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Returns on rural land
Old 05-17-2018, 05:21 PM   #21
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Returns on rural land

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.
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Old 05-17-2018, 05:39 PM   #22
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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.
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Old 05-17-2018, 05:58 PM   #23
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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.
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I like land but not as an investment
Old 05-17-2018, 06:01 PM   #24
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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.
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Old 05-17-2018, 06:16 PM   #25
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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.
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Old 05-17-2018, 06:49 PM   #26
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As far as prepping:

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.



Since the medical estabishment would also cease to exist along with public health water and sewer services, epidemics would spread like wildfire, which might get you first.

As far as gangs although things have changed a lot since consider the fall of the western roman empire and the protection racket that was feudalism, i.e you gave your land to the lord in exchange for his protection. Likely would happen again as ad hoc versions of governments lead by strongpersons took over.
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Old 05-17-2018, 07:38 PM   #27
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When I see Attila the Hun coming at me with his bloodthirsty hordes, I'll grab my gun and stick it in my mouth and pull the trigger.
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Old 05-17-2018, 07:41 PM   #28
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When I see Attila the Hun coming at me with his bloodthirsty hordes, I'll grab my gun and stick it in my mouth and pull the trigger.
Ha ha, and regret your decision to hold off on taking SS?
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Old 05-17-2018, 08:31 PM   #29
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20 wooded acres in Da Pines in Mississippi. 80 acres in CRP north of Kansas City. And - And two wooded lots in the a city with $170/year property tax that no one seems to want.

As for 'prepperitis, plan B etc. - I have an up to date Passport and dreams of Patagonia.

heh heh heh - near a ski area and the mountains of course.
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Old 05-17-2018, 09:48 PM   #30
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In terms of the original question on value of land, I co-own over 200 acres of undeveloped land in the mountain west, with a spectacular view and currently only being used by the neighbor cattle rancher for a few months each year.

It's about six miles on gravel from the main road, has no access to water or electricity, and is a great place for hunting.

My ancestors got it for whatever the cost was in 1907 to take out the homestead claim.

We sold a portion of it a few years ago for $1,500 an acre. Which is about what it would have gotten in early 2008.

So, the profit is huge over 110 years, less so over 10.
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Old 05-18-2018, 12:47 AM   #31
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Appreciate the replies so far.

So far, the award for most on-topic reply goes to pjigar:
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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).
Curious to hear how other people think land in other parts of the country appreciate.
The usual generalization is that over time, real estate appreciates per the general rate of inflation. Often something in the 3% to 4% range. There is another adage that "all real estate is local"; so I'm confident that you can find places where land has appreciated by far above the inflation rate, and other places where prices have stagnated - especially if you look at a shorter period of time (like the past 10-15 years). But if you are looking for a general average of land appreciation rate over the whole country and over a long period of time, the inflation rate should cover it.

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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.
I agree with this - for real estate to be a good investment, you usually need to do more than just let the land sit there. Use it as a tree farm. Rent it to a farmer. Clear the land and use it as a mobile home park or make it into the next "Six Flags over Texas". Break it into lots and put houses on them. Whatever you do to use the land, your total return on the real estate is then the sum of the land appreciation rate plus the return you make on using the land. If you can find a profitable use for the land, in many cases you can end up with a better overall return than the stock market.
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Old 05-18-2018, 07:40 AM   #32
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Fun discussion, thanks for all the replies. General response seems to be that of course it varies by location, but in general and on average bare land doesn't really appreciate, but if used you can get some value out of it. Also good points made that if the banks cease to exist, likely so does respect for property rights so my initial premise that this land could serve as a real backup scenario may be incorrect. Also good point by MRG that the idea that I'd be able to jump from the city or burbs onto my land and start effectively living off it with 0 experience and skills in that area may be a bit optimistic. I guess I need to instead start considering the purchase of an abandoned nuclear silo and in case of TEOTWAWKI (that's a new one to me, thanks lwp2017) transitioning to my new life as a naked mole rat.
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Old 05-18-2018, 02:50 PM   #33
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When I began looking for land twenty years ago for the same reasons, I was pretty pumped. DMIL, worked for the state forestry department, suggested I plant black walnut trees and harvest in my golden years, as at the time black walnut was pretty pricey.

Well, I ran into speculators who purchased property ahead of the coal mining operations. Coal company buys you out, repairs any damage that occurs to property, sells property back to land owner for $1.00, as they don't want to hold property. Vandalism of homes, taxes whatever. I couldn't touch a piece of property.
Then I found some land tracts that were in the family for years as hunting camps. Okay, I don't hunt, but peaceful places in some God forsaken areas. I ended up finding nothing but environmental disasters. Years of discarded appliances, cars, batteries, lumber, junk piled into small ravines. One place had numerous 55 gallon drums of whatever yards from streams. We couldn't get away fast enough.
Then back to scenario #1. Coal company's purchase of land was not sold back to land owner, it was kept so they could develop Marcellus gas and oil assets.
And above all now, black walnut is not any higher as it was years ago.
Never did buy any land as I would have lost my a$$, or made a killing. I never would have had the time to maintain the timber.
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Old 05-18-2018, 03:10 PM   #34
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When I began looking for land twenty years ago for the same reasons, I was pretty pumped. DMIL, worked for the state forestry department, suggested I plant black walnut trees and harvest in my golden years, as at the time black walnut was pretty pricey.

Well, I ran into speculators who purchased property ahead of the coal mining operations. Coal company buys you out, repairs any damage that occurs to property, sells property back to land owner for $1.00, as they don't want to hold property. Vandalism of homes, taxes whatever. I couldn't touch a piece of property.
Then I found some land tracts that were in the family for years as hunting camps. Okay, I don't hunt, but peaceful places in some God forsaken areas. I ended up finding nothing but environmental disasters. Years of discarded appliances, cars, batteries, lumber, junk piled into small ravines. One place had numerous 55 gallon drums of whatever yards from streams. We couldn't get away fast enough.
Then back to scenario #1. Coal company's purchase of land was not sold back to land owner, it was kept so they could develop Marcellus gas and oil assets.
And above all now, black walnut is not any higher as it was years ago.
Never did buy any land as I would have lost my a$$, or made a killing. I never would have had the time to maintain the timber.
Speaking of which, I ran in to "lumber investment" opportunities and passed up all of them for the vary same reason.
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Old 05-18-2018, 03:46 PM   #35
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When I began looking for land twenty years ago for the same reasons, I was pretty pumped. DMIL, worked for the state forestry department, suggested I plant black walnut trees and harvest in my golden years, as at the time black walnut was pretty pricey.

Well, I ran into speculators who purchased property ahead of the coal mining operations. Coal company buys you out, repairs any damage that occurs to property, sells property back to land owner for $1.00, as they don't want to hold property. Vandalism of homes, taxes whatever. I couldn't touch a piece of property.
Then I found some land tracts that were in the family for years as hunting camps. Okay, I don't hunt, but peaceful places in some God forsaken areas. I ended up finding nothing but environmental disasters. Years of discarded appliances, cars, batteries, lumber, junk piled into small ravines. One place had numerous 55 gallon drums of whatever yards from streams. We couldn't get away fast enough.
Then back to scenario #1. Coal company's purchase of land was not sold back to land owner, it was kept so they could develop Marcellus gas and oil assets.
And above all now, black walnut is not any higher as it was years ago.
Never did buy any land as I would have lost my a$$, or made a killing. I never would have had the time to maintain the timber.
One of the smartest choices ever. Stay away from black walnut, it's a fool's game. Back in the 70's-80's I was involved in buying walnut timber. On average it was worth the same as firewood. Sure I've seen 10k trees, sometimes they disappear.
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Old 05-18-2018, 03:59 PM   #36
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Rural land has been going up in price in my area (3 to 4 States) for many years now.

I have always had an interest in land not homes or buildings on land just bare ground. In an earlier post I had on this thread I mentioned a real estate deals I have had in the past. I never bought land unless I got it for what I wanted to pay.

I bought them right and had a vision for what I wanted to do with it. Also location is a big deal and have some imagination and creativity for what you want to do with the land.

The land I bought last I bought knowing I will not make any money from it but it was for my pleasure only. I could rent it out for cattle country but have no desire to do so. It is my ranch to enjoy so I don't care if I ever make a dime owning it. I could sell for 5 time more right now because I bought it right.

The farm I owned I didn't make any major changes that cost me much of anything for the years I owned it either. Just bought it right and made money on it while I owned it and sold it because of location and timing.
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Old 05-18-2018, 05:24 PM   #37
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There was a professor at Texas A&M that did a study on "valuing rural Land". I read a good deal of his research in the late 80's early 90's. Bottom line is rural land falls in to several categories when it comes to value. Closeness to populations centers, i.e. likelihood to be developed for housing, recreational purpose i.e. doctors and such buying weekend ranches. This category is largely dependent on the presents of water and trees to add value. Then there is true rural land, and this is valued at the capitalized value of its cash crop, be it plants or animals. Not sure this helps, but there are most likely current articles at A&M on this subject.
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Old 05-19-2018, 09:59 AM   #38
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I can speak from some experience with 250 irrigated farm acres in rural Oregon. Bought 160 acres in 2007 and added the neighbors farm of 90 acres last year. Great water rights, fair soils. This is a cow/calf operation with pasture, alfalfa, pinto beans, corn. I retired from the corporate world in 2016.

The cash yield is negative as I come up the learning curve, add equipment assets and improve the irrigation infrastructure. I'm not dependent on farm income for retirement purposes. Farming is hard physical work and it also demands that you become an amateur electrician, mechanic, carpenter, welder and hydraulic specialist.

Local land values are steadily increasing. In my particular case due to proximity to urban growth from the Boise area and attendant land speculation. Also there is a demand from well off wanna be preppers from California - mostly properties with some sort of additional attribute such as river frontage or hilltop view.

One of the big local operators has 3000 or 4000 acres either owned or leased and is the most active of the local buyers. With the current crop prices they are lucky if they pay themselves a reasonable salary plus satisfy the bank interest. In my opinion, their only endgame is to exit in ten years, and cash in their capital gains.

Another couple I know, the husband retired from a unionized HVAC job in Portland. They cashed out of Portland, bought a 80 acre farm with the plan to grow fruit trees and subsequently went broke. They kept the farm but he is back now to installing HVAC systems locally at age 67.

Rural land is relatively illiquid and you might have to wait two or three years to find a buyer in case you need to sell.

I think you buy farmland for the lifestyle and the sunsets, but its not ideal as an investment vehicle. If you do end up buying, you can make money with the right location and assuming you bought at the right price and have a long (ten year plus) investment horizon. Also I would recommend you have independent revenue stream other than the farm as cash yields from farming are low or negative.
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Old 05-19-2018, 10:59 AM   #39
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Unless you are extremely prescient on timing or location, I suspect raw land will at most offer you an inflation type return. As a lifestyle choice or disaster hedge, I suppose it could make sense but your aims in what the land has might be different than what makes a good investment.


As for SHTF considerations, it is best to be realistic. No man is an island. If we are talking about, say, a pandemic, unless you are not in contact with many people from day to day your are fooling yourself thinking you could successfully bug out, etc. If that happens, I will simply fill every container I own with potable water and hole up for as long as I can. I live at the edge of what has become a major metro area, so that is unlikely to be for very long before the breakdown of law and order causes problems. If an EMP knocks out the grid, well, I would hang on as long as possible at the house, but ultimately we would see a lot of violence via desperate people and a large die-off. So there is a limit to what you can do to hedge the truly awful scenarios. If this stuff worries you, make what preparations you can without becoming financially burdensome or changing your lifestyle, but also make your peace with the idea that in many of these ugly situations you will not be around very long. And I say that as someone whose hobbies are really just a collection of post apocalyptic survival skills: hunting, gardening, foraging, camping, fishing, hiking, trapping, candle/soap/beer making, etc.
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Old 05-19-2018, 12:11 PM   #40
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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.
Small sidenote: Money Markets actually did break the buck. Second time in history it seems.

https://dealbook.nytimes.com/2008/09...ld-lose-money/
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