Returns on rural land

[mrWinter]

The Doomsday Scenario thread by Mark24609, and specifically the zombie comment by brewer1234 got me thinking. Mark's 'doomsday' scenario was really about a not entirely unheard of market downturn. Not really a doomsday and nothing that the various retirement calculators don't account for. A conservative withdrawal rate would survive just fine. Some people go ultra-conservative on their withdrawal rates, thinking that the future may be worse than any series thus far experienced in the past. Possible, but I feel like if that really happens, then it may well be coupled with some serious disaster, nuclear war, coronal mass ejection solar storm, pandemic... zombies, etc. Whatever it is it would have to be something worse than anything the US has experienced so far in its history. In that scenario it doesn't really matter what your withdrawal rate or allocation of bonds to stocks is, because electronic and paper money might not be worth anything. The banks might not be solvent, or have closed their doors, or have been atomized by Tsar Bomba. Good luck making your retirement account withdrawal when the electricity on the entire eastern seaboard for 3 months. Were Parisian retirees able to make retirement account withdrawals in 1941?

This isn't a new idea, it's what all those 'preppers' out there are on about. I'm sure we've got some preppers here who can chime in.

So how does one try to ameliorate risk in this type of scenario? My first inclination is to own some rural land so that when SHTF you bug out there and begin your new life as a subsistence farmer. I've heard stories of billionaires doing the likes of this, buying 100's or 1000's of acres and building bug out bunkers or compounds, but I imagine you wouldn't need 100's of acres to self-sustain. This could also maybe serve as a cabin in the woods for the family or something too.

My question is about how such rural and/or agricultural land performs as an asset class. I feel like when people here talk about owning Real Estate as an asset class they usually are talking about property in cities, or burbs, or in vacation spots like some lakefront or something, but maybe that assumption isn't correct. Do rural properties tend to appreciate as well as urban and suburban properties? (Do we have any REIT fund managers on here? I'm sure they could answer.) If so they seem like an attractive option as they can provide growth long-term during non-doomsday, but also serve double duty as a doomsday backup. I guess the downside being that you can't siphon off any of that value until you sell the property, so you can't make withdrawals from that stash, meaning your asset allocation to that class would get heavier over time.

I actually have lots more questions about such a property, but will keep to the main question about returns for now. I think it's an interesting idea, I could get into the whole prepper thing.

 

[karen1972]

Not sure what the actual stats are on that, but what I've found recently is that a few things have been driving up certain rural land.

1. lack of hunting land near cities... this has made it such that even land I'd consider "swamp" land has increased in value as most hunting is done in winter when its frozen over anyway. Also, the increase in wildlife has opened up many areas to other hunting beyond just deer hunting.. ie bear, plenty of turkeys, etc.

2. Lack of land to spread manure... the biggest problem with these corporate farms is you have to get rid of the manure, regulations say you can only spread a certain number of inches per acre and they are producing FAR more manure than that.. thus having to buy up more and more acreage to spread it on.

There are also some regulations about wetland that has driven up some land pricing... ie anecdotes from farmer friends that felt there was NO WAY that land is worth X.. when some corporation bought it, broke all the tile lines, and its now deemed as a wetland. Also, lumber has been fluctuating so there has been some upward pressure on wooded areas.

Obviously in other areas its whats under the soil that matters more, land near growing cities, etc... I'd assume if there are REITs they would be segmented base on land use.

If your doing "doomsday" you might want to look beyond bunker and what your land could produce and provide for you to sustain you... ie if we just lose electricity, my parents home would still be ideal.. windmill to create its own, well water, enough food in the basement in canning jars to last 2 years, hunting land, fishing pond, wood to burn if need be for heat, and plenty of land to grow our own produce and raise animals.. I recommend goats and rabbits for doomsday.. you want something easy to reproduce and care for.

 

[NYEXPAT]

Mmmm, did someone say "Wabbit"?

 

[pjigar]

Land in Texas keeps up with inflation if you are lucky. You get what you pay for when if comes to land (like many other things in life).

 

[4legsgood]

I knew some people who bought farmland while working their city jobs and leased it out to people who actually grew stuff on it. That would mean you'd have land already arable and income producing (maybe).

Personally, I keep a few months supply of freeze dried meals on hand with a supposed shelf life of 20 years. My suburban yard is big enough for a few chickens, small veg garden, plum trees, and grapes. Also have a wood stove.

 

[joylesshusband]

This isn't a new idea, it's what all those 'preppers' out there are on about. I'm sure we've got some preppers here who can chime in.
So how does one try to ameliorate risk in this type of scenario?

Perhaps not what you'd want to hear, but my answer is pretty simple:

Get armed.
Get training.
Once the scary scenario unfolds, take whatever you need from others.
Rinse and repeat.

If you don't, what's yours will be shortly taken away (by said preppers and freshly-minted bandidos like myself).
High-risk game, played at high stakes. Few will survive it.

 

[youbet]

Perhaps not what you'd want to hear, but my answer is pretty simple:

Get armed.
Get training.
Once the scary scenario unfolds, take whatever you need from others.
Rinse and repeat.

If you don't, what's yours will be shortly taken away (by said preppers and freshly-minted bandidos like myself).
High-risk game, played at high stakes. Few will survive it.

How does this tie into OP's discussion question?

My question is about how such rural and/or agricultural land performs as an asset class.

Are you saying that bandidos will take your rural and/or agricultural land from you so it will be low performing as an investment?

 

[meierlde]

If truly looking for land for a place to hide out, you want to go to counties that are still frontier, ideally off grid like a lot of the homesteaders on youtube try. Don't have to go into food growing if the area has underground temps in the 40s you can buy 30 years worth of food. The main issue is how to get there if the SHTF Likley you might install a large water tank as well. (perhaps a windmill to pump the water not electricity)


In this case look for hill side land so you can build with most of the house underground, but high enough that it won't flood, which eliminates most weather risk, as well as fallout risk. (10 foot deep takes care of tornadoes as well as fallout)

 

[Texas Proud]

Perhaps not what you'd want to hear, but my answer is pretty simple:

Get armed.
Get training.
Once the scary scenario unfolds, take whatever you need from others.
Rinse and repeat.

If you don't, what's yours will be shortly taken away (by said preppers and freshly-minted bandidos like myself).
High-risk game, played at high stakes. Few will survive it.

How does this tie into OP's discussion question?



Are you saying that bandidos will take your rural and/or agricultural land from you so it will be low performing as an investment?

Not the one who posted the response but I will give an answer...

Yes... IOW, if it gets to a point where people are going to have to go out and grow their crops and raise their own meat then just having that is not going to be enough... the population is too large IMO to support going back to the farming era... many people will be looking for ways to stay alive and coming across a 10 to 100 acre farm with one to say five people on it is easy pickings....

So, many people will have to die before having land will be worth it... I have the same opinion about preppers... but some of them have trained on ways to keep what they have...


Also, if it gets so bad that I would have to scrounge for food etc. and it is an all out downfall of society I might as well just pack it up and die... I have lived a decent life and am not young where I could do what is necessary...

 

[mrWinter]

Appreciate the replies so far.

So far, the award for most on-topic reply goes to pjigar:

Land in Texas keeps up with inflation if you are lucky.

Curious to hear how other people think land in other parts of the country appreciate.

 

[dunwerkin]

Not answering the prepper/doomsday scenario, but we have farm land as part of our investments. High quality farm land in the farming belt will produce a return/income each year. We have acreage in the upper Mid West that produces right at a 4% return of purchase price/land value after property tax payments are made. The land is leased to producers in the area on a per acre rental rate that is generally paid the first quarter of each farm year. Rents can fluctuate some each year depending on the commodity prices, but have been fairly consistent over the years.

 

[CRLLS]

DF and DM bought an 8 acre plot in rural Fla in ~1976 or so. 30 plus years later, when the estate was settled, the property sold for about the same as when they bought it. Not much of an asset class IMO.

I've been watching farmland around us. Wife's DM has about 40 acres that she rents out to farm. I haven't seen that property increase or decrease over the last ~10 or so years. Farm land and rural land seems to be a real loser as an investment. IMO

From my very small sample, I would say that rural property, away from urban sprawl areas seems to be decreasing in value when adjusted for inflation.

 

[meierlde]

Land in Texas keeps up with inflation if you are lucky. You get what you pay for when if comes to land (like many other things in life).

Since the climate accross Tx varies so much one needs to be more specific about the location. The piney woods in NE Tx is very different from the area around Sonora and Ozona, The NE is in generally well watered and you can grow a lot of crops while out west you can only reallistcally run cattle or if you can persuade wind or solar power companies to locate on your land get some return.

 

[meierlde]

DF and DM bought an 8 acre plot in rural Fla in ~1976 or so. 30 plus years later, when the estate was settled, the property sold for about the same as when they bought it. Not much of an asset class IMO.

I've been watching farmland around us. Wife's DM has about 40 acres that she rents out to farm. I haven't seen that property increase or decrease over the last ~10 or so years. Farm land and rural land seems to be a real loser as an investment. IMO

From my very small sample, I would say that rural property, away from urban sprawl areas seems to be decreasing in value when adjusted for inflation.

For rural farm land you need to look at crop prices when high the value of farmland goes up when low (like now) the value goes down. In particular this is true for grain farms in the Midwest.

 

[CRLLS]

For rural farm land you need to look at crop prices when high the value of farmland goes up when low (like now) the value goes down. In particular this is true for grain farms in the Midwest.

You are right. Prices depend on not only crop prices, but how productive the land or farming practices happens to be. However looking at just the price per acre, or rent prices, they seem to be stagnant. I have no actual data written down. Just an observation.

 

[zinger1457]

Curious to hear how other people think land in other parts of the country appreciate.

May not be typical but owned some acreage in Arizona and sold it about 10 years ago. Just dumb luck on my part to get rid of it at the right time. Today that same lot is going for about 40% less than what I sold it for. Then you add in having to pay property taxes on the land for all those years it turned out to be a pretty lousy deal for the buyer.

 

[MRG]

Please tell me where you are are buying this land to survive on. I know a bunch of good old boy farmers and loggers, they'll pay good money to watch a bunch of newbies attempting to survive off the land.

 

[ncbill]

As other posters note, raw land usually has a terrible investment return.

Farmland would be better.

I have an acquaintance who bought a small farm, around 50 acres, about 5 miles out of town ~15 years ago, pre-paying the mortgage in order to own it free & clear by the time he retired from Megacorp.

Property taxes are low as long as the farm generates ~$1000/year in revenue.

 

[MoneyIsMyHobby]

In that scenario it doesn't really matter what your withdrawal rate or allocation of bonds to stocks is, because electronic and paper money might not be worth anything. The banks might not be solvent, or have closed their doors, or have been atomized by Tsar Bomba. Good luck making your retirement account withdrawal when the electricity on the entire eastern seaboard for 3 months.

Land ownership rights are just paper as well. If paper money becomes worthless land deeds may be just as worthless. Just saying. That puts out an argument for gold and silver... but of course, they can seize that too. I guess that is why so many survivalists are all about guns and amo. In the meantime, I'm satisfied nothing that crazy is coming our way.

That said, I was recently educated on the Japanese market crash that never recovered, really. Although it finally does seem to be headed in the right direction now, 30 some years later. I suppose there is an asset mix that survives this, but not my current asset mix.

3 decades later and the Nikkei has not recovered -- Will the SP500 do the same? – Birds of a FIRE

MIMH

 

[calmloki]

Could say I knew a farmer in Oregon who actually hit the lottery and won a million dollars. When asked what he was going to do with the money he said he was going to keep on farming till the money ran out.

As a farm kid the common term was "land poor". Lotta raggedy crippled up ol' boys who were worth an amazing amount - except they couldn't get their money out of the land. We have residential rental properties which are supposedly worth a bunch but will take a long time to sell - and then the taxes will chomp us up. Good thing is the rentals generate a decent annual income. Also have some bare dirt by the coast that we pay property taxes on and maintain, but it doesn't earn anything and nobody is wanting to buy at our break even price.

I'm dubious about bare dirt as an investment absent a visionary eye that sees breaking the property up into individual lots or recognizes a new store site or such. As a bug out location to raise bunnies and chickens and tomatoes I'm real dubious. Back pre Y2K I was all hot on propane & water tanks and hand cranked grain mills kerosene lamps and water purification units and generators dry food and guns and lotsa bullets. Dawned on me that if we had the one bright spot around we were going to be inviting our neighbors in or fighting them off - either way we wouldn't be extending our lives much.

 

[lwp2017]

I live on a farm. Raise cattle, hay, and pecans. Large garden and orchard.
Also worked 60 hours a week at stressful job until retired.

I know the term land-poor. I know a lot of land millionaires barely making it on cattle prices.

Currently I'm in a bad drought. No grass left, forget about a June hay cutting.
Going to lose a lot of money on the farm this year. I went through my farm records this morning selecting a third of my cows & calves to sell early, all young nice 3 year old cows, it's going to hurt.
Thank goodness for 401K savings and pension check.

As far as prepping:
I'm prepared for a short term 21 to 30 day or less scenario of disruption, a place for family to find safe haven. Ideally a scenario FEMA could respond to successfully for the unprepared.

Problem with large SHTF, TEOTWAWKI scenarios is the Golden Horde. You'll have hundreds or thousands at your farm wanting, stealing, & killing for food.

I made my mind up I couldn't lethally harm starving kids that would show up and eat all of our food thus long term survival planning isn't practical for me.

The ruthless gangs that would form after SHTF out looting and plundering would be my demise.

 

[Newventurer]

I think you have to decide if it’s a good investment for a run of the mill downturn, because as others have said, in SHTF scenario there is no ‘mine’ it’s ‘theirs’

Mom has farmland in north central Kansas, the taxes are crazy, going up each year about 8%, even though the prices of land hit a peak in that area a few years ago and have now decreased. She has a few renters and some is on the FSA CRP program (paid to let it sit, with no crops) so there are lots of economics that impact the value. The amount of rainfall historically has much to do with the price of the land, and of course the yield, but that is mostly a function of rain.

BTW - people that scoff at the thought of SHTF scenarios do not recall the mood in 2008 when the Money Markets almost ‘broke a buck’ as well as everything else going to hell, it felt like we could have been weeks away from martial law in normally very civilized neighborhoods.

 

[pjigar]

Since the climate accross Tx varies so much one needs to be more specific about the location. The piney woods in NE Tx is very different from the area around Sonora and Ozona, The NE is in generally well watered and you can grow a lot of crops while out west you can only reallistcally run cattle or if you can persuade wind or solar power companies to locate on your land get some return.

True. My comments are based on my limited exposure to north Texas.

OP,

If you really want to have land as an asset class that generates returns then look for farm land in high crop states like Upper midwest, California and Florida. Check lease rates before you buy. In north Texas, you may not get anything for rental if you are lucky enough to find someone who will farm on *your* farmland. The reason for us is the "use based tax exemption" i.e. if you have someone farming on your land then you pay minimal property tax (close to negligible). In effect, tax saved is your lease payment.

 

[flintnational]

I like land but not as an investment

All real estate is local. I live in the SE. Accordingly, the following comments reflect my experience in that market for tracks of land from 10 to 200 acres.

IMO, without special knowledge, raw land is speculation and not an investment. You might get lucky and the value exceeds inflation but there is no income stream like stocks have to support growth in values. Farming and tree plantations can add income, converting raw land to an investment, but both require special knowledge and tend to produce sub par returns.

I would consider raw land a lifestyle decision and not an investment. At best, it might be a store of value similar to gold. Or consider it insurance, a cost, to mitigate some minor social unrest. I fall into the group that believes if it gets bad enough to need a plot of land, you probably can't adequately defend it.

FWIW, for years I have tried to justify a land purchase as a "timber investment". In today's market, I can't make the numbers work. And, all the folks I know that own timber land, think of it as a lifestyle choice. From my limited knowledge, it appears leasing the land to farmers has even poorer returns.

A lot of folks want to own small tracts of land for hunting or recreational purposes. I think they are driving the prices up beyond what the investment returns in timber or farming can justify. This is particularly true for land within a couple hours of major metropolitan areas.

Finally, if you do want to purchase a small track of land, wait for an economic downturn. Since, for many, it is a lifestyle purchase, bargains can be found during times of financial stress.

 

[street]

Interesting stories and topic.

When I first started my career and after a few years working I bought a small irrigated farm. I was born in a rural area and lived my entire life in very rural America so that was a top priority to buy land. I raised vegetables and sold produce as a side job/ hobby and made money doing it. The remainder of the land was rented to a real farmer that raised crops. I always made money not enough to make a living at but it was profitable.

About 5 years ago I sold that land for 14 times more then I bought that land for. I was lucky and the timing was just right. I made enough money from that one deal to live from the profit my entire live.

While I still had that farm I bought a small ranch in rough country which is located a long a river with beautiful scenery. All the wildlife a man could ever want and very isolated. I have private access to river frontage and the fishing is spectacular. In one of the canyons I built a cabin and it is paradise to me. I can tell you I could sell it now for 5 times what I paid in a heart beat but I won't ever sell it.

Land to me has been very good and rewarding to own. As a country boy I couldn't imagine NOT having a place to go and being able to kick the weeds around and having the solitude I like.