|Photo by George Peet
A lot of wealthy golf enthusiasts will fancy the idea of buying a golf course now and again, but if you have the funds and the desire to the point that you actually seek out serious real estate guidance, you’re liable to find it’s not as implausible as it first sounded. Not everyone, not everywhere, and not all the time. Like anything else, a smart real estate deal for buying or selling a golf course really depends on the local market conditions at that time, the attitude and leverage points of the buyer/seller, and the particulars of the deal.
Tax Incentives for Golf Courses
One of the so-called tax “loopholes” that survived the recent tax reform legislation? Golf courses are still entitled to conservation easements in the promotion of green spaces. The land- and property-use issues at play are complex: Golf courses do preserve green space near population centers, as well as much of the natural landscaping, but it does make some modifications and golf course maintenance can result in higher than necessary water use. Nevertheless, the size of the deduction and the qualifying criteria can vary from one course to the next, so we hesitate to make blanket statements.
Buyer’s Market for Golf Courses?
Golf attendance has been down from peak levels of the previous decade. This recent trend—and possibly contributed to by tax incentives for golf courses—has led to a number of struggling golf courses, as well as a number of owners who are worried about the future viability of their courses. At the same time, despite the rumors that Millennials are killing the sport, golf isn’t dying. More than 700,000 people attended this year’s Phoenix Open, setting a new PGA Tour record. Plus, all those disaffected football fans have to go somewhere.But again, it really depends on the timing and the local market. Golf courses near population centers and with a decent amount of name recognition do not come on the market very often. The course could be up for grabs during an estate sale.Perhaps the Board of Trustees decides its time to call it quits. And it only takes one other interested party to get into a bidding war. Due to the limited availability of existing golf courses that are on the market at any given time and given the relative ease of buying undeveloped land and building a golf course, many people end up taking this route in the end.
Land Use Diversification
In more rural locations, the surroundings for a basic driving range and 9-hole golf course may resemble the corn fields in the movie Field of Dreams. In these settings, there are a number of different motivations and goals that go into building a golf course. There may be part of a land parcel—primarily valuable for farming or mining—for which there is no good use. Any number of circumstances may make 75-100 acres of land suitable for a respectable 9-hole course, (or about 140-180 acres for an 18-hole course) but unsuitable for other commercial uses. It could also be that there is a legitimate demand for this type of course. The only other option for dozens, if not hundreds of miles, may be exclusive country clubs.
Profits and Motivations
Here’s one of the worst kept secrets for those who know golf courses and real estate. Despite the size and complexity of buying or building a golf course, if you’re intent and financially capable, you can almost always succeed in becoming a golf course property owner. Turning this real estate venture into a profitable operation, however, beyond the value of the land itself is not as easy or as common as the real estate deal itself. This can be especially true when building a new course, which takes a lot of time and capital—even after closing—to get up and running. Take a look at this recent New York Times article to learn more about trying to make a profit as the owner of a golf course.At the same time, it’s also true that at the swankiest clubs and the most hollowed courses, making a profit on the course itself may not be a primary motivation. Being able to attract a network of movers and shakers at your golf course can yield an indeterminable amount of soft returns—as well as the prestige that naturally comes with being the owner of a golf course of some note.
Golf Course Real Estate Expertise
Speaking of country clubs, you think the rules for your local HOA are onerous (or not onerous enough!), it’s even more important, by an order of magnitude, to understand what you can and can’t do with your golf course. This applies to tax incentives, membership clubs, land use, water consumption, and a host of other potential allowances and restrictions. Tell us what and where you’re looking to buy/build, and we’ll tell you what we can about your local market, state rules, and federal laws in your area.