Returns on rural land

[brewer12345]

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]

Yeah, the Palmer divide is between me and Cheyenne Mountain, but I would guess that it would make little difference if the bombs fall. If that didn't do it, communicable disease, lack of clean water, violence from desperate people, etc. would do it. You pays your money and you takes your chances.

 

[brewer12345]

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%.

Out of curiosity, how much did the manager charge as a percentage of the property value? Corn and beans are highly cyclical like most farming, so if you don't catch the really good years it can be hard to survive the bad ones.

 

[omni550]

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.

Not having researched this...but wouldn't something simple like rat poison be effective and easier to amass than hoarding life-ending meds?

omni

 

[luckydude]

A bit late to the discussion but here’s my 2 cents.

Acquired 1,500 acres spread across 10+ properties over the last 10 years 1 hour’s drive north of major metro area in a “very big” state in the South. Properties leased out for cattle ranching, farming, etc. Have also explored other uses such as wind farms, oil/gas exploration (where mineral rights exist), CRP enrollment, with mixed success. Said state has ag exemption so property tax is close to nil. Overall net around 1% return in the form of rental income on capital (i.e. land value) annually. Properties are in the path of growth as the said metro area continues to sprawl northward, with the closest suburb now 15 miles away.

Original investment objective was land banking with a long investment horizon of 30-40 years with the expectation that land would eventually be sold for development by heirs. Strategy has panned out thus far with per acre price doubling to tripling on average.

In my view there are three types of rural land investment:

1. Pure farming/forestry land with no development potential; this only makes sense if one has economy of scale, the financials and management/technical expertise.

2. Recreational land (often in remote locations) with no development potential and no visible means of monetizing the land; examples are hunting properties; note that it’s possible to lease hunting land out but game management expertise is required and it’s often not worth the trouble. In general properties in this category are cash flow negative.

3. Land with development potential; IMO this is the best type of land investment, although the holding cost may be substantial (depending on investment horizon, cost of purchase/finance, and whether property can generate income in the meantime).

I also have a property that falls into #2. Bought the small parcel (only 16 acres) a couple of decades ago on a whim and for a song, and after all this time, it’s still worth only a song. Been trying to sell it for 3 years now and no takers.

Bottom line is what one buys depends on one’s investment objective. I personally would only invest in #3.

Lucky Dude

 

[racy]

Out of curiosity, how much did the manager charge as a percentage of the property value?....

0.3% as a percent of farm value.
What they actually do is base it on a percentage of cash rent: 8%