Creative Financing Idea

[SD51555]

Ok team,

Wild idea here. Wanted to run it by the brain trust to see what u guys thought.

Buying farmland as an investment:

Put down enough money to get the good financing rate, and to ensure your rental income covers taxes and interest and maybe a little of the principal.

Bad idea?

 

[wklman]

It's not a bad idea if you can keep the payment on it even in a down turn(I.e. land prices go down, rental rate goes down, crop prices go down....). Prices will fluctuate but in the long run they usually go up. I've thought of doing the same thing now that my current land is payed for.

 

[SD51555]

My thinking is to lock in the price now, let someone else pay the interest and taxes and some of the principle, and you pay the rest at present day prices with future dollars. I don't know, just spitballing ideas. At this point, I also don't see how much higher farmland prices can go. There are only so many bushels per acre.

 

[bryant]

Bushels per acre will have less and less to do with land prices as time goes on.

 

[huntall]

Sounds like a good idea if you can get the good rate!

 

[foggy]

I would venture to say that interest rates won't get much cheaper. Land prices?.....well that could be another story. To me....most farm land in MN is over-priced.....but how much over-priced?.....and who is to say I am right? ;) If, after a down payment, the land will cash-flow thru thick and thin.....then let the price be what it is and go for it. (unless this land venture kills another future opportunity you may want?)

 

[Freeborn]

Land is not very liquid compared to other investments. If the land was 100% tillable it would be more liquid but most farmers don't buy land on impulse. If you buy land you want to make certain you won't need the money for some time.

I agree with Foggy, land prices are high right now.

 

[Deer Kar]

MBC hit it on the head. I have a few buddy's that are extremely large farmers and will steam role little guys with lease terms. Both guys keep attorneys on speed dial. If you find a sweet deal grab it and flip it as long as your get terms you can live with. There are a lot better investments than trying to play nice with big AG.

 

[SD51555]

All excellent points. Thanks fellas.

 

[Redonthehead]

Finding that deal on land is the tough part. What's your secret MBC? From what I have seen the bankers, lawyers, and real estate brokers snap up the deals for themselves.