Things to Consider When Buying Remote Alaska Property

Things to consider when looking at a remote vacant land offering include the following:

1. Objective - If you plan to build, is there a suitable building site above ordinary high water? It’s not uncommon for rivers in Alaska to crest the banks in spring during the break up and later in the summer when rain and snow melt pump water into the streams and rivers. While the duration of these flooding events is typically short, keep these in mind.
2. Logistics – When building in remote Alaska, consider how building materials and supplies will be delivered. Overland in late winter, early spring, or by boat or barge in the summer is logically the most economical. Some sites are accessible by air only and costly, to say the least.
3. Sustainability – getting building materials and supplies to the property is a challenge but keeping your new cabin, lodge, or off-the-grid home supplied throughout the year is another challenge. Talk with other landowners and pilots and consider the cost, frequency, and accessibility of supplying a remote property.
4. Natural Resources – Does this land provide resources such as wood for fires, logs for buildings, and freshwater? Is there abundant game in the area, is hydro, solar, or wind a source of energy beyond petroleum? Also, consider how to address waste; is the soil well drained? Is permafrost a consideration? Do you know what to look for as to tell if the soil is well drained at a glance?
5. Mineral rights – Rarely does an Alaska property come to market and it includes mineral rights. Those are few and far between as in the state of Alaska, for the most part, the minerals are reserved by the state, for the state. Some Alaska landowners know the status of their mineral rights, while others have no clue. A title company can do a search and let a buyer know their status prior to closing.
6. Taxes – Depending on which Borough the land is located on, many remote Alaska properties with no public services, roads, or nearby infrastructure often have no property taxes.
7. Lenders – there are lenders in Alaska that do lending on remote properties. Vacant land is high risk so expect LTV’s 50/50 at best; seller financing is more typical.
8. Contractors – Alaska is home to several off-the-grid builders and contractors. These are a hardy, driven, and creative group, and the knowledge and expertise they bring are invaluable.

Buying a developed remote Alaska property such as a fish or hunting lodge, cabin, house, or getaway can be just as straightforward as buying a home in the lower 48 except for access. Things to consider when buying a remote Alaska-developed property include the following:

1. Why is a Seller selling – Just as in the lower 48 states, Sellers divest for any number of reasons. In Alaska, it’s good to understand this and look for alignment with both Buyer and Seller objectives.
2. Buildings – there are numerous building inspectors in Alaska who will, for a fee, travel to the site and do an inspection. Inspectors are looking for the same things a buyer is looking for, such as mold, structure integrity, overall condition, historic failures, leaks or signs of flooding, how human waste is being handled, roof condition, and so on. Alaska inspectors offer the Buyer an advantage because they are substantially more familiar with Alaska and the associated complexities of owning and maintaining remote properties.
3. FF&E – Fixtures Furniture and Equipment – part of the value proposition is the ease by which the Buyer can step into the ownership and carry on. As a Buyer, you may want the Seller to provide a complete detailed list of all fixtures, furniture, and equipment that comes with the sale. Most Alaska Sellers prefer to list what doesn’t come with the offering rather than take the time to inventory everything. It’s just as expensive to haul materials, equipment and supplies out just as it is to haul them in. Many Sellers install generators to power the infrastructure, typically diesel powered, on occasion propane, and some supplement with solar or wind, or hydro. The generator is often the heart of the complex, so a tired, outdated power plant may be as much a liability as an asset.
4. Personal Property – Many Lodges have extensive equipment such as boats, planes, UTV’s Sherps, ATV’s and others that are critical to the operation and function of the complex. Tired, outdated equipment can still be useful and functional, but the liquidation value is limited. Many lodge owners update their outboard motors, UTV’s, and boats regularly to avoid breakdowns or dissatisfied clients. A buyer would want to see a detailed list of the personal property included and should anticipate the conveyance with a bill of sale.
5. Valuation – valuing remote Alaska properties can be challenging due to the ubiquitous variables impacting all offerings. There are numerous approaches to establishing market value, and the reality is that Buyers alone establish the market value, and it is Sellers who go to market with the expectation. Sellers either agree or don’t agree with a Buyer’s final and best offer. For Buyers with these income-producing properties, there are several approaches to establishing value, Cap Rate, a formula of EBITDA, replacement costs, or some combination of one or more of these approaches. In 2022 valuations for income-producing lodges varied significantly from 10% Cap Rates to as high as 23% Cap Rates. On properties well cared for, room to expand, large customer lists, and solid growth, the argument can be made for a lower Cap Rate. If using forecasted income, flat income growth or other forms of decline, Cap Rates logically will remain higher. Comp sales are not always indicative of actual market value for example, a similar sized Lodge in the same fishery sold recently but the sale included an earn-out and the Seller retained 25% of the ownership. In this example the Buyer attempted to de-risk the investment and thus was far more comfortable using a much more aggressive Cap Rate to value the property. The transactions dynamics of a “comparable sale” can swing things greatly. Alaska does not require Sellers to publish closing price and sale details therefore closing details are not always readily available to an appraiser. As a Buyer when trying to understand the value proposition look at the P&Ls, hidden value can be found in re-castable expenses, which in Alaska Lodge ownership can be significant.
6. Representation – The state of Alaska does a very good job with oversight of its licensed Alaska Real Estate Agents. As is the case with attorneys, not all agents are well-suited and/or qualified to effectively represent a Buyer for a remote Alaska property. When choosing an agent to represent you, a good question to ask them is how many acres of remote property they have sold and what experience they have with income-producing properties. If the response is “little” and “none”, you may want to consider looking for another agent.
7. Timing – If an Alaska land acquisition is on the horizon begin planning in January for your trip in June, rental cars are hard to come by and hotels fill quickly. Air fare is more reasonable when booking out more than 90 days. Allow several days to get to the property. Weather in Alaska even in the summer can be unpredictable and can cause delays. Making offers and closing will likely take more time and its entirely possible the Seller does not live in Alaska nor does the Buyer. Add to it Alaskans in the summer are trying to make up for 7 months of ice and snow or Sellers have 40 new guests every week it can be wise to plan on taking more time to get a sale signed around and to get a sale closed.
8. Additional considerations – If your interest is in a remote Alaska fishing lodge for example and your plan is to visit the property during season with guests present, Sellers may be uneasy and not feel completely comfortable and with good reason. Remote Alaska can be a remarkable and indelible experience both as an owner as well as a visitor. One thing that holds true, however is the Alaska owners who thrive and offer the best opportunities to new owners are those who have McGyver-ish qualities and the ultimate “can-do” attitude.
9. Alaska Consumer Pamphlet – The Alaska Real Estate Commission (AREC) is the regulatory authority in Alaska with oversite of its real estate agents and brokers. The AREC requires a broker to provide a copy of the AREC consumer disclosure to perspective buyers/sellers prior to engaging in any real estate services such as drafting offers or LOI’s or MOU’s. The pamphlet outlines roles and responsibilities for agents and requires the agency relationship be understood between the “buyer” and the agent as well as between the agent and the seller. By acknowledging receipt of the pamphlet you are not committing to anything between you and the agent but you are helping the agent avoid a hefty fine if this is not in the agents file performing services for you.

About: Troy Dana spent the majority of the 80’s working in Alaska as a Tow/Tug Boat as a USCG licensed Operator and then Master operating through-out the Yukon River, Arctic Ocean to Prince William Sound. His 32-year background in real estate includes President/CEO of Hodges Gilliam & Dana, closed transactions totaling just at 200,000 acres, and authoring a white paper on carbon sequestration with native and commercial forests. Troy has authored and taught continuing education courses and was approved by the Washington state Bar to teach CLE’s. In addition Troy has mentored several tech start-ups with clean energy or climate mitigation objectives.

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