In yesterday’s blog post about North Dakota Governor Doug Burgum not liking the Dickinson area, in the last paragraph I wrote the sarcastic comment that the Governor was very impressed with how land owners spent their oil revenue money on luxury fifth-wheel travel trailers, side-by-side buggies, and four-dour four-wheel-drive lifted one-ton diesel trucks. I want to explain and elaborate on why the behavior of Dickinson area people is irritating and ignorant to people elsewhere in North Dakota, the U.S., and the World.
In western North Dakota, where farmers were poor historically, when the most recent Oil Boom came in 2007, thousands of land owners began receiving large initial oil lease payments, and then later monthly oil well production payments. Not having had this kind of money before, and not knowing what to do with it, many local land owners could only think to buy the biggest and most expensive pickup truck that they could find, the biggest and most expensive fifth-wheel travel trailer they could find, and then the most expensive four-wheelers and side-by-side buggies they could find.
To educated, professional people, who either had good incomes, would have good incomes, or came from middle-class, upper middle-class, or wealthy families, this kind of spending of once-in-a-lifetime windfall money, was foolish, ignorant, reckless, obnoxious, and even tragic. The money that could have benefited entire families for generations to come, was going to disappear within ten years, like it never even happened.
To explain this, some of the larger four-door four-wheel-drive lifted one-ton diesel pickup trucks can cost $80,000 new. The largest fifth-wheel luxury travel trailers $80,000 new. The nicest side-by-side off-road buggies $20,000. Add these three items up, and the total is $180,000. Then add sales tax, registration fees, title fees, and insurance, and the cost is easily $200,000.
Ten years from now, the truck will be worth about $20,000, the travel trailer about $20,000, and the side-by-side buggy about $5,000, altogether about $45,000. Together, this is a $155,000 loss on an investment of $200,000.
To educated people, or wealthy people, with an initial investment of $200,000 in the right stocks or the right real estate, ten years later you could have $400,000. It is a tragedy that someone could take $200,000 and turn it into $45,000 ten years down the road.
So when Dickinson area North Dakotans think that they are impressing people when they are driving down the road in an $80,000 truck, towing an $80,000 trailer, towing a $20,000 side-by-side buggy, they are actually embarrassing themselves, showing their ignorance, and showing their lack of understanding about money.
Rather than staying in a campground in a travel-trailer every year for ten years, and at the end of ten years the truck, trailer, and buggy are worth $45,000, having lost $155,000 in depreciation, the initial cost of $200,000, if it were invested, could have paid for a luxury vacation anywhere on Earth, not for ten years, but for an entire lifetime.
How should have North Dakotans spent or invested their initial lease payment and oil revenue money, in a way that would have been the most beneficial to themselves and their families? In the oil field where I worked in southwest Texas in 2012, the ranch owners built guest houses or guest cottages with their oil revenue money, and I will explain why this was a good idea.
In southwest Texas, the land was kind of barren and desolate, not that much different than the land in western North Dakota. Instead of getting down to -30 degrees Fahrenheit like North Dakota, it got up to 125 degrees Fahrenheit throughout the summer in southwest Texas. Like the farms in North Dakota, the ranches in southwest Texas were not very fancy sometimes, because the owners had not always had money.
In the oil field where I worked in Texas, once the ranch owners began receiving oil revenue money, many of them built guest houses or guest cottages on their property, that ranged from nice to very impressive. I don’t mean that they went and bought single-wide or double-wide manufactured homes and placed them next to each other on their property like a trailer park, I mean they put a lot of thought and pride into creating something on their property that was an enhancement, improvement, and beautification.
The ranch owners would pick a spot on their property that they had always thought of as a good place to build a house, whether on a hill with a good view, in the middle of some trees that provided shade, or near a fishing pond. They would think out and plan what kind of house or cottage they wanted, would it have a front porch, a back porch, a patio for Barbequeing, a swimming pool, a grass lawn, landscaping?
The ranchers intended to rent out their guest house or guest cottage to hunters, or oil field companies if it were going to be used for professional personnel. Or, they would allow their friends, relatives, or guests to stay in their guest house or guest cottage. But in any case, they built, furnished, and decorated their guest house or guest cottage to be something that was attractive, inviting, enjoyable, and something that they could show off and be proud of.
In the Dickinson area, if land owners who began receiving oil revenue would have built nice guest houses or guest cottages on their property, this would have been something that was very beneficial to themselves, their family, and others. Instead of spending $80,000 on a fifth-wheel travel trailer that would be worth only $20,000 ten years later, this $80,000 would be enough to build a nice guest cottage on their land.
During hunting season, pheasant hunters or deer hunters would have paid $1,000 per week for a nice, furnished cottage on a farm in rural western North Dakota. For just four weeks rental per year, this would have been $4,000 per year income for the next twenty years, re-paying the $80,000 initial cost to build it. The other forty-eight weeks per year, friends, family members, adult children, or grandchildren could have been invited to visit and stay in the cottage.
During the Oil Boom, a guest cottage could have been rented to a professional person working in the oil field for $1,500 per month, which equals $18,000 per year, taking only five years to re-pay the $80,000 initial cost to build it.
When I mentioned that this guest house building or guest cottage building would have been helpful to others, consider the following. Many adult children, or other family members, either through divorce, separation, job loss, accident, injury, or illness become temporarily unable to afford a place to live. Or, sometimes an elderly parent may temporarily or permanently become unable to live on their own. Or, a friend or family member may be unable to afford to pay for anywhere to stay on vacation. Or, a friend or relative may need a low cost place to stay when trying to find work in the Dickinson area.
Yes, I know you don’t want to help anyone, go buy your $80,000 fifth wheel that will be worth $20,000 in ten years.