Returns on rural land

[meierlde]

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.

 

[RobbieB]

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.

 

[Newventurer]

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?

 

[unclemick]

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.

 

[googily]

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. [emoji16]

 

[ILikeStarTrek]

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. 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.

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.

 

[mrWinter]

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.

 

[Winemaker]

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.

 

[pjigar]

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.

 

[MRG]

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. [emoji12]

 

[street]

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.

 

[Rustic23]

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.

 

[wingfooted]

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.

 

[brewer12345]

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.

 

[Totoro]

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/2008/09/17/money-market-fund-says-customers-could-lose-money/

 

[fritz423]

Responses seemed to have diverged into two categories: "Is rural land a good invest" or "Can you survive on rural land after SHTF". Here's my 2c:

You can make a small fortune ranching, if you start with a large one.

Read the accounts of the German settlers in Texas around 1850ish. They thought they were going to live off the land too, but left a trail of corpses from the gulf coast to Fredericksburg..

I have been raising cattle in Texas for 20 years.

 

[RAE]

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.

Yes, I agree. And we enjoy all of the pursuits you mention also - not so that we can survive the apocalypse, but because we want to maintain a direct connection to the land and the resources it provides. We find the lifestyle to be very rewarding and satisfying, in many ways.


Sorry if I hijacked the thread.......

 

[meierlde]

Yes, I agree. And we enjoy all of the pursuits you mention also - not so that we can survive the apocalypse, but because we want to maintain a direct connection to the land and the resources it provides. We find the lifestyle to be very rewarding and satisfying, in many ways.


Sorry if I hijacked the thread.......

In particular if you have a chronic conditions, and after the event medicine is non existant, how long you would last is unclear.

 

[daylatedollarshort]

One consideration for investing in rural land would be are hydroponic farming in warehouses and lab grown meat the next big things?

World's Largest Indoor Farm-
https://www.afoodieworld.com/foodie/3207-world-s-largest-indoor-farm

Kimbal Musk's Container Farm -

A big disaster would have to be worldwide for people with means to not be able to invest internationally and just pack up and move to a different country.

 

[brewer12345]

In particular if you have a chronic conditions, and after the event medicine is non existant, how long you would last is unclear.

On the contrary, it is quite clear: not long at all.

 

[audreyh1]

I’m not interested in prepping for the kind of survivalist scenarios that require hoarding food and ammunition or making a living off the land. If things go to hell like that - we’ll just have to live by our wits and I’m sure we’ll have plenty of company. We’re too old now to care.

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...

Exactly!

 

[audreyh1]

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.

Totally! And my survivalist skills are extremely rusty, and I don’t intend to retrain at this point.

 

[audreyh1]

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.

Huh? Did not experience this at all.

 

[googily]

In particular if you have a chronic conditions, and after the event medicine is non existant, how long you would last is unclear.

I don't yet have such a condition, but I am instead hoarding the sort of medications that would allow for a quick end if/when my interest in sticking around in a SHTF scenario wanes.

Though, if the SHTF scenario is a nuclear attack, I live smack dab in the middle of one of the likeliest targets, so I'll just never know what hit me and instead leave y'all to go Mad Max. [emoji16]

 

[racy]

....My question is about how such rural and/or agricultural land performs as an asset class. ... Do rural properties tend to appreciate as well as urban and suburban properties?...

My family has farmed in Nebraska for over 100 years. It's currently pivot irrigated and produces corn and soy beans. I left the farm for my career but have been privy to the financials since my parents retired from farming and hired a farm manager about 5 years ago.

So, some numbers:
The value of the farm did not change for between 2013 and 2016, but decreased 2.5% in 2017. Net cash flow, after mgmt fee and property taxes, as a percent of land value averaged a little over 2%.