Posted by kyhayman on January 06, 2008 at 19:51:31 from (64.12.117.74):
In Reply to: farm land price posted by macco on January 06, 2008 at 16:30:51:
You cant pay principal on farmland farming it. Interest, usually but not principal.
400 acres at 7000 an acre will run you 2.8 million. Interest on that kind of loan will run you at least 500 an acre. Opportunity cost if you've got the money would be 350 an acre at 5 percent.
If it runs 180 bushels per acre at 4.00 you've got 720 per acre gross. I dont know what annual operating cost is in Iowa but here, with custom harvest that will run at least 300 an acre probably 400 an acre. 400 an acre above operating cost at 400 acres would be 160,000. Thats good money but interest on borrowed money will eat up that 400 an acre and then some. Lost interest on your money if you have 2.8 million on hand would leave you with 50 an acre, IF the 4.00 market holds. 400 acres at 50 an acre would leave you 20,000. I couldnt see risking 2.8 million to buy a 20,000 a year job and I sure cant see working for less than nothing if you have to borrow that kind of money.
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