Author Topic: Bought Some More Farm Ground  (Read 3633 times)

Fishindude

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Bought Some More Farm Ground
« on: February 22, 2016, 02:54:40 PM »
Had some money that wasn't doing anything and already have a chunk working in the stock market.  Don't really expect to make a big return off of it, but I feel like this is a good safe way to sock some money away long term and "preserve" it.  Traditionally, this has always been a pretty decent deal in the midwest, and in some instances a real good deal.  It's not like a rental where you have to replace roofs, furnaces, buy insurance, deal with tenants, etc.   Worst expense you might run into other than taxes is a drainage problem or maybe some fence, and taxes on bare ground are cheap.   Can also get a little return by farming or various government habitat programs. 

They're not making any more ground.

Gone Fishing

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Re: Bought Some More Farm Ground
« Reply #1 on: February 22, 2016, 02:57:36 PM »
Never could make the numbers work in my neck of the woods.  Lease rates are too low.  Do you mind showing your analysis?

Bearded Man

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Re: Bought Some More Farm Ground
« Reply #2 on: February 22, 2016, 06:24:39 PM »
I've thought about doing this in the greater Seattle area, off I-90. The lot my development is on was all owned by the guy who lives behind me and he sold it for 5 million. He just sold another smaller lot for a few million.

I view it as a buy and hold investment. It's a way to avoid investing in the stock market but not invest in houses, just raw real estate. No renters, nothing. How much land did you buy and for how much?

I see 20 acre tracts of land in eastern WA for 40-50K, but alas, they are far from society. I'd like to buy somewhat closer and let it get to the point where I can cash out for a few million. This is tricky to do because you can't predict the areas that are going to get valuable over time. Anything that is a sure bet is likely to be very expensive as it is, and I'd hate to make a loan payment on something that has no cash flow.

Fishindude

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Re: Bought Some More Farm Ground
« Reply #3 on: February 23, 2016, 05:19:08 AM »
Analysis for every piece of ground is different, but here is a pretty general typical example:

(40) Acres at $6,000 / acre = $240,000

Cash rent at $150/acre = $6,000 annual income
Less annual property taxes +/- $1,500
Net annual income $4,500

Just under a 2% return.
If crop prices run back up again, income can get a little better.
It's a bit better than what you can get out of a CD, and you would hope to have a little gain on it when you sell.
Won't work borrowing money, obviously.

As a hunter, I always try to pick up stuff that has a little hunt-able ground too, which is a pretty nice side benefit.


arebelspy

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Re: Bought Some More Farm Ground
« Reply #4 on: February 23, 2016, 05:29:47 AM »
I feel like speculating with 240k should get a bit better return, but to each his own.  :)

I'd be purchasing land, personally, if I was going to develop it for better and higher use, not for speculating.

There's a few exceptions.  Lumber may be one.
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Fishindude

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Re: Bought Some More Farm Ground
« Reply #5 on: February 23, 2016, 05:42:36 AM »
Per original post, the goal for me is primarily to "preserve" this money.  Around here, farm ground is just a good safe investment, and if you need the cash, it can be quickly sold to get your cash back.   And very slim chance that you would ever lose money, unlike the market.

If corn got back up to $8 / bushel like it was a couple years ago, that ground would shoot up to near $10,000 per acre quickly.   Saw ground changing hands at some ridiculous per acre prices a couple years ago.  That has settled down, but the good ground is still fetching a premium.   A single prime 700 acre field in my county recently sold for a bit over $11,000 per acre.

To give you an idea of long term potential, the first farm I bought in 1990 was $750 / acre.   It's easily worth $6-7,000 / acre now.


SwordGuy

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Re: Bought Some More Farm Ground
« Reply #6 on: February 23, 2016, 09:33:12 AM »
Not really a lot different from buying a stock that pays a 1.8 to 2% dividend and betting on the appreciation.

Except that, presumably, he can master the knowledge of farmland in his area more easily than one could master the knowledge of a large public company.

arebelspy

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Re: Bought Some More Farm Ground
« Reply #7 on: February 23, 2016, 09:43:11 AM »

Not really a lot different from buying a stock that pays a 1.8 to 2% dividend and betting on the appreciation.

I'm gonna have to disagree with that one.
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Mississippi Mudstache

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Re: Bought Some More Farm Ground
« Reply #8 on: February 23, 2016, 10:01:09 AM »
Is it just me, or is this statement:

PAround here, farm ground is just a good safe investment, and if you need the cash, it can be quickly sold to get your cash back.   And very slim chance that you would ever lose money, unlike the market.

at odds with this one?

If corn got back up to $8 / bushel like it was a couple years ago, that ground would shoot up to near $10,000 per acre quickly.   Saw ground changing hands at some ridiculous per acre prices a couple years ago.

Wouldn't the people who bought land at "ridiculous" prices a few years ago be losing money if they needed to quickly cash out today?

Fishindude

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Re: Bought Some More Farm Ground
« Reply #9 on: February 23, 2016, 12:05:23 PM »
Wouldn't the people who bought land at "ridiculous" prices a few years ago be losing money if they needed to quickly cash out today?

Yes, this could apply to anything.  Pay too much, then try to sell it soon and it's a loser.
Buy ground at or below market value and you can just about always get your principle back pretty quickly.

The farm mentality is pretty crazy.   The guys paying the ridiculous prices are career farmers and aren't planning on selling, they are increasing their land holdings.   Something right next door to their ground, or something that nicely compliments their current operation comes up for sale and they're going to buy it if they can.  The thinking is that this may be their one and only time to get that ground.   Most of these guys already have many acres of paid off ground they bought much cheaper in prior years, so they will occasionally pay a premium for the right stuff.   

Was going crazy a couple years ago.  They were snatching up any ground they could get their hands on, buying equipment, new barns, grain bins, etc.  Guess they figured, rather than give so much away in taxes, may as well put it back in the business.

lthenderson

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Re: Bought Some More Farm Ground
« Reply #10 on: February 23, 2016, 12:27:14 PM »
Personally, seeing a trendline looking like below, I think I would steer clear of "investing" in farm real estate for the time being. It already has fallen nationally around 9% over the last year or so nationally and according to most experts, has a ways to go before getting back to where it should be.

Scandium

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Re: Bought Some More Farm Ground
« Reply #11 on: February 23, 2016, 09:10:51 PM »
Just off the top of my head, wouldn't dropping the silly corn ethanol mandate suddenly make this less of a "safe investment"? I think I'd take a 2% bond to park money, but to each their own

Fishindude

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Re: Bought Some More Farm Ground
« Reply #12 on: February 24, 2016, 05:15:36 AM »
I'm not sure they can ever drop that corn / ethanol mandate?
Too many jobs and businesses are now tied to ethanol production.  Shutting it off now would be political suicide.