Land Prices and Return on Investment

FarmerZeb · Jul 30, 2013

We all know land prices are sky high right now. I was trying to make some sense of if. There is a 50 acre parcel for sale near me for 6000 dollars per acre. This ground rents for $200/acre in a county with an average yield of 148 bu/acre. From an investment perspective why would you drop $300,000 and only get a 3.2% roi?

-Paul

wisbaker · Jul 30, 2013

3.2% isn't all that bad in today's market and you're not looking at potential appreciation the land may have while you hold it. Only thing that scares me is you'd be buying in at market top.

redgems · Jul 30, 2013

1. Because 3.2% is more then you'll get in bank.
2. It will contribute to your living in meantime
3. Most important you'll have a valuable asset in old age that can be rented out or sold.
I am 67yrs old and don't regret any piece of land I bought in my life time and some of it I paid too much at the time. I've been a farmer all my life and continue with hired help. Would hate being on S.S. only with no write offs.
BUY IT!!If you can fit it in budget in any way.
Tony

Anonymous-0 · Jul 30, 2013

Around here land is over 9,000 and yields are about the same so is cash rent

MarkB_MI · Jul 30, 2013

When CDs are paying less than one percent, three percent ain't too bad. Farmers are flush with cash, after several years of good grain prices, and looking to invest that cash. Not to mention investors, foreign and domestics, looking for the next big thing. Also, there are federal programs to help young farmers get started, and those are driving up demand for farmland.

We auctioned off a half-section of farmland this year. We didn't really want to, but it made no sense to hold onto it at current prices.

Formerly PaMike · Jul 30, 2013

My grandma has a piece we wanted to buy. 26K an acre,22 acres, and a rating of 158bu/acre. Try doing the math on that one...

buickanddeere · Jul 30, 2013

Scared paper money being turned into hard assets that won"t disappear when the Euro and US fails due to high debt.

John A. · Jul 30, 2013

Farmer Zeb, SECURITY! So that 50 acres can't be taken from you when a land owner dies and the Kids decide there is more $$$$$$$$ to be made by selling it, or siblings, Don't have to deal with each other anymore. In 15 yrs when the City grows out to you and that parcel is worth 10K/acre and you decide to sell and retire!
Don't be short sided here. As the other have said 3% is not shabby when you consider your Crabby Crappy Banker is only only paying .0075% on CDs over 100K place on Deposit for 5 yrs!!!!
++++++ Buy it and Be Secure in the Knowledge you Won't have a 50 acre Trailer Park and all the Headaches that come with it, where you used to grow Corn!!!
BUY IT!!!!! NOW!
Later,
John A

donjr · Jul 30, 2013

I bought this place some 30 years ago at what I thought was top dollar then for about $2500/ ac. Yields then were about 100 bushels, and the price for corn was about $1.75 or $2. I sold the old house and 2 acres for close to half of what I paid for the farm, and have built new buildings on it since. The ground alone around here is now worth about $10K per acre, we produce well over 150 bushel corn, and the price is usually $5+. Talk to Farm Credit, or if you're just starting, to FSA. If it will pencil out, it's a great investment, and those two outfits will try to work with you because the specialize in farm financing. If you're willing to work, and smart enough to think ahead, it will pay you back later.

RodinNS · Jul 30, 2013

3.2% is better than you'll get at a bank and over the long haul this is probably safer.
Aside from that, ownership is control. Long as you make the payments some fickle fool isn't taking it from you next year... plus... even tho it's not a large parcel the income can still make a contribution to overhead that might not otherwise be there.

Rod

paul · Jul 31, 2013

Sounds cheap, sadly.

Land went 6 grand 18 months ago, last December it went 9-11,000 in 5 parcels around me.

Not much better than yours.

We bought a 40 5 years ago, was nuts what we paid for it as it is 1/3 swamp grass. Now it is valued double what we paid for it....

Paul

El Toro · Jul 31, 2013

One of my friends that was drafted one year before me bought 43 acres around 1960 with a small house. I don't know what he paid, but it was probably a lot less than $20,000.00. In the 1990's he had a large log home built. He sold it
last June for $475000.00. He made E-6 in 11 months in 1952 when in Korea. His granddad was a gunsmith and gave him rifles with a scope. We could shoot those ground hogs a long distance away.

A few weeks ago you asked me if I was employed as civil service employee. I went to work at APG in 1951 and was drafted in 1953. In 1955 I was rehired back at APG as a returning vet. I worked in the secured area behind the fence. I spent most of my hitch at Ft Bragg NC with the 82nd Airborne. Some of largest test projects was the M1 A1 Abrams Tank, Bradley Fighting Vehicle, M60 Tank, 8 & 16 ton Goers, M578 Recovery Vehicle and the M88 Recovery Vehicle and lots of Trucks. After retiring I worked for 10 years for several defense contractors. Hal

Spook · Jul 31, 2013

For some folks, it is all about the really long run, they are buying land they hope their sons and grandsons will farm. Most farmers I know of inherited signifigant acreage. It's a multigenerational investment.

Unruh · Jul 31, 2013

Back in the 70's somewhere, land had just taken a raise in price. I was custom cutting soy-beans for a 80 + yr old land lord who crawled into the combine to see how it all worked in these modern times.
We got to talking about the high price of land (below $500.) and I asked him if land had ever been cheap in his estimation. He looked down at the floor and finally said, "A forty once came up adjoining mine for $12.00 an acre." Did you buy it? "I couldn't even figure out how to pay the interest on $12.00".

RGMartin · Jul 31, 2013

(quoted from post at 22:20:09 07/30/13) Farmer Zeb, SECURITY! So that 50 acres can't be taken from you when a land owner dies and the Kids decide there is more $$$$$$$$ to be made by selling it, or siblings, Don't have to deal with each other anymore. In 15 yrs when the City grows out to you and that parcel is worth 10K/acre and you decide to sell and retire!
Don't be short sided here. As the other have said 3% is not shabby when you consider your Crabby Crappy Banker is only only paying .0075% on CDs over 100K place on Deposit for 5 yrs!!!!
++++++ Buy it and Be Secure in the Knowledge you Won't have a 50 acre Trailer Park and all the Headaches that come with it, where you used to grow Corn!!!
BUY IT!!!!! NOW!
Later,
John A

Big brother can just as easily pull eminent domain on it... Give you half of what it is worth, no recourse.

Times get bad, Low grain prices, No rent income, No tax money... How quickly will you realize that you don't really own it.

DaninKansas · Jul 31, 2013

3.2% return? I'll take that in a heart beat.

Dan T in MO · Jul 31, 2013

An 18 acre patch across the road from me was recently on the market for $4000 per acre. It had no electric, no well-just a fence and pasture land. The realtor laughed at my offer. The only thing the land really had going for it was easy access to Highway 54.

Luckily, a sawmill operator bought it. I had fears of a housing development like the one just to my south.

John A. · Jul 31, 2013

RG, Not sure of your point, But Zeb Didn't make mention of any New 4 lane Highways in the future. If one get out in front of That, They are usually more than fair.
There is always Some Drought, Some where, More rain than one needs at other times. If the World goes to H3ll in a Hand-basket then there is more to worry about than taxes
IMO Zeb was talking about every day life and my answer was directed to that. If You Own it, You control it.
If you don't pay your taxes there can be a problem but Again They will work with you if you have a little something to work with and try, when you stop trying they stop helping too.
Anyway......
Later,
John A.

GordoSD · Jul 31, 2013

Because you will be making at least 10% appreciation on the entire 300K or 30k a year investment gain.
Also look at it from this viewpoint. If YOU don't buy it someone else will. And that could be anything. Maybe a hog farm.

RGMartin · Jul 31, 2013

(quoted from post at 09:41:13 07/31/13) RG, Not sure of your point, But Zeb Didn't make mention of any New 4 lane Highways in the future.

I guess I'm just pointing out that all is not sunshine and roses. There is risk...

John A. · Jul 31, 2013

RG, True!, I have Rented and I have and Do OWN, You Rent Ground, take care of it like the owner would or even better and you can still have it jerked out from under you on a whim!!! I will take Ownership every day of the week!
Later,
John A.

SweetFeet · Aug 1, 2013

People are making more insane buys than that.

Last night I saw 3 "pending" land sales in the paper... EACH going for 10-11 THOUSAND PER ACRE.
One parcel is over a hundred acres...
So if that deals goes through somebody is going to drop about 1.2 million on a fairly small hunk of dirt. It is just crazy!

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