July 24, 2006 at 6:37 PM #6986
Here’s the scoop on the Yuma land deal offered by the financial planner: they bought 300 acres of land, $20K/acre, outside of Yuma, AZ, and 4 miles away from a proposed oil refinery. After the 4,000 workers come to build the plant, the area will grow out, and in 10 years, they will sell the land at a profit to a developer. The workers will need houses, schools, stores, and many will end up staying in Yuma. Blue collar retirees who cannot afford So. CA or FL will choose Yuma as a cheaper alternative.
I checked, and the fact is you need only 300 workers to run the plant. So much for all that housing. The 4,000 he mentions are temporary construction workers.
I asked him for a copy of the feasibility study and appraisal, and he said it was not available. Bugs, what do you think about that? You told me to ask for it.
Here is the rebuttal e-mail I sent to the planner. I would also like to hear everyone else’s input. My neighbors doubled their money in his last investment, and already made a purchase on Yuma land.
Thanks again for the info on the Yuma land investment. I checked your
website for more details, but could not find it.
I did some research on Yuma’s economy, and I am not optimistic about its
prospects. Here are a couple stories about Yuma:
The fundamentals, jobs and wages, drive sustainable property values. The
second article sounds like what I hear from so many local economists about
San Diego: a strong economy. But without data, I cannot be sure. What
exactly is the source of job growth in Yuma, and can the per capita income
sustain the current economy and housing market?
From what I see, Yuma experienced a housing bubble, and overbuilding boom
that will take years to balance itself out, and the highest unemployment
rate in the nation (19.2%).
You mention that blue collar retirees will flock to Yuma. I couldn’t find
any data on the number of retirees in Yuma. I find it hard to believe that
blue collar retirees, presumably from the Midwest, will flock to any city
which has 65% foreign born citizens (i.e. Mexicans). The retirees
congregate in Mesa and Casa Grande, but I don’t know if they would go to the
closer border cities. (Midwesterners are a little prejudiced)
The refinery will have only 300 jobs, and those will most likely be hired
from within Yuma. I suspect they will hire 50-100 upper level managers and
specialized trades, but that small number will be easily absorbed by the
The 4,000 people you mention as employed by the refinery are actually
temporary construction workers, and they will come and go in phases. I
assume we will see at most a few hundred present at any one time. First,
the grading crew will come, then the foundation crew, and so on. These
people will rent short term apartment leases, Motel 6, and perhaps temporary
trailers. These migrant workers are unlikely to buy homes or bring their
families. Businesses won’t be developed around people who are in town for a
short term project.
I know you made money on past real estate projects, but I know, that anyone
who bought real estate after 1993, and sold by this year, has made money.
Economist magazine has called today’s real estate climate the largest global
bubble in history.
I suspect the price of the parcels we discussed has risen double or more
since 2000, and that would provide proof of the real estate bubble once
again. They are not going to rise again.
I am open to hearing your points of view on these concerns that I raise.
From my vantage, after studying this, I see no opportunity to make money in
Yuma real estate,but I am open to be proven wrong.July 25, 2006 at 7:26 PM #29615
The financial planner has not offered to provide any of the information I requested, so I asked again. Is this fishy, or what? Now I requested a copy of the appraisal and a feasibility study.
My friend invested in this, minimum is $10K, and I think she will lose it all. Her reason for investing with him is that the last investment they made in AZ tripled in value. Well, duh!! Everything in AZ is in bubble land. But the boom is over, baby. I hope she can get her money back, but I doubt she will listen to me. After all, RE can only go up, and the financial planner lied so well when he said the refinery will employ 4000 people who need a place to live, schools, etc. Isn’t this illegal, to lie like this? Come on, someone speak up about this post. It is just more damn lies by a real estate salesman. It’s just pi**ing me off!!!!July 25, 2006 at 7:29 PM #29617BugsParticipant
If there’s an appraisal on the property you don’t necessarily have a right to read it, and even if you do you may not learn anything of substance from it. If the appraisal is extremely focused on valuing the site without going into the analysis of what would go on the site then all you’re going to get is a number.
If the financial planner doesn’t have the marketing materials necessary to sell to a savvy investor then it seems to me the only investors buying will be the non-savvy. That doesn’t sound too promising.
BTW, 300 manufacturing jobs should create some local service jobs too. 4,000 jobs is a pretty big stretch, though. However, even if the 4,000 figure was right, so what? To see what kinds of effects adding jobs in the desert has on local RE go on over to Calipatra where the prison was built. They added a ton of high-dollar jobs over there but it didn’t lead to price increases compared to other areas of the Imperial Valley. There’s just too much room for expansion to create the sense of scarcity needed to make one piece of scrub more valuable than another.
If you do get an appraisal and you want help deciphering any of it just let me know. I don’t know ‘nuttin about Yuma but I do know about appraisals.July 25, 2006 at 7:45 PM #29619
I ran this by a business consultant friend. He said that about 200 of these jobs would be local hiring, and the other 100, for high level managers and specialists, would be people moving in. He said that Yuma can easily absorb 100 new people without seeing an impact. The pop is 90,000.
The financial planner told me their strategy is to buy land in outlying areas that have the potential to grow, hold for 5 years until the development grows up around that land, and then be the last parcel to sell. Buy low, sell high. It’s a savvy marketing talk, and my friend fell for it. It worked once because their timing was good, and now they probably put a lot more money into it. The planner told me you can use 401K money, so I think my friend put her retirement money in there; I’m certain that’s what she did. I told her all these problems that I see, and that I am warning her this is risky. I hope she stays my friend.
I will post back any further information I get. Aren’t they required by law to give me a bunch of information and disclosures? They have a feasibility study and appraisal, so what reason could he give for withholding that? He doesn’t have to give it to me, but wouldn’t it look bad for him, if he withheld it?
I want to know how much the land in Yuma appreciated already, to find out if the raw land is also part of the bubble. Yuma residential properties are in bubble territory, as I wrote in the post.
Why wouldn’t this land become more valuable, if Yuma does indeed grow out by 10 miles? He told me the refinery is outside of town (he didn’t say how far), and the parcels are located 4 and 8 miles on either side of the refinery.
I mistrust him a little, because he lied to me. He said the refinery would employ 4000 people. My consultant friend pointed out that refineries are capital intensive, but need very few workers. He said the 4000 figure refers to construction crews, who come and go in phases of several months each. You don’t build schools and shopping centers for a temporary crew of 300 construction workers, most of whom would come without their families anyway. So for 3 years, you’d have 300 temp workers, coming and going, and when it’s all done, you’d have 100 well paying jobs for specialists who are brought in. How would that make the price of that land go up? Impossible!
What happened in Calipatra?
I am fascinated by the way some of these real estate salespeople fool investors. This story, if you follow it, is a fascinating exchange of logic, where clearly the salesman is falling flat on his face. Thanks for helping me through this Bugs. I owe you one!July 26, 2006 at 9:14 AM #29676
My friend blew off everything I said, and my warnings. She trusts this company, “to make informed decisions about the land they purchase, because it is their expertise. They have been in business since the 60’s or 70’s and have only had one situation on land that didn’t increase the value to the investors.” They wanted to diversify so earlier this month they moved retirement money into investments with this company, buying land in Arizona and Nevada.
Maybe this is a good situation, but what bothers me is how the planner misled me about the impact of the refinery, and that he has so far refused to provide any of the analysis I requested.
This is a portion of the e-mail I sent to the financial planner:
Mr. Financial Planner,
As far as Yuma appreciating despite the end of the RE boom, it is certainly possible. I am interested in learning how you arrived at your decision.
I am a serious investor, and am looking for places to make a good return.
I would like to request copies of the analysis, feasibility study, and appraisal report. What type of information are you required to provide to investors – I would like a copy of that also. Please provide a list of your prior projects with the rates of return earned on each.
My address is xxxxxx.
Now, let’s see what he sends me, if anything. Maybe this is a great opportunity, and something I can share with all. Maybe this guy is unwilling to disclose the precarious nature of this deal, and is therefore twisting the facts. Let’s follow this story, because it sure is interesting!July 26, 2006 at 9:48 AM #29679(former)FormerSanDieganParticipant
“Midwesterners are prejudiced”
Prejudice is, as the name implies, the process of “pre-judging” something. When applied to social groups, prejudice generally refers to existing biases toward the members of such groups, often based on social stereotypes.
Stating that “midwesterners are prejudiced” is in itself a prejudiced statement.July 26, 2006 at 10:27 AM #29682
“There’s just too much room for expansion to create the sense of scarcity needed to make one piece of scrub more valuable than another.”
Bugs, he says that 87% of AZ and NV land is government owned, and of the 13% that is private, most is used for agriculture, leaving little land for developers.
I checked further into this, and the refinery is 40 miles outside of Yuma. How expensive can land ever get 40 miles outside a small desert town with high unemployment? The guy kept saying, “It’s outside of Yuma”. He didn’t say it was a 45 minute drive! So the parcels are 36 and 48 miles outside of Yuma, too far to be impacted by any growth originating in Yuma. Who would be a potential buyer in 5 years, assuming the refinery goes in?July 26, 2006 at 12:31 PM #29698AnonymousGuest
I don’t understand why this person would no longer remain your friend–could it be because you inevitably harp on this issue to the point where she becomes irritated and responds in kind?
This seems to be an underlying thread running through many of your posts, that people are stupid to ignore your Cassandra-like warnings. You could be right, she may be making a stupid decision, but as her friend I would think you’d make your argument and leave it at–unless you’re more interested in winning the argument rather than remaining friends.July 26, 2006 at 12:54 PM #29702
Where’d you get the idea she is no longer my friend? We still ARE friends, and have a get-together today. I agree with you to let this drop. I already told her earlier today that I would keep investigating this, but keep mum to her, since I don’t want to upset her, but if she wants to know what I find out, she can ask.
I’m a Nebraska girl, and my parents still live there, so I feel that gives me the right to speak of the Midwest. My husband’s family is farmers in Iowa. So you’re barking up the wrong tree to call me prejudiced toward Midwesterners. I would have preferred a statement from you proving me wrong, i.e. that you know blue collar workers from the Midwest are flocking to Yuma and other border towns, and that the racial profile of the community is irrelevant to them. I am more interested in figuring this thing out and being proven wrong, than in whether I make an observation that is politically incorrect. Let’s face it: housing issues are full of racial and ethnic factors, and ignoring them doesn’t help me learn about this issue.
Anyway, the comment about the Midwesterners was made by the businessman that I discussed this with; I really don’t know if Midwestern blue collar workers would avoid Yuma. I could find no data that Yuma is a retirement community magnet, so I assumed he was right.July 26, 2006 at 1:07 PM #29705AnonymousGuest
You wrote in a previous post that she did not appear to be accepting your views and arguments against this transaction and wrote “I hope she stays my friend.” The clear implication being that she might very well end up not being your friend because of this issue.
It was a different poster who responded to your comment about Midwesterners being prejudiced, but that was an ignorant comment, even more so from someone who has written previously of being discriminated against for their ethnicity. Just because you are from a specific area doesn’t insulate you against the fundamental error in ascribing global tendencies to a specific ethnic/geographical/racial group. It might give you specific insights but it certainly doesn’t allow you to make blanket statements like that. And the fact that you didn’t even formulate the statement on your own, but just mouthed the idiocy of some “businessman” is even worse.
There is a huge difference between saying something politically incorrect and saying something that is absurd on its face. Please don’t try to hide behind the former to excuse the latter. Do you honestly not see the difference?
And for the record, I have known multiple Midwesterners who are as color-blind and racially integrated as any urbanite from NYC or LA–was that all you really needed to disprove your hypothesis?July 26, 2006 at 1:15 PM #29706BugsParticipant
San Diego County is something like 67% government owned. That doesn’t make commercial land in Boulevard (45 miles outside of El Cajon) a great investment opportunity over the next 5 years. I can practically guarantee that El Cajon will not expand out to include Boulevard any time in the next couple decades and I’d be pretty surprised if Yuma exploded to become a 45-mile wide community.
Commercial development is not like residential development. If you build it they may not ever come. Commercial use parcels are limited to certain uses, most of which require an established residential or traffic base to economically justfy development. Without the economic base in place, the commercial use won’t be able to generate sufficient revenues to pay the mortgage or rents, let alone the investor’s required returns. Boulevard will not be supporting a supermarket anchored retail center any time soon. It probably wouldn’t even suport another 7-11 right now, and its been a community for years.
The situation you’re describing might be a winner if the parcels they’re talking about cover all the major intersections and adjacent parcels at the highway access, ’cause then they might be able to justify a gas station and a Burger King (together) there. Every other parcel is going to be SOL until a community grows up there, though; and that might not ever happen in our lifetimes.
I’m not saying this is a stupid deal for an investor (’cause I don’t know), but I do think I’d want a whole lot more information than what these guys are dispensing before I invested. I also don’t think I’d be getting too excited about an argument that starts off with “they’re not making any more land”, because I happen to think AZ is one of the places that is manufacturing more dirt as time goes on.July 26, 2006 at 1:18 PM #29707North County JimParticipant
Do you know definitively whether there is a refinery planned for Yuma? It seems an odd place for a refinery.
Is there an existing infrastructure of pipelines for receiving crude oil and shipping refined products? If not, their competitive position would be less than ideal.
Furthermore, permitting a refinery is a multi-year endeavor. Has anything been done on the permitting end?July 26, 2006 at 1:26 PM #29709
Chieftain, do you think it is likely that Yuma, a city with 65% foreign born from across the border, will attract high numbers of Midwestern retirees? Enough retirees to make this land, 40 miles outside of town, appreciate in value?
The comment about staying a friend was tongue-in-cheek, because she really is a friend, not just an acquaintance, so she and I will remain friends even if we disagree on an investment issue:)
On the other issue, I tend to believe my friend, even if that makes me a prejudiced ignorant idiot who makes absurd comments. What’s at stake here is deciding whether to make a real estate investment, so I don’t have the luxury of being politically correct. I need the facts. Therefore, it is important that I know if my assumption is false.
If you could show that there is a high demand among blue collar Americans buying homes in border towns in Texas, Arizona, etc., then I would be corrected. I welcome you to provide accurate information on this topic. It goes to the heart of the financial planner’s sales spiel, that the land will be more valuable because blue collar workers are coming in droves. They would have to come in by the tens of thousands to appreciate land that is 40 miles outside of town. An example of one or two people won’t do. I’m looking for large groups, such as what we see in Florida and Phoenix AZ.July 26, 2006 at 1:43 PM #29710PDParticipant
My husband and I spent a lot of time checking out Yuma real estate last year as we thought there was a chance we could end up there. There has been HUGE residential building in Yuma. I think RE in Yuma is going to crash big time. There has been wild speculation already and big price increases. The time to make money over this refinery and a possible expansion of the Marine base is over.
There is land for sale as far as the eye can see. I doubt that there will be a boom around the refinery. There may be a few employees who plop down a doublewide but that will be the extent of it. The whole thing sounds like a Florida swamp deal.
We just drove through Yuma last weekend. I was surprised to see that two huge RV dealerships seem to have gone belly up in the last six months.July 26, 2006 at 1:50 PM #29711(former)FormerSanDieganParticipant
I apologize if you took my post to mean that I thought you were predujiced. Just trying to point out an irony, which I found amusing. Perhaps my sense of humor is too dry. My comment was directed at the statement, not the author.
Here’s what I said …
Quote- – ‘Stating that “midwesterners are prejudiced” is in itself a prejudiced statement. ‘ – end quote
Anyway, back to your point. As a Kansan by birth and a southern California resident by choice, and having spent a week in Yuma one night I don’t understand what the draw would be to anyone living in the Midwest or any reasonably sized city in the US. You would have to be coming from an area whose climate, business environment, recreation or cultural activities are better in Yuma than in your current situation. I think that as far as other parts of the US are concerned, that is a pretty small pie from which Yuma could take its slice. I would not be buying into Yuma.
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