Land: a green investment.

Q. I have money ready to invest in land. Can you recommend the most eco-friendly ways in which I can purchase acreage and envision a "green" land use plan?

An eco-minded client once asked me, "Why would I choose to buy acreage?" Good question! land has intrinsic value," I answered. A lengthy discussion of the financial benefits of the environmentally sensitive land purchase and the benefits of eco-friendly land planning and use followed. Land is synonymous with natural social and economic capital. In terms of the law of supply and demand, there is only so much land. Whether it's a large naval tract or a single acre or two in town, prime acreage in our area is becoming more and more difficult to locate, especially when land use is a primary consideration.

Let's say you have money ready to invest in land. Before you invest, have you considered what kind of land attracts you and how you plan to work with that land? It's always a good idea to evaluate what I call your "land use factor." If you are an eco-minded investor interested in agricultural land, for example, your vision for this land might be to create a working farm, develop co-housing facilities within a sustainable eco-village, or to supply organic crops and dairy products. On the other hand, a private investment group may choose to set aside 1,900 of 2,000 acres of rural land to protect a watershed, to create a trail system for biking and equestrian pursuits, to restrict use on 100 acres of such a parcel for a nature-education center for the public, or to designate a fifteen-acre parcel for a "green-built" cluster home ecovillage.

An eco-friendly urban land investor might envision a LEED certified "green" office building or a multi-family or "affordable homing infill project. Bottom line--it's about stewardship. For the eco-wise investor who has done the land use and envisioning homework there are many exciting ways to produce positive outcomes, including the possibility of tax advantages such as those available through Federal and State programs and the 1031 Like-Kind Exchange as defined by section 1031 of the Internal Revenue Code, 26 U.S.C. [section] 1031.

Recently, a "green" investor and I were talking about "green" investment strategies and concerns about the 1031 Like-Kind Exchange process. He had mistakenly heard through the grapevine that he absolutely had to acquire property exactly like the property he was about to relinquish. He was distressed about being able to locate an exact eco-friendly match for his three-story brownstone in the area. I assured him that finding an exact match is not required. While there may be a limited supply of three-story brownstones, he could select from a wide variety of exchange properties. Eco-investors not only have latitude, but an intriguing menu from which to choose under the 1031 Like-Kind Exchange program.

Not long ago, a client I call "Merlynn the Magic Maker" proved that point. She traded her beachfront resort condo with its cumbersome property management woes for the relative freedom of a land purchase: a fifty-plus acre tract with incredible natural features. This mountain beauty she "manifested from a lump of coal" demands only that she remember to bring a picnic basket, "set-a-spell" by its waterfall, hike up to the knoll to see the sunset, and stay, if so desired, to camp out with her family under the stars. This is about natural and social capital, but what about the economic capital? To watch over it for future generations. Merlynn could create a private land trust with protective covenants, which would provide her with additional tax advantages. Of course, her acreage must qualify as an "outstanding natural area." thereby having natural character in order to meet certain criteria governing the 1031. It must either provide habitat for a rare or endangered species of plants or animals, or have scenic or other features of scientific or educational value. Should Merlynn choose to build there in the future, a conservation restriction she imposed at the time of purchase--tailored to meet the needs of both the buyer and the land--allows limited construction under strict guidelines that protect the property's natural assets. Here are a number of interesting points for the eco-friendly investor: 1) Merlynn's property will forever remain in private ownership and on the local tax rolls. 2) The restrictions stay with the property, even if it is sold or transferred, and therefore permanently limit the use of the property. 3) These restrictions are binding in perpetuity, and designed for a distinct conservation purpose. 4) The owner of a

qualified natural area may also transfer fee ample title or other interests in the land to the State and have fiscal benefits. 5) A conservation easement may also significantly reduce the estate taxes that must be paid by the heirs of the property. This is especially valuable for families that have land as a significant portion of their net worth. 6) land subject to a conservation restriction is generally appraised at a lower value than comparable unrestricted parcels. 7) Donation of conservation-restricted property can constitute a charitable gift with financial rewards for an investor. Individuals who donate land or easements for conservation purposes often qualify for a Federal tax deduction.

For more information on state tax credits, find information at newlifejournal.com or visit the Land Trust Alliance at www.lta.org or The Carolina Mountain Land Conservancy at www.carolinamountain.org

The basic definition of a 1031 Real Estate Exchange is the sale of existing investment real estate property and the replacement of that property with new investment real estate within a specified time frame. Visit www.irs.gov/businesses for more information.

JaneAnne Narrin, ePRO, ECO is the founder and Broker-in-Charge of Eco-Steward Realty. She and her team of eco-certified real estate practitioners specialize in "value-added" and eco-friendly mountain homes and land legacies in the spirit of stewardship. Visit her website: www.janeanne.com