California Riding Magazine • June, 2014

Get While The
Gettin' Is Good!
Activity in equestrian real estate
is on the rise amidst inventory issues
and a challenging loan environment.

by Kim F. Miller


Hunter Lane Equestrian Center in Santa Rosa – $2.25 million. Two parcels of 18 acres, four homes, five barns, five arenas and permitted for 100 horses. More info: Lisa Thomas: 707-217-2683 or visit www.lisathomas.com.

California horse property agents say things are looking up. Certainly, there's much more movement than during the pit of the recession that started in 2008, and it's happening along the very broad spectrum loosely labeled as "horse property."

West Coast realtors polled by HorseProperties.Net provided positive feedback on recent trends. Eighty-three percent said they were seeing more sales, better prices and/or more buyers in the past year. Forty-three percent of the 152 agents queried said the market for "horse properties, equestrian estates, ranches or gentleman farms" compared favorably to the urban housing market and almost half responded that prices for acreage had risen in 2013.

In Sonoma County, Lisa Thomas sees anything under $700,000 for "little ranches" that can house a few horses as "very much in demand." In Santa Clara County's Gilroy, a 2,300-acre parcel, priced at $4.9 million and suited for cattle ranching, was shown to six potential buyers in the last two months, versus once per quarter in the previous year, relays rural land specialist Kevin Sullivan of Ukiah.

In between those ends of the spectrum, it's hard to make generalities because the horse property market is diverse and differently valued. It can encompass regular homes in communities classified as "equestrian" because they have trails, arenas and/or stables. It can include what Lisa calls "horseable" properties that have no existing equine-oriented improvements but can be outfitted to suit. At the highest end of the range are purpose-built properties with barns, covered arenas and permits for hosting shows and/or clinics or even commercial boarding.

Activity in equestrian real estate generally follows that in the residential market. As the economy continues its slow recovery, the first level of movement comes from people confident enough to buy a regular home. The next step is the confidence to invest in property that is more dream fulfillment than practical necessity. And that's were things are now, yet challenges exist.


Two hundred acre working resort, Rancho Grande – $4,900,000.
Take the equestrian lifestyle to a whole new level at this Rose Valley resort. Features include original, updated guest cabins, an event hall, cookhouse and caretakers house, plus horse and cattle facilities, barns, workshop, three lakes, campsites, etc. More info: Nora Davis, www.ojaivalleyestates.com or call 805-646-7288.

Loans

San Diego realtor Pam Moss says the dream of at-home horsekeeping is particularly tough for buyers in the relatively modest end of the price range, say $400,000 - $500,000. New mortgage rules make it harder to get the property appraisals needed to receive loans. Stabling, fencing and arenas add very little to land values in the eyes of the bank, Pam explains. A recent transaction was stymied when a $499,000 full-price offer was paired with an appraisal of $425,000. The undervaluing is because "they're giving no value at all for improvements to keep horses," Pam observes. "A seller can put $20,000 to $50,000 into fencing, stabling, etc., all of it permitted, and they (lenders) are giving that no value."

The Dodd Frank and Qualified Mortgage rules put in place to reduce risky loans "are not helping anybody," Pam asserts. "They've made it almost impossible for the seller to provide financing because they have to comply with everything the bank does. So they've eliminated seller carryback and eliminated the value of horse related property improvements." And this is true for properties zoned and suited (there is a distinction) for horses and with nice, if modest, homes on them.

"We're now seeing the market narrow out the segment of horse properties that used to be available for people of relatively average incomes," she says. "For the family that makes between $100,000 to $250,000 a year, it's become a huge stretch."


Luxury home in Bonsall's gated community, Saratoga Estates – $1,249,000. Dual primary suites with 5,553 feet of living space, plus a sparkling pool, three fireplaces, four bedrooms and five baths. Private trails are directly off the south and east side of the property, giving way to miles of trails, plus use of the private community's oversized arena. More info: Dawn Aaris, 760-420-9999 or e-mail dawnaaris@gmail.com.

At about the $600,000 mark, "you start to get nicer houses with sufficient square footage to merit the higher appraisals," Pam notes, but the problem can still affect higher-end transactions. Understanding the current loan environment is key to structuring a successful transaction.

Cash has always been king in real estate and that trend is flourishing at the higher end of the horse property market. Properties closer to the coast or with expansive acreage, and anything else in the one million-and-up range, have long been largely cash transactions.

"We're seeing strong sales in all-cash purchases, but the rest, in both regular real estate and horse properties, remains to be seen," says Heather Fogarty, San Diego realtor and owner of Horse Properties International. "I try to follow everything from the coast out to Ramona and I'd say the non-high end properties are a little here and there, not selling real strong."


This large estate in Rancho Santa Fe Covenant typifies in size the type of property that agent Cathy Gilchrist-Colmar sees an increased demand for in today's market. More info: 858-775-6511 or visit www.sothebyrealty.com

Appraisers might be cut some slack given how uniquely difficult it is to place a universal value on land outfitted for horses. "It's a very unique field," says Heather. "You could have a property decked out with all the nicest equestrian amenities and it would have a huge value to a very small group of people and a very different value to a non-horse person.

"You could have the nicest barn, the top footing imported from Europe, and a house of comparable value, but the non-horse person may ask, 'Why should I spend more money to haul that all away?'"
That's even true between different horse people, notes Lisa Thomas. "A $2 million buyer might sniff their noses at a property that's a dream for another, because one is, say, a reiner, and the other is a hunter/jumper rider. Horse property is unique because everybody wants something different."

Land In Demand

Taking the availability of equestrian acreage for granted is one of the biggest mistakes a prospective buyer can make. That's been the case for some time now, and increasingly so as land itself becomes more scarce in desirable and densely populated regions. These include Los Angeles, San Diego and the Bay Area, where a reasonable work commute can co-exist with a home life with horses, triggering higher price tags.


Horse Creek Trail in Valley Center – $1,995,000. Twelve-plus acres in San Diego's Valley Center feature a three-bedroom, two-and-a-half bath home. An eight-stall barn, two-acre pastures, large jumping and dressage arenas are among the amenities on this two-parcel property. More info: Caren Kelley, 858-350-1018 or visit www.equestrianre.com.

General land scarcity has a distinct impact on availability of horse property because it often leads to non-horse people buying equine-zoned parcels with no intent of keeping horses. They might want tennis courts, a residential compound or simply a lot of space and privacy in a lovely area like Rancho Santa Fe. So they're competing with what San Diego realtor Cathy Gilchrist-Colmar describes as an upswing in buyers looking for lots that can house over 10 to 15 horses. "Even though we live in an area where land is selling at a premium, the horse community is as strong as ever and people need places to raise and train their horses, often incorporating a professional trainer and his or her clients."

In some areas, vineyards are encroaching on what could or has been prime horse turf, although the 10 acres typically required for viable grape growing is a considerably larger parcel than what's commonly needed or preferred for maintaining horses at home.
"Low vacancy rates are already here," observes San Diego realtor Caren Kelley. "For those who enjoy the equestrian lifestyle, it's easy to take for granted that there will always be wonderful places to ride—until suddenly no suitable facilities are available. Making sure that you and your horses will always have a lovely place to pursue your happiness is one of several reasons that now is the right time to make a great personal investment."

Dawn Aaris sees an inventory shortage in Bonsall, Fallbrook and surrounding areas, especially in properties under the $600,000 mark. She describes the current scenario as "more of a seller's market, but it's really a winning situation for both. Sellers who have taken the chance to gain equity have a great opportunity if they are ready to downsize and, at the same time, interest rates have scaled down."

The Right Realtor

In every aspect of buying or selling horse property, working with an educated and experienced realtor is essential. Finding property that is zoned for the amount of horses you plan to keep is critical, but it's only the beginning. The land's topography – flat or hilly -- affects its suitability for arena construction and maintenance. Water sources or the cost to get water, septic and drainage issues and the nuances of every city and/or county's permitting rules and processes are all areas in which a realtor can either facilitate a buyer's dream or bring about disaster.

"Don't go with your best friend, your niece, your cousin or an out-of-the-area realtor," says Pam Moss. In her experience, top equestrian realtors work well together and help each other navigate their area's unique realities. "We all work a specific niche and we can help each other out."


At-home horsekeeping in Bonsall's Saratoga Estates – $1,025,000. Three bedrooms plus separate den, four-stall barn with tack and feed room. Saratoga Estates is a gated community with very low annual association dues, riding trails and a community arena. More info: Pam Moss, 714-296-9300 or visit www.countryequestrianestates.com.

Helping buyers recognize a property's potential is part of a realtor's job. "The more customized the facility, the narrower the target audience for it," notes Lisa Thomas. "That's something that's harder for clients to understand." From the buyer's side, she prepares them to accept that changes will usually be required to adapt a property to their specific sport and needs. From the seller's standpoint, there's the tough reality that, typically, the more developed the property, the harder it is to get money back from those investments.

Helping buyers understand the realities of at-home horsekeeping is another responsibility for good realtors, Pam Moss asserts. "I ask clients if they've kept horses at home before and if they understand that it's not cheap." Hay, water and shavings are just a few of the big costs that can catch newcomers by surprise.

Still, the dream of seeing horses from the kitchen window is compelling for good reason. Observing what horses do through the course of the day and night is an eye-opening education for most and a great opportunity to take the horse/human bond to new levels.