Why your land deals might be sitting unsold for years.
The speaker explains why understanding absorption rate is critical in rural land markets. Flooding a market with more parcels than typical annual demand will result in extended holding periods. Proper research into local market absorption prevents oversaturation mistakes.
Summary
In this short clip, the speaker addresses a common pitfall in rural land investing: failing to account for absorption rate before subdividing and listing parcels. The speaker illustrates the concept with a concrete example — if a given rural market typically sells through 10 five-acre parcels per year, and an investor introduces 30 parcels at once, the supply far exceeds the market's natural demand capacity. This oversaturation means the investor should expect to hold those unsold parcels for a significantly longer period than anticipated.
The speaker acknowledges that demand conditions can vary — in some cases parcels may sell quickly — but emphasizes that researching absorption rates before entering a market is essential to setting realistic expectations. The core argument is that neglecting this research step is a primary reason land deals sit unsold for extended periods, tying up capital and delaying returns.
Key Insights
- The speaker argues that absorption rate research is essential before entering a rural land market, because not knowing it is a primary reason deals sit unsold for years.
- The speaker illustrates that adding 30 parcels to a market that only absorbs 10 per year constitutes market saturation, regardless of whether individual demand signals look promising.
- The speaker claims that flooding a market with excess supply directly causes investors to hold parcels far longer than expected, implying a significant opportunity cost.
Topics
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