Landowners, what % of your net worth does your land equity represent?

[bwoods11]

So have you been buying/selling a number of times to take advantage?

Yes…I’ve bought and sold several farms in Iowa, a couple in MN . Started in 2001. The first farm I purchased in Iowa was 1100/acre and had $14,000 in cash rent .

I’m pretty happy with the Iowa farm I have now. So I’ll keep it long term. Maybe add near it or adjacent to it.

It was EZ pickins back then, but I spent what little extra money I had on land (not toys and fancy vehicles).

 

[momatt]

I owned my first place for about 12 years, a little 40-acre piece in central MO about 80 miles from where I lived. I had grown up hunting deer, its a big part of my heritage. Dad was a country preacher and we had access to lots of places to hunt. As an adult I didn't live anywhere near where I grew up. I'd get a chance to hunt now and again but longed for a place that I didn't have to worry about permission, or had to wait till someone else tagged out to hunt. In my late 30s my wife and I thought maybe we could get a small piece and I started looking. I found a place in my price range and the owner had it listed with a realtor. The add said he'd consider owner financing. We agreed to a 5 year note with 20 percent down and a big balloon payment at the end which kept the payments to a level I could afford. I sold it last year when I bought a much larger property that I am building a house on. I didn't make hardly any money on the property AND I think it may have been the best investment I'll ever make.

Why was it such a great investment? Well for one financially it was a stretch. We'd have spent that money on stuff that would be long gone. Instead we owned our little farm outright at the end.

My kids grew up spending a lot of time out there. Instead of the vanilla memories of many suburban kids, they learned to drive tractors and a bull dozer and run a little sawmill. We kept bees, grew fantastic pumpkin patches and sweet corn. We camped in our private paradise, they swam in the creek and dug for treasure in the cave. We planted an orchard, boiled apple butter in a giant copper kettle, pressed cider. We harvested enough wheat each June with a scythe and hand threshed it, ran it through a little grain mill and made a loaf of bread. In July I'd run the plow under the potato rows pulled by my old 8n ford and they would gather buckets of potatoes, sometimes we even found an arrowhead. They hunted deer and turkey from as young as 9. They wandered and explored. We trapped racoons and made Daniel boon hats. We had great bonfires and they learned to catch lizards in the firewood piles. They learned to love the land and their confidence grew. They did hard things, important things, they learned how to work. How about raising some 10 year old twin girls who go looking for a garden hoe when little sister sees a copper head and you catch them propping its mouth open with twigs so they can see the fangs.

Yes, the land was the best thing I ever invested in.

 

[Tree Spud]

My business parter bought 300 acres in 2003 for $300K. He put $80K down when he bought, and paid $24,000 a year for 17 years, plus, he built a sturcture, some fencing, and a pond at $75k. He spent a total of $563k. This does not include annual expenses for maintenance, seed, fuel, power, etc. He did get some income tax deduction for interest paid.

He sold a year ago last summer for $625K. After taxes, and realtor commission, principal owed, he ended up with $475K. But, while not a great financial investment, he considers the time spent on his farm as invaluable.

Like you and your biz partner, that is where I am at. Ability to buy real estate for enjoyment & quality of life and not having to have it be an investment that makes a return takes years of disciplined financial mgt.

 

[roosterstraw]

Mines at 17%. If I could talk my wife into it I’d have it higher than that.

 

[gunfun13]

I'm at ~20%. Took out a 30 year loan for my property 4 years ago and paying it off this week. All of my mine and my wife's tax advantaged accounts are maxed and we've got a few decades to watch it compound before retirement. Beyond that, I'm focused on eliminating debt. Logging the property paid off my wife's student loans and now that the farm is paid for we only have the house to tackle. I hope to have that done in 24-36 months.

Once our debt free goal is hit, I could see a much larger % of our income being allocated towards land. However, that might not change the Land/Net worth % a lot as I expect other investments to outpace land pretty significantly. That being said, I'm all about putting money into appreciating assets (and some depreciating lol) that I can enjoy! My kids won't see much benefit to cash I've tied up into paper investments until I'm dead. They will, however, use the hell out of my land and we'll create some amazing memories along the way.

 

[Knehrke]

I'm not sure what percent of our net worth is tied up in land, but even having paid off the loans, I do know that the taxes are going to eat up a significant chunk of my retirement capital. That's life in NY, even upstate. I figure that between town and school taxes, owning land is costing me ~15K a year, just for the privilege of saying it's mine. So, if I live for 30 years after I retire, I better have a half million dollars just to pay taxes. I about fainted when I figured out how much it would cost. Unfortunately, all of our pieces are just under the limit for qualified tax incentive programs such as EQIP (50 acres). I guess you need to pay to play - and our plan is to donate the land when we die so that it stays forever wild, and maybe all my habitat improvements won't end up under a Walmart parking lot lol.

 

[Tree Spud]

Of your net worth, including retirement accounts, brokerage accounts, cash, other investments, real estate, rental property, crypto, home equity, etc. what percentage of your net worth is your hunting property equity? If that’s too personal a question, what percentage do you feel is a responsible/acceptable percentage? What % of your net worth is the overall value of your land?

I’m at a little below 10% and that’s on the downswing, as my land isn’t appreciating at nearly the rate of other investments (which isn’t a complaint)… for now. When I bought my land, I paid cash and the % was probably around 20%, but I didn’t diligently track my finances at that time. I’m considering another land purchase that would require borrowing money, so I’m thinking about this constantly.

I’m keenly aware of a few facts that make it difficult for me to sort thru this from a $ standpoint:
- Recently in my area, even with a hot rec real estate market, stocks have been a better investment, save for some folks that really hustle and have tremendous connections.
- I extract a huge amount of value from land ownership that I’m not sure my young family will mirror in the future
- I want to be very careful not to make this an emotional decision, but the opportunity is for a tract of land I have tremendous connections with and never dreamed I’d be able to own.

We’ve truly got some savvy and insightful folks here, so what do you say? If this thread sees some activity, maybe I’ll provide some more details to seek more specific advice. Tia

This is a good question as many are confused what makes an investment. Buying recreational land and rationalizing it as an investment is different that buying actual investment property that has some recreational value.

I think the actual question might be ... should real estate be a part of your investment portfolio and at what impact to your personal/financial situation? Yes it should, as to what percentage it depends on a number of factors. As a disclaimer, I know very little about timbered land investment.

In my view, true real estate investment is a property that has either a unique feature that will cause it to increase in value substantially, or it produces income (rental, mineral/gas/oil, ag land, etc.). To me, property income should exceed your PITA (Principal, interest, taxes,& insurance). When we have bought land, we have always studied the market for 2-3 years in an area to understand what the market values and costs are. We are not real estate experts, but at least we avoid making a purchase decision based on emotions. I do consider buying recreational land an investment if you are buying it correctly. I have sold properties in last 2 years that were many multiples of what we paid for them. Part of this was understanding the market (location, location, & location and values) and part was luck. Remember that preparation plus opportunity = luck!

I also learned many years ago what compound interest was relative to a mortgage. My first property I owned I put 10% down and was very excited to see how much equity i had after a year of payments. I quickly found out that on a 30 year note that about 90% of my 1st year payments went to interest .... uggggghhh!

From that point on I developed the following approach when buying real estate. Hopefully some can benefit to help guide their approach:
1. Make sure you can afford to buy a 2nd property. If you are financing, I have always made sure my debt to equity ration was less than 30%. Make sure you can handle the PITA without robbing from
other financial goals.
2. Put down as much as you can as a down payment, up to 30-50% if you can as this is important for # 3.
3. We have never taken out a 30 year note again. When we financed future properties, it was a 15 year note with a large down payment. We have then paid off these loans in 8-10 years by paying more
on every payment than the mortgage required. Or having good equity in the real estate you own gives you leverage with a bank.
4. Buy small at first, pay off quickly, then use $$ from selling that property as your down payment to buy your next property.
5. Before purchasing your 2nd property, make sure you are maxing out your 401k at work, are putting another 10% or more in other investments (mutual funds, etc.), and building a good cash reserve for emergencies or to buy an auto without financing. I started years ago to put $25/month in a direct deposit account out of my paycheck. This account did not have a checking account and no ATM
card so I could not access without going to the bank. If you increase the direct deposit amount every so often you will be surprised how much cash reserve you can build up. Buying your autos with
cash, holding on to them long term, can really make a difference in building wealth and freeing up cash for other investments.

As mentioned previously by others, a critical factor in buying real estate is really about how much debt you take on. Making sure you can maintain #5 above helps insure you are not putting all your eggs in one basket along with becoming cash poor.

Good luck and look forward to learning more about your approach in timbered land!

 

[Apple Junkie]

I bought 100 acres when land was cheap, then had the Amish build a functional one-room cabin and porch. It is far from fancy, but it's heaven to a whole slew of us that enjoy it. I don't think this represents more than 6% to 7% of our net worth max, but it's true value is much higher.

 

[yoderjac]

Maybe we should talks about the difference between investment land, land that supports a job, and recreational land. Most of us are unlikely purely in any one of the categories. Each of these categories probably should be a different percentage of net worth in my opinion.

Investment land - To me, this is land that is purchased for the purpose of producing a profit. That profit could come from income the land produces, on capital gain presuming the land gains capital value and is intended to eventually be sold. I see this as land that is managed as a side hustle and takes relatively little time. For example, one could buy farm land and lease the land to a farmer or one could buy a couple townhouses and pay a real estate management company to manage it for you. Even more pure would be an investment in a REIT where you have no management responsibilities.

Land that supports a job - To me, this is land that is required to support your job. You are working full time at something that requires land. This might be a small for-profit farm for example or even large timber tracts that require a full time manager where your primary income source comes from timber sales.

Recreational land - This is land that we may hope goes up in value, but we purchase it primarily for recreational purposes. While we may use it to produce some income, like selling timber or leasing a little to a farmer, the income produced does not come close to justifying the purchase.

To my way of thinking, recreational land should not be thought of in terms of net worth. It should be considered like a boat; a hole in the water in which we dump money. It should be looked at as a lifestyle choice and should be a function of what your can afford after necessities and saving for a rainy day and retirement. Land that supports a job, should probably be looked at like equipment. Even though it may appreciate rather than depreciate like equipment, since you don't really have the option to sell at opportunistic times because you need it to live, I would look at it like capital equipment. I do think it makes sense to look at investment land as a percentage of net worth like other assets in a balanced portfolio.

Thanks,

Jack

 

[Turkish]

I think the classes of land investment are a little more nuanced or hybridized, if you will. Nevertheless, even if I viewed this land as a “boat,” I think it can be prudent to benchmark any class of expenditures against net worth or salary or net cash flow or whatever among respected, like-minded folks.

 

[yoderjac]

I think the classes of land investment are a little more nuanced or hybridized, if you will. Nevertheless, even if I viewed this land as a “boat,” I think it can be prudent to benchmark any class of expenditures against net worth or salary or net cash flow or whatever among respected, like-minded folks.

I agree, as I said, the land most of us have doesn't fall nicely in a single category.

 

[Brian662]

We've got two land properties. A 70 acre that we live on and another 46 acre chunk a few miles away. Raising a family in the country has always been the only option for me. Fortunately my wife grew up on a dairy farm and mostly agrees. We bought our house property a little over 8 years ago and got a pretty good deal on it. Land value has nearly doubled in that time around here not to mention we've paid off over half our note.

Our other property we got for a song when some people were moving out of state. This was right at the start of the covid (paranoia) mess and we had 30% equity when we signed the papers which has since only increased.

I'd say pretty comfortably that our land equity is 30-40% of our net worth and we both have very comfortable early retirement packages saved.

Like others, we don't plan to sell and I'm sure my kids will figure out what to do with the land when I'm gone. That doesn't mean that under the right circumstance we wouldn't use one or both properties to get into something different or bigger if the opportunity presents itself, I'm always looking. Buying/looking for land is a sickness and I've been on the lookout for 60-80 acres across the river in WI and will eventually find the right place so my boy and I can get some more buck tags. It hasn't happened yet, but one of these years I'll use my MN buck tag on a deer early in the season and be a miserable SOB if my season is over before it really begins.

 

[Tree Spud]

Of all the billions on this planet only a handful own their own land - something to ponder maybe??

Not sure that is accurate. Billionaires are some of the largest landowners in the US. When you have created an amazing amount of wealth, at some point you will sell of your stock in the company you created, you need move that money into other ventures to find way of keeping that money to continue working for you and sheltering income.

For example Jeff Bezos owns 455,000 acres, Ted Turner owns 2,000,000 acres, and Bill gates owns around 250,000 acres.

Landowners in America: These people own the most land in the U.S.

 

[cavey]

Not sure that is accurate. Billionaires are some of the largest landowners in the US. When you have created an amazing amount of wealth, at some point you will sell of your stock in the company you created, you need move that money into other ventures to find way of keeping that money to continue working for you and sheltering income.

For example Jeff Bezos owns 455,000 acres, Ted Turner owns 2,000,000 acres, and Bill gates owns around 250,000 acres.

Landowners in America: These people own the most land in the U.S.

not Billionaires, billions of human beings - of the almost 8 billion people in the world a small percentage are landowners of any amount of acreage. Those of us that have 5, 20, 40, 120 ish acres should consider ourselves blessed with one hell of an asset portfolio - being a land owner of any sorts sets us apart from the worlds average person. I think my grandfather understood that - he worked the ground, bled into it, was a very educated man (real world and via schooling) and knew its real value.

Having a 40 acre plot makes you one of the worlds wealthiest people... Im guessing even a handful of acres puts you in the same spot. Everyone weights the value of land regionally and forgets the big pictures in life. Having land is only a thing most people dream of... The OP was trying to place or measure the value of his land and I was just pointing out it maybe more valuable than he ever imagined.

 

[bwoods11]

One of the largest landowners in the US is John Malone (SiriusXM radio) & Liberty Media. His office is in Denver, Colorado.

He’s bought land in many states, but the big wealthy guys seem to buy up land that is cheap per acre. His holdings are out west, also in Maine.

These guys are smart. Great diversification. I think most of us are a little naive to how much $$ ….chasing these land parcels.

Then you also have Zuckerberg buying land in Hawaii for his private compound.

 

[SD51555]

One of the largest landowners in the US is John Malone (SiriusXM radio) & Liberty Media. His office is in Denver, Colorado.

He’s bought land in many states, but the big wealthy guys seem to buy up land that is cheap per acre. His holdings are out west, also in Maine.

These guys are smart. Great diversification. I think most of us are a little naive to how much $$ ….chasing these land parcels.

Then you also have Zuckerberg buying land in Hawaii for his private compound.

Nobody owns more than the federal government, and the state of MN isn't too far behind the federal government at the land trough. MN might be third, only behind Alaska. If the state of MN owned all the federal land held in the state, it'd be the least free state in the union as far as quantity of government controlled productive land.

Never forget, you're always bidding against them too. This is why I don't think land will ever go down. If there were to be a land price plunge, I think anything up for sale would get taken by the government never to be private again. The whole 'crisis go to waste' mantra of government. Plebs to the towers of Brooklyn Center.

 

[Wind Gypsy]

Nobody owns more than the federal government, and the state of MN isn't too far behind the federal government at the land trough. MN might be third, only behind Alaska. If the state of MN owned all the federal land held in the state, it'd be the least free state in the union as far as quantity of government controlled productive land.

Never forget, you're always bidding against them too. This is why I don't think land will ever go down. If there were to be a land price plunge, I think anything up for sale would get taken by the government never to be private again. The whole 'crisis go to waste' mantra of government. Plebs to the towers of Brooklyn Center.

I'm damn glad there is as much public land as there is and will continue to advocate for it. My best hunting experiences have occurred on public land and it aint even close. It allows hunting to be pastime and way of life for people of all means. Hunting has devolved into a pay to play game enough the way it is.

Some pictures from time on state land. It sure didn’t feel “less free”.

 

[Mortenson]

I'm sure that's true. Just know not all public land is the same!

 

[Bill]

I'm sure that's true. Just know not all public land is the same!

And remember he who owns the land makes the rules for it. There was a plan to ban the use of lead bullets and fishing tackle on federal land. Trumps interior secretary scraped those plans on day 1.

Something tells me that’s not last we will hear of ideas like that. IMO steel shot was one of the worst things to happen to waterfowl hunting.

I’ve had some really great experiences on public land both State and Federal also. I just hope the owners keep letting us use the way they have in the past.

 

[Wind Gypsy]

And remember he who owns the land makes the rules for it. There was a plan to ban the use of lead bullets and fishing tackle on federal land. Trumps interior secretary scraped those plans on day 1.

Something tells me that’s not last we will hear of ideas like that. IMO steel shot was one of the worst things to happen to waterfowl hunting.

I’ve had some really great experiences on public land both State and Federal also. I just hope the owners keep letting us use the way they have in the past.

I can’t say what steel shot was like at first but it sure doesn’t hurt waterfowling now. If you’re not killing birds clean these days it ain’t the steel shots fault!