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

[bwoods11]

I can remember very good farm land in southern MN that sold in sold in the area of $200 to $400 an acre in my youth. Today, that same land may sell for $10,000 / acre and up. Farmers that accumulated land have made a pretty good ROI on that land value.....not to mention the farm income over time. Hard to argue with owning income producing land for the long haul. Just don't own so much that you choke on it. lol

I travel from my home in West Central Minnesota to Western Iowa quite often, to hunt, farm/habitat work, trail cams etc..

5 hour drive… every farm I drive by with say (120 acres or more) is a millionaire on paper. Unless they are loan maxed or something !

It’s insane when you think about it. In Iowa a guy will drive by land that is worth 20k per acre .

 

[SD51555]

If I had the option to pick between a doubling of my hunting property value or zero increase in value, I'd take the zero. I'd rather have no fantom increase in value and be able to buy another 40 for what I bought mine in 2016. I have a hunch mine will double again in the next 2-4 years, not for any real increase in perceived value, just crumbling of the dollar and a sharp drop in the supply of unencumbered private land still in existence. If the inflation vulnerable seniors sitting on land are blessed to live a long life, they may be forced to sell their land into permanent easements to stay afloat. I don't think all of that land will make it generational transfer without being lost to the state.

It's not a big deal right now, but the dutch are just a year or two ahead of us in what they're doing with their private rural lands.

 

[Wind Gypsy]

I travel from my home in West Central Minnesota to Western Iowa quite often, to hunt, farm/habitat work, trail cams etc..

5 hour drive… every farm I drive by with say (120 acres or more) is a millionaire on paper. Unless they are loan maxed or something !

It’s insane when you think about it. In Iowa a guy will drive by land that is worth 20k per acre .

I remember when being "a millionaire" meant something!

 

[SD51555]

I remember when being "a millionaire" meant something!

I've got more digits than I've ever had and this is also the most underpowered I've ever been when it comes to affordability of things. It's all ass backwards.

 

[Maddog66]

That’s exactly how me and my wife are feeling right now in trying to build a house SD. I know what we make and what it’s gonna cost to build a modest home. How in the world someone does it today without being way way above ‘middle class’ I have no idea?

I’m so thankful for the things we bought and paid for before Covid started though……land, tractor, implements, couple of toys even……back in the good old days before the whole world lost its effing mind.

 

[T-Max]

That’s exactly how me and my wife are feeling right now in trying to build a house SD. I know what we make and what it’s gonna cost to build a modest home. How in the world someone does it today without being way way above ‘middle class’ I have no idea?

I’m so thankful for the things we bought and paid for before Covid started though……land, tractor, implements, couple of toys even……back in the good old days before the whole world lost its effing mind.

I’m glad you said that. My wife and I make quite a bit more than what the rich kids parents did 20 years ago and we can’t afford anything those rich kids had…


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[Howboutthemdawgs]

I can remember very good farm land in southern MN that sold in sold in the area of $200 to $400 an acre in my youth. Today, that same land may sell for $10,000 / acre and up. Farmers that accumulated land have made a pretty good ROI on that land value.....not to mention the farm income over time. Hard to argue with owning income producing land for the long haul. Just don't own so much that you choke on it. lol

What I can’t wrap my head around is how do they make the numbers work. 10,000 for 100 acres of tillable is obviously a million dollars. Even if you buy it cash how many years do you have to row crop that to even break even. What am I missing?

 

[Foggy47]

What I can’t wrap my head around is how do they make the numbers work. 10,000 for 100 acres of tillable is obviously a million dollars. Even if you buy it cash how many years do you have to row crop that to even break even. What am I missing?

Most farmers I know that are buying that land, have allot of other land too. They think they can average their land costs and pass it along to the future generations.....or if they miss that piece next door, it will not be available ever again....so they plunge. In so doing.....the next generation will get the stepped up basis as a new land cost at death....thus avoiding much of the tax. Same goes for stocks tho.......if you die with a stock you paid a dollar for....and it's worth $10000 dollars now.....no capitol gains tax on that gain. (same goes for a home) Still...there can be estate taxes. There is always freaking taxes.

 

[Wind Gypsy]

What I can’t wrap my head around is how do they make the numbers work. 10,000 for 100 acres of tillable is obviously a million dollars. Even if you buy it cash how many years do you have to row crop that to even break even. What am I missing?

All of them! When not taking equity into account at least..

I don't know the real numbers behind well run operations but published #'s I've seen make it hard for that to pencil out if a guy has to account for loan interest too. https://www.extension.iastate.edu/agdm/crops/pdf/a1-20.pdf

 

[Wind Gypsy]

That’s exactly how me and my wife are feeling right now in trying to build a house SD. I know what we make and what it’s gonna cost to build a modest home. How in the world someone does it today without being way way above ‘middle class’ I have no idea?

I’m so thankful for the things we bought and paid for before Covid started though……land, tractor, implements, couple of toys even……back in the good old days before the whole world lost its effing mind.

No kidding.. My spirits were crushed in the last year when I saw what a home build was going for now days. A million $ plus for a less than flashy 3500 SF home is the norm. Wild.

 

[Foggy47]

No kidding.. My spirits were crushed in the last year when I saw what a home build was going for now days. A million $ plus for a less than flashy 3500 SF home is the norm. Wild.

Agreed, This inflation gig is not going to end well. We keep getting closer to the SHTF day. Glad, I lived in the days I did. Worry about my grandkids and great grandkids. Gotta keep your head screwed on straight on those issues .....and likely have some faith. Can't say it felt easy at times for my generation either. Get's better with time.....and allot of effort.

 

[Jerry-B-WI]

No kidding.. My spirits were crushed in the last year when I saw what a home build was going for now days. A million $ plus for a less than flashy 3500 SF home is the norm. Wild.

3500 SF? What the hell, you got 8 kids? Who needs 3500 SF? I'll agree with Foggy we're getting closer to SHTF day because people don't want to live within their means.

 

[Turkish]

I’m half joking and half not joking, but no one is answering the question. ;)

 

[g squared 23]

I was just at a 1 million dollar house that was 3800 sq ft. Pool with electric pool cover, poolhouse, putting green, on 2.5 acres. Unbelievable. I will never be able to afford such a place. I’ll be super lucky to buy another hunting property again in my lifetime.


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[b116757]

My main home is 3800sf and I bought another farm to pass on to the next generation last year. I’d rather leave them land than more easily liquidated assets. I will likely buy one more 160 acre tract before they stick me in the ground. All the farm ground will likely be placed in a trust for our kids at some point. Farm ground doubles in value roughly every 10 years or so but there are no guarantees in life. I bought that 151 acres last year for $3800 an acre it has some prime walnut timber on the place I estimate at around $80,000 worth. I can make about $8k in rent on that farm taxes run $900 a year. If that particular property was row crop capable rent in my area would be double those numbers. So you’re buying it as a long term investment with the hope it appreciates if ever sold. That particular tract borders an interstate and is at an exit (I own the corner) so it may very well lend itself to commercial purposes if my boys wish to go that route in the future.

 

[Hoytvectrix]

My main home is 3800sf and I bought another farm to pass on to the next generation last year. I’d rather leave them land than more easily liquidated assets. I will likely buy one more 160 acre tract before they stick me in the ground. All the farm ground will likely be placed in a trust for our kids at some point. Farm ground doubles in value roughly every 10 years or so but there are no guarantees in life. I bought that 151 acres last year for $3800 an acre it has some prime walnut timber on the place I estimate at around $80,000 worth. I can make about $8k in rent on that farm taxes run $900 a year. If that particular property was row crop capable rent in my area would be double those numbers. So you’re buying it as a long term investment with the hope it appreciates if ever sold. That particular tract borders an interstate and is at an exit (I own the corner) so it may very well lend itself to commercial purposes if my boys wish to go that route in the future.

For anyone wondering that needed to do the math like me, you need about a 7.2% return year over year to get a doubling every 10. I think historically, recreational land has averaged about 6%, but I think this will likely go up in the long term given the latest spike. If you have a mixture of ag on your land, it will likely only increase the rate as @b116757 was saying. Most of the record land sales in Iowa are carrying multiple sources of income like wind or solar in addition to farming.

I was talking with an ag economist a little while ago and he was lamenting that if it wasn't for increasing land prices, most farmers would not be all that profitable. Coincidentally, the local farmer who passed up on buying the farm I just bought this spring has been complaining to anyone that will listen about all of the out of staters that are driving up land prices. He is a millionaire several times over and as much as he would like it to be true, it wasn't just because of farming.

Jake Hofer from the Land Podcast often says on his show that an appealing aspect of owning hunting land compared to a 401K, is that you generally cannot do better than financial planners who do it for a living. Whereas, many are able to make improvements on land or spot undervalued properties better than the market is currently appreciating. The added benefit is that you get to hunt and enjoy developing the habitat in the process. How much longer we get to enjoy this merry go round until it turns into another diminishing return is anyone's guess. I am just here to enjoy the process.

 

[Wind Gypsy]

3500 SF? What the hell, you got 8 kids? Who needs 3500 SF? I'll agree with Foggy we're getting closer to SHTF day because people don't want to live within their means.

Who said anything about needing it? Who needs all this land we chat about here? For me 3500 SF is an ideal aspirational setup with more space than necessary for 2 parents that work from home and 2 kids. $750k for 2400 SF (size of my current home where my wife's office is setup in our bedroom) isn't a drop in the bucket either.

 

[Tree Spud]

What I can’t wrap my head around is how do they make the numbers work. 10,000 for 100 acres of tillable is obviously a million dollars. Even if you buy it cash how many years do you have to row crop that to even break even. What am I missing?

When you understand the staggering amount of Gov't money they get, up 40% of their income in subsidies, pretty easy to make things work.

U.S. government checks constituted 40% of farmers’ income in 2020: USDA

 

[Tree Spud]

^^^^ ... then consider their property taxes are about 1/4 of what recreational ground is ... farming as a business is just an entitlement gig.

 

[T-Max]

Uh oh…. This conversation is officially headed in another direction!


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