What to Consider Before Buying Farmland

Written by Posted On Thursday, 19 February 2015 09:13
farmland farmland istockphoto

Whether you want to hoe your own fields or not, farmland has done better than the stock market for well over a decade. That means it's time to learn a few tips on buying farmland.

How Young Are You?

If you're looking at this from an investment-only perspective, you aren't alone. Many farm owners are not farmers. However, learning about who runs a farm is an important aspect of this possible business venture.

The under-45 crowd averaged less than 16 percent of principal operators in 2012. The average age of the primary operator of a farm in 2012 was 58 years old – that number actually rose from 2007. More retirees also means more land for sale.

The value of a working farm will continue to increase due to the rising risk of food shortages. It sounds worrisome – and it is – but with the older generation retiring and fewer young people being able to afford to enter the industry, it's a real factor.

The good news for an investor is that food will always be in demand.

Add value to your farmland by employing a younger family to maintain the lands and profit from the annual harvests.

The Value of Farmland

A graph from the United States Department of Agriculture shows the average price per acre has steadily increased from 1984–2014. Land is generally a sound investment, and farmland doubly so.

According to the Census of Agriculture, "operations with sophisticated facilities and buildings have the highest per-acre values; these include fruit and tree nut, horticulture, and hog and pig operations."

If your dream is to start your own apple orchard, the cost of equipment once the land is actually purchased can be a deterrent. Remember to include estimates for agriculture equipment, like brush cutters and skid steer loaders, to help you get the property in shape for farming, or consider financing because many heavy equipment stores offer 0 percent financing – perfect for a new farmer still getting things together.

It's important to keep any workplace safe, but a farm has added hazards. If you're interested in farm animals, you're already aware that a misstep with an animal can cause some serious damage. Whether you're thinking of purchasing an already established farm or not, make sure you're aware of the equipment used to keep livestock and workers safe.

Investing in a Farm

As far as investments go, farmland is a historically safe bet. What about current market conditions?

It’s recently been noted that corporations have started to buy up U.S. farmland, because land is a tangible commodity. After such a long stretch with a risky economy, investors would rather take a smaller risk on something that has the potential for respectable returns. Remember, the investment isn't all in the land, there's also the profit from your probable crops.

If you don't like the sound of basing your investment on crop production, you can also buy the land and rent it out. That means a stable check from renters instead of fighting over tobacco with bugs.

Start your research now. Would you rather take advantage of Kansas farmlands or California vineyards? The time to act is now, before the investment firms snatch up the best land.

 

 

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