and I have talked about with many guests and among ourselves the importance of culture and community and how you put a value on that. What attracts people to Montana? The quality characteristics code of the West, just the very unique culture we have in Montana. Is that something worth protecting? Is it worth conserving, and is there a obligation or a duty with these land trusts to protect community and culture? as much as open space and real property and wildlife and habitat, so I know I’m not going to name any names but one of our land trusts in Montana. They promote the shit out of that, but they are not just conserving open space and ag properties and wildlife habitat, they are conserving community and culture. Yet their board is made up of individuals who are billionaires, people who live in Greenwich, Connecticut, which is like all billionaires. Their board is made up of people in Los Angeles, Chicago, New York City, and that is a Montana organization and I’m thinking how can these individuals make informed decisions from their experience to protect community and culture? That is to me, that’s gross misrepresentation. If that were in a brochure that should be turned into the Department of Labor and your local realtor organization.

Andy Rahn: 56:01
Yeah, well, it’s interesting and I haven’t been tracking. I guess I haven’t been following who’s on the board as closely as you have, because I know in times past I know that there have been locals on that board.

Colter DeVries: 56:14
But they get a token DEI Diversity, equity and Inclusion a token local who’s? Only for representation.

Andy Rahn: 56:27
Well, it’s interesting. I don’t think that’s the way it was in the early days. I think in the early days boards were made up of locals and it sounds like to me like those organizations are probably in a situation where they have to balance all the like you said, the preserving of local culture, but the funding and the pockets, and that’s why they have to entice some of their funders with board positions, and I’m assuming that that’s part of the mix.

Colter DeVries: 56:59
Absolutely yeah. I mean, how do you raise $60 million of donations if you’re in Plentywood, montana? Right, you kind of got to go to New York City to do that.

Andy Rahn: 57:12
Well, you know it’s interesting, you know what comes to my mind. So you know I’ve worked with the Nature Conservancy and watched I guess you could say the Nature Conservancy. They’ve had a large presence in Montana for years on some big ranches and particularly the Centennial Valley, you know, have a big presence there and up at Malta and all that stuff you know and what. And you know they had some, they had some trouble. This might predate you a little bit but remember the Washington was it the Washington Post or the New York Times big expose about it was about 20 years ago, 15, 20 years ago, of the TNC and the insider deals with their board members and it was a. It was a big, big deal. Three, three part expose of where they really got their hands slapped and for these kind of practices. But watching them on the ground in Montana and even knowing some of the individuals personally, like I, really saw this transition from this kind of outside, you know, environmental slash conservation organization coming in with big ideas to do big things, but watching them evolve and adjust and be, learn how to become neighbors, which means integrating into the culture a little bit. And you know it’s interesting, out simulators come in whether they’re a landowner or a group, and they come in and you watch how much the culture rubs off on them and how much they rub off on the culture. And I, in the case of the nature conservancy, I’ve really seen a lot of change and a lot of and they’ve they’ve learned how to work and you know they have the, they have the program. I hope I’m not mixing this up with the APR, but the don’t they have their own wild beef program or whatnot, where they offer neighbors lease on grass for some cons in exchange for some conservation practices. I think the APR does that too. But anyway, some innovative programs and what? And now I’ll jump to the APR. The APR is the new kid on the block, especially. I mean, you know nature conservancy has been around for decades. Apr is relatively new.

Colter DeVries: 59:14
And they are non-profit.

Andy Rahn: 59:15
Yeah, both non-profits. I think the APR is still in in a period of sorting out how well they’re going to fit in the neighborhood or not, cause there’s you know, obviously there’s more controversy. You know nature conservancy is integrated more and better by now. Of course they’re not. They’re not as big, they’re not as they’ve not tried to change things as fast or bought as many places up and that kind of stuff. I think the APR and I’ve seen signs of it already that they’ve modified you know their stances and whatnot, but you know they’re they’re still figuring out how to how to fit in the neighborhood.

Colter DeVries: 59:56
That is my you know if I’m, if I’m going to be an armchair quarterback my critique of APR TNC versus these land trusts I see the land trust as a Trojan horse. They are disguised as a local group, local community working group, and they’re just selling this novelty to a Granite’s Connecticut. They’re selling it to New York city. It’s, it’s to me it’s disingenuous. The land trusts are, whereas APR, tnc, they have their values, they have their mission, vision statement. They, from what I can tell they, they hold to it. I think they do stick to their guns and they’re they’re unafraid of saying no, this is, this is our money yeah. This is what we raise the money for. This is what we’re going to do with the land.

Andy Rahn: 1:00:51
Right, right, yeah, well, you know it’s interesting and I’ll bring up I’ll. I’ll say the name. You know Montana land reliance, the biggest Montana land trust. I mean, you kind of referred to this earlier. You know the the cows versus condos campaign, I guess you could call it. I will say I think the land trust was early in transitioning from. I mean that cows versus condos is pretty classic because I think most would argue 30 years ago the conservation community did not care much for cattle across the board. Cattle across that board were kind of the enemy. It seems to me that the land trust, montana Land Alliance was kind of early in making that transition to no open space. Agriculture has value, hence the campaign. So I do see them as a little more insider in terms of and just to get clear with people, land trust they are facilitating conservation easements with landowners. So they’re a little bit more I don’t know if boots on the ground is the right word but they’re working with landowners to do conservation easements, whereas TNC and APR generally are buying their own ground and doing what they want with that kind of thing, with some exception. I mean it’s a little bit more complicated than that, but land trusts just facilitate a open market opportunity for landowners to Voluntary transaction. Voluntary transaction, yeah, yeah, yeah, I do see your point and I do think that’s the rub is, these out of state funders are a big part of their success matrix and so they have to walk this line between are they local? working with locals, made up of locals, or are they out of state funded? What I’ve seen, I think some of these board members are talking about, I think a wealthy out of state landowner comes, buys a piece of ground, goes through the easement process and now is welcomed onto the board and I think some of them bring more to the table. In fact, it’s coming to my mind now Some guy might be a legitimate financial wizard kind of deal. It’s like, oh God, this guy on the board will be amazing. Kind of deal, not just placating to the wealth but the skill set and the well and the networking and the right. So this guy, all the benefits. Yeah, this guy is, like you said, a Connecticut big wig kind of deal, so it just moves those gears for more deals. So yeah, I think that’s a position they’re in.

Colter DeVries: 1:03:45
And I may or may not be talking about referencing any one particular land trust.

Andy Rahn: 1:03:50
Yeah, because there are a bunch of them.

Colter DeVries: 1:03:52
Yeah, I’m making a broad generalization because I don’t want to burn any bridges, but I do want to broadcast some local sentiment.

Andy Rahn: 1:04:01

Colter DeVries: 1:04:02
But if it doesn’t feel right, let something to address.

Andy Rahn: 1:04:07
Well, I can tell you, when I got started I actually and I haven’t done a conservation easement appraisal in a while, so I’m a little bit out of the loop but it used to be more aggressive. I mean, I remember dealing with some of the guys from the land trust like sometimes dealing with incomplete information, sort of, provided to the landowner. And here I come along as the appraiser with a different story and there was some period back earlier in my career where there was some tough negotiations and tough moments and I feel like the land trust got a lot more sophisticated and we kind of figured things out. And the new generation that I see managing these land trusts are more sophisticated and things like they know their lane and they would never make assertions that is on the appraiser, for example, for the land value scenario. So the things have gotten better in that way. And I mean just to step back to when I get calls about and my position on conservation easements is they’re simply a tool, they’re a tool in the toolbox, they’re a program, like you’re saying, a potentially farmable program. If it works for you, great. If it doesn’t, great. And I certainly push back on if I sense any oversell or any kind of and I don’t see it so much from the land trust themselves. But sometimes it seems like there are other conservation entities that just pick up that trumpet call and everything needs to be a conservation easement and it’s like, well, slow down a little bit. It’s just a tool. It has its benefits, has its drawbacks. Right, if it works, it works. If it doesn’t, it doesn’t.

Colter DeVries: 1:05:50
Yeah, we could go deeper into that, because a lot of these are funded by NRCS. Yeah, so you’re using public money that’s going to benefit one family, one landowner, financially, economically, and is that a good use of taxpayer dollars, or is the general public getting their value out of that conservation?

Andy Rahn: 1:06:13
easement. Huge question, yeah, it’s. I mean, in some ways I think the argument for it is we’re able to do we, the public, are able to do things without having to buy land or whatnot. Right, it’s like more efficient process because we’re able to just buy a fractional interest in a land to get the X result. But that doesn’t necessarily fully answer your question.

Colter DeVries: 1:06:37
It’s like buying a fractional interest in Coulter’s DPP. So you can go hunt on it and you can have all the recreational benefits and not none of the management responsibilities.

Andy Rahn: 1:06:48
Is that going to be your marketing pitch directly against land? Trust, you choose me over, well you bring up.

Colter DeVries: 1:06:56
So there are these problems that are creating friction and these problems are increasing land values. I think that’s the buyer pool, the billionaire class that has entered Montana in many different aspects. So if that is a problem, my solution is different than TNC’s Grass Bank, which I think that they have a great solution, but they are nonprofit and I’m a capitalist, economic driven person. I haven’t seen TNC scale that. I haven’t seen them replicate the Matador recently. It’s been a long time since they’ve done a Grass Bank. I am not the APR, they’re 501C3 non-profit. They have their mission, vision, values. Again, no return involved there. I’m not the land trust. So again, I mean there’s no economic benefit. So I’m more like the free market solution to this problem of land reach out of touch to most people.

Andy Rahn: 1:08:05
Yeah, it’s an interesting diversification in the marketplace. I could see where it could certainly have some appeal, because all the things you outlined nonprofits and government programs and have downsides. I do think in general, certainly in Montana well, I should qualify old Montana Sometimes to be conservative and despite us pulling in more federal dollars than we put back out and despite being a highly subsidized industry, we are, in our hearts, try to be libertarians and fiscally conservatives. But I think we are a bit tired of program creep and that kind of stuff. I mean, even as some of these programs maybe are the best thing ever, it’s just there’s so many of them and it is hard to analyze if we’re getting a return.

Colter DeVries: 1:09:05
Yeah, old Montana, I think you’re going to get coined that term, I think you’re going to own it now, like old Mexico, I think the day of the independent guy, the independent rancher whose freedom and sovereign stands on his own, I think that’s dead.

Andy Rahn: 1:09:27
Yeah, I was afraid you were going to say is coming to an end and I was going to say the same thing. So isn’t the classic scenario? You see, this beat to shit old ranch, which is a really inefficient, not supporting the people involved or the landscape. Well, but goddamn, they’re free, even though they’re probably getting checks in one form or another. And, like I said, their road to town isn’t paid for by the county or even the state. A lot of that’s federal. I always thought it was a buck 30, but something I saw the other day was more like a buck 70. A buck 70 comes into Montana for every buck that leaves in our tax regime, and I think to me roads is one of the big ones that I think that ties into. We don’t pay for our own roads. We got too few people in too many roads. Well, we should privatize them. Private roads Everywhere you go.

Colter DeVries: 1:10:27
Everywhere you go.

Andy Rahn: 1:10:30
This is goddamn it. This is the debris Mud ass, 40 gravel. They’re charging washboards Two feet deep.

Colter DeVries: 1:10:42
No speed limit, but you might want to drive 15 miles an hour. No speed limit, but you might want to drive.

Andy Rahn: 1:10:48
In fact, we recommend 65 to just blow over those washboards.

Colter DeVries: 1:10:53
Starts a nice little home. I think it’s an opera when you get going fast enough, it just hums.

Andy Rahn: 1:11:02
But I mean I’d like to continue with that, because I mean where does that, how does this, how does that? I mean, how does that guy? I say guy, that family, that entity, that multi-generational family ranch that is starving to death, literally and financially, you know, mired in inefficiency, with a, you know, with a asset that’s exploded even though it’s not been necessarily the best cared for, like, where does that and this? You know, there’s this, there’s all these new opportunities. I mean I think both you and I try to try to look at change with an eye to what are the opportunities. So there’s, there’s more programs, there’s more opportunities, but that guy just still seems to be in the, in the spiral.

Colter DeVries: 1:11:54
Yeah, I mean that’s what leads to gentrification is you. You have a wealthy, high value people who see the value in the assets, area, geography, neighborhood, whatever it is and they have the resources to polish it. They see, they want to see it live up to its full potential, and that’s you take a whole neighborhood and you gentrify it.

Andy Rahn: 1:12:21
So I’m going to. I love the podcast you did this spring with Dallas on the ranching for profit, because you guys yeah, dallas Mount, you guys touched on this. So why? Why isn’t efficiency of operation? Why isn’t? Why isn’t the family and the next generation getting engaged with, you know, creating a more vibrant business entity on the landscape that has place for the next generation and has some, has some momentum for, for a thriving business, is that? Is that because? Is that? Am I going to answer my own question? The market is is so poor that it’s just that opportunity isn’t there. You know what I mean. Why?

Colter DeVries: 1:13:11
I would say it’s a generational, the boomer generation, who owns the land. I’d say that they are obstructionist to the millennials who are taking over the young guy and his wife. They want to do more enterprises. They want to change with the times and either do direct to consumer. B for bringing in more conservation programs, tourism hunting, monetize hunting via land trust. Free plug for Nick. So you see the millennials hunger for that. But the control, uh, in the obstruction from from the landowner, the guy who built all that equity. It’s just not getting turned over and it’s it’s a complete generational.

Andy Rahn: 1:14:02
So I graduated out of the Ag Department at MSU, which is our land grant Montana State, here in Montana. I graduated in 2001 and I was a non-traditional student. I was 30 years old and I was very disheartened. I didn’t see much innovation or I felt like the ag I think it was an in transition at that point because things started to shift. Now they got sustainable food systems and well recently, the ranch management program, dan Scott, who we’ve had on here, and that’s sort of stuff. But at the time it was like, well, here I’ll tell you, so I was. I was a transfer student because I had gone to school in Northern California. So I was coming in as a transfer student doing a whole day of orientation and the last bit of it, I was in a room with other ag transfer students and it was a vice president of ag came to talk to us and he was all this great time to be an ag, all our programs, blah, blah, blah. And then, almost under his breath, he said just, you know, just don’t be a producer. And it was like so I felt like there’s been this culture in that land grant and the whole industry. You know just, you know, get bigger. You know, lean in tech technology, but just sell to the same market and don’t, don’t learn, don’t know anything about markets or marketing, don’t know anything about gross versus net. That doesn’t, that doesn’t really matter. Right, like this real, real lack of innovation and and very separate from any other business sector. Right, like I mean a whole different metric for risk. For one thing leverage the hell out of everything you know, don’t worry about it, it’ll work itself out. Like, why is ag so separate from any other business venture in so many regards? And does that not lead to that? I still have this image of this old guy, this old beamer boomer, you know, withering away on the place as kids bailing and they’re going to sell the estate. They’re going to sell the land for the land value and the ag operation, the tradition of the ag operation, all that is, evaporates. Hold on, they hold on as long as they can.

Colter DeVries: 1:16:22
Yeah, I mean that’s, you just painted what’s what has been. That’s, that’s the way it has been, right. So how? How would things change? Are things going to change? I would say business as usual. What has been will continue to be.

Andy Rahn: 1:16:39
And even though we’re talking about this being a change, which is for sure is, it’s still remarkable how many guys are out there like that, though I mean we can drive out of buildings, you know right now, and once we, especially once we get a little bit out of town, you can go by four or five places that are that same guy before you hit a new own ownership regime. I mean it’s the countryside is still pretty well dominated by Absolutely. You go to the coffee shop and any given small town and all those old guys are in there. They’re still hanging on, they’re still yeah, it’s just takes time.

Colter DeVries: 1:17:12
A generation is what? Every 30 years or something. So, as and I’m not I’m not like counting down the days, but as boomers fade out and die away, or your generation acts, no one really cares about.

Andy Rahn: 1:17:28
We like it that way. We’re the stealth.

Colter DeVries: 1:17:35
The disgruntled ones came up with like nirvana, rage music, grunge music. But it’s just going to be a slow generational shift and I can’t help but plug my own DPP again, and I think I’m just getting set up for that. We there is the future is probably absentee, owned, investor, owned, institutional owned land for the appreciation and for the technical expertise required to optimize that asset. I don’t think you can have so and will Harris, white oak farms, white oak pastures, big, big celebrity guy and regenerative. This is where him and I disagree. He, he stanchly opposes my view of specialists separating enterprises. Whereas you know, I’m. I’m literally putting my money where my mouth is and saying no, I think that’s well, you know it’s interesting.

Andy Rahn: 1:18:41
You brought up culture earlier and we’ve been talking a lot about economics and land economics and it’s, you know, it’s clear as a bell that the land economic scenario is heading to exactly what you just said. Right, there’s, that path is pretty, pretty clear, that investor owned, institutional, owned, wealthy people right, that I mean. How, how can it be otherwise? But again, going back to that boomer guy aging out on the place, what really seems to be the death, if you want to call it that, or the transition, there’s a culture component too. I mean if, if the land, if the rural landscape had appeal and opportunity for young people, even if the land value, even even given the land economic situation, that could be a game changer, I think. I think when the culture changes like it has and I’m particularly thinking about just not having much appeal or opportunity for young people, for the next generation, that’s really harbinger of change, you know.

Colter DeVries: 1:19:51
Yeah, the opportunity is going to come. In my belief, it’s going to come in nuanced ways, so be a specialist outfitter, guide hunter. You want to be on the land and live in Broadus, montana. Build that book of business, become the expert.

Andy Rahn: 1:20:08
Be a coder during the off season for remote for Google, and put on your Outfitter hat during the hunting season and go bag some bulls.

Colter DeVries: 1:20:19
Absolutely yeah and and yeah, find, find I mean we live in this decentralized world find a good paying income consulting or remote work elsewhere and further ranchers, become the best animal husbandry rancher producer there is. And yeah, you’ll be leasing land but there’s no reason to be stretched thin on P&I and try to own the land when you can grow your one specialty enterprise and do it very well and then diversify away from that. Get your 401k I mean ranchers don’t have 401ks.

Andy Rahn: 1:20:56
Right. Right, you know I might I don’t know if I’ve shared the story or not but you know I I aspired to be a producer. That’s what I wanted to do in my 20s, going into my 30s and, of course, not having family land, and you know that kind of stuff hit, hit a big old brick wall in that deal, you know, and I can remember getting pretty jaded about the whole thing. But then I also remember having a little bit of an attitude adjustment, realizing that I was expecting salary and 401k and I mean I had a young family and, you know, wanted a respectable career. But looking back historically, it’s like, well, farmers, you know, ranchers don’t historically travel, have 401ks. I mean, you know I was, you know, coming to. My kids were coming up in an age where it’s like, you know, ipods or you know iPads were expected or this or that. Right, so I was. I was imposing a modern idea of income and, you know, career support on an industry that has never necessarily supported that.

Colter DeVries: 1:21:57
Right, a legacy industry.

Andy Rahn: 1:22:00

Colter DeVries: 1:22:01
Well, andy, I’m going to get one final ask in as we wrap it up, so I would anyone who’s listening again that’s an accredited investor please let me know if you see DPP pooled resources syndication as a solution to what we’ve been talking about many different subjects where we identify some of the problems. If you think that pooled resources, direct participation programs, passive investors is a legitimate free market capitalistic approach to solving a problem, so let me know. I’d love to hear from you and Andy, get here. Time to get your plug in. Yeah, your ask of our audience.

Andy Rahn: 1:22:43
Yeah, I’ll just ask people go to MTlandsourcecom and check out all our resources. I think that goes hand in hand with what Colter’s doing as far as being a resource on the on the market and what’s happening and keeping up on trends, and we’ve got the best and most current data out there on the on the land market. So check out MTlandsourcecom.

Colter DeVries: 1:23:02
Thanks for coming in, andy. Yeah, thanks, colter, it’s good August 1st 2023. Let’s see what happens. Listeners of the Ranch Investor podcast who are receiving this immense value for free. Thanks for tuning in. I do have an ask in place of advertising. I do not monetize this. On Spotify, apple, anywhere. I don’t click the monetize button. So I do have to get a plug in here and I ask. What I’d like from you is to hear some feedback. So, on our social media, please share this episode. All I ask in return for not having promotions and advertising is that you share this. Send a text, get it out there so more people can enjoy what we’re producing. Thanks for tuning in.

Stock Voice: 1:23:54
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Market Conditions and Selling Real Estate
Real Estate Market and Pricing Strategies
Real Estate Market in Montana
Conservation’s Role in Land Value
Discussion on Conservation Easement Properties
Culture and Community in Conservation
Montana Land Trusts and Conservation Easements
Challenges and Changes in Agricultural Industry