Over the last 15 years throughout Colorado, many of the large ranches have been bought up and developed. In most cases the popular parcel size is 35 acres. The reason for this is the Colorado Subdivision Act, passed in the 1970′s which defined a subdivision as any splitting of land into two or more tracts either of which is less than 35 acres. Under this regulation, parcels split into less than 35 acres come under significantly more regulations, both from the county and the state. To stay outside of those regulatory statutes, developers typically size the parcels to a minimum of 35 acres.
In the typical Pagosa Springs ranch development, a large ranch is divided into 35-acre parcels after laying out the roads, utilities and open space areas. Usually the developer will record protective covenants and establish annual assessments to cover the maintenance of the roads, fencing and common areas as well as a property owner’s association to administer the covenants compliance and other tasks. In the Pagosa Springs area, annual maintenance assessments run from a low of $600 to a high of $5,000.
In many of the ranch developments around Pagosa Springs, owners have opted to retain agricultural property tax status by maintaining livestock grazing within the ranch. In the typical arrangement the cattleman pays a small amount per head or per pair as a grazing fee and grazes the land from about May to mid October. This arrangement results in a substantial property tax savings for the parcel owners. By having an agricultural status on the land the taxes will typically be less than $100 per year. (This figure will go up of course, once a home is built on the land). By comparison, a 35 acre tract with a market value of $400,000 without agricultural status would run in the neighborhood of $4,000 or more per year.
So, what other costs are involved in owning a 35-acre tract near Pagosa Springs? Usually the costs are limited to the property taxes and the annual property owner’s association assessments. For some tracts the total annual carrying costs can be as low as $700. So, when looking at a ranch parcel as a potential investment, it is important to be sure the 35-acre tract is in a qualified grazing lease arrangement. You also want to be sure the property owner’s association is adequately funded. If it is not there could be substantial special assessments in the future. You also want to be certain that the roads are well built and that the private water system is in good shape. Replacement of roads or water system components can be very expensive. Well run property owner association will keep a prudent reserve for capital repairs and replacements.
Overall, the 35 acre market in Pagosa Springs has softened somewhat over the last five years, except for those parcels that are closest to town. It seems fewer people are interested in owning acreage that may be 20-30 minutes from town. We also know that many 35-acre tracts were purchased in past years for investment. Some owners have experienced significant losses in their stock portfolios and have decided to sell their land to try to offset some of those losses. We have seen more people looking to own land closer to town, most often within a 15 minute drive, especially if they are looking at living here full time. Nevertheless, an investment in a 35 acre tract can be rewarding in terms of future value if you follow these guidelines:
-Be careful when considering tracts more than a 15 minute drive from town.
-Choose a tract with an impressive view from the building site. Be sure the quality of the site won’t be compromised by an adjacent parcel in the future. (Some ranches have protected building envelopes, most do not.)
-Be sure the parcel is served with central water and that the system is sufficient to supply the entire development at full build-out.
-Look for a ranch that will retain agricultural property tax status. Without this your carrying costs will be significantly higher.
-Be certain the property owners association is adequately funded and well managed, talk with the directors about their plans for the future.
-Carefully review the protective covenants and architectural guidelines and be sure there is full compliance within the ranch.
-Don’t invest in a 35-acre tract with the plan to flip it in a year or two. You should be prepared to wait a minimum of 3-5 years if you expect to realize any significant appreciation in value.
If you follow these guidelines while working with an experienced Pagosa Springs real estate broker, you should do well. The supply of ranch tracts is limited and it is likely that new developments will be more expensive to bring to market in the future. There will always be those that dream of owning their own little Colorado ranch property, and a good number of those will follow through and make a purchase in the years ahead.
Feel free to contact us at 970 264-7000 to discuss any of the 35-acre ranch developments here in SW Colorado.