Has any one invested in farm land? How do you like it so far? Is it a hassle to maintain?

With banks paying so little interest and increased difficulty in rentals business, I am looking to diversify.

We live in North Texas with lots of development and growth all around us. I am thinking of buying 20-30 acres of farm land 30 mins out, along the path of development and just let it sit for 20 years. At the end of it we can rezone, build on it or sell to builders.

Is there any good resource on how to invest in land? I know I need to look into things like flood zone, soil testing, zoning, utility access, easement, land lock, what other land near by are zoned for and set backs etc, but I have no idea how to identify value in a piece of land, like what size to get, what location to look for, buy in city limit or in ETJ. It seems like buying land is a bit of gambling as well.

Any advice will be greatly appreciated !

40 years ago a large parcel was being sub-divided. Each lot was going for $28,000 to $35,000. I spoke with 3 friends about which lot they should buy but "wax" in their ears, "male ego pride" and not being real estate educated made them disregard my input. I was a youngster and they were adults.

When you buy a lot, LAND, that can never be depreciated! So two of my friends purchased a $28,000 lot, something they can never write off of their taxes....

I on the other hand purchased a lot with a structure. A wooden shack called a farmer cowhands flop house. I paid $32,000, that's $4,000 more than my friends. I was able to depreciate $27,200 over the next 15 years. Now the depreciation schedule is 29-1/2 years. Meaning each year for 15 years I got to write off $1,813. The land ended up costing me $4,800....

So 20 years later my friend said they paid $28,000 plus interest, a total of $40,000 for each lot. They asked me what I paid... I said after tax write off's and since I paid off the lot early with a short term loan, my total cost was around $9,000.

Robert J, how where you able to depreciate that property?

Before I purchased the land with the "Shack-Cowhand's residence on this farm property", I asked the seller if he could place someone in the "shack" as a month-to-month tenant. The owner sub-divided his parcel into many small lots and still had a section being used as a farm. So the owner put a worker into the "shack", for a grand total of $125 a month -- the going rate per square foot.

According to the IRS code, a structure is valued at 85% of the purchased price and the land is only worth 15%, here in California.

Then after the "Shack" was seen by other owners of their sub-divided lots as a eye sore, they reported me to "Housing" and I was ordered to bring it up to current standards or tear it down. I didn't listen and Housing RED TAGGED the "Shack". My tenant was no longer able to live there so I had to tear the "Shack" down -- giving me a casualty loss -- was able to accelerate my depreciation

Before I purchased the land with the "Shack-Cowhand's residence on this farm property", I asked the seller if he could place someone in the "shack" as a month-to-month tenant. The owner sub-divided his parcel into many small lots and still had a section being used as a farm. So the owner put a worker into the "shack", for a grand total of $125 a month -- the going rate per square foot.

According to the IRS code, a structure is valued at 85% of the purchased price and the land is only worth 15%, here in California.

Then after the "Shack" was seen by other owners of their sub-divided lots as a eye sore, they reported me to "Housing" and I was ordered to bring it up to current standards or tear it down. I didn't listen and Housing RED TAGGED the "Shack". My tenant was no longer able to live there so I had to tear the "Shack" down -- giving me a casualty loss -- was able to accelerate my depreciation

Before I purchased the land with the "Shack-Cowhand's residence on this farm property", I asked the seller if he could place someone in the "shack" as a month-to-month tenant. The owner sub-divided his parcel into many small lots and still had a section being used as a farm. So the owner put a worker into the "shack", for a grand total of $125 a month -- the going rate per square foot.

According to the IRS code, a structure is valued at 85% of the purchased price and the land is only worth 15%, here in California.

Thanks for the feed back!!!

Robert J -- good point, only the value of building can be depreciated though, it will depend on the value of the land stated on the tax record.

Wow !!! thanks Robert J, I will look into it. My CPA took the land tax value to do depreciation and we never changed it over the years..

I have been thinking the same thing but I'm on the fence. I have neighbors with farms (horse and cattle). Personally I think you're better off buying a large enough piece of land that a builder would be interested in. 50 acres? And I'd look on the outskirts of the city in the direction of where a highway may be expanded like one of the tollways in DFW. Maybe something north of Prosper, McKinney, or those areas.

Beware of property taxes. They'll eat you alive if a long-term purchase. I'd consider buying a property that has an AG exemption. You could farm hay, run cattle, or similar to quality. I hear there are even companies that will give you what you need to qualify. They'll stock the land to qualify for the exemption. Not only can you deduct the business loss from taxes, but with ag exemption, your property taxes will be near zero.

Back in the mid/late 90's, DH lived in Sherman, which (for those of us not in N TX) is about 65 miles north of downtown Dallas.

The City Fathers were looking at the DFW metro area's long-term plans, and decided that in about 20 years, there would be a lot of expansion in their direction.

If I had been a land speculator at that time, I totally would have bought up a bunch of land along the I-75 corridor on the way to Sherman, with the knowledge that the sprawl would catch up sooner or later, and developers would pay top dollar for my land.

But we were poor, and so we didn't. :)

In reality, things actually did expand northward. McKinney was at the halfway point to Sherman. It exploded from pop. 35k in 1997 to pop. 181k in 2017. Sherman, on the other hand, has grown as well, but at a much more sedate pace: from 32k in 1997 to 42k in 2017.

The point being, that even though those studies were commissioned by professionals who were paid a good amount of money to predict the future, it didn't come true in the way that was expected. The consultants expected people to distribute themselves evenly, but people insisted upon concentrating, and refused to cross various imaginary boundaries.

At first, they resisted crossing too heavily past 190/the George Bush Turnpike. And once they got used to, "Well, maybe Plano isn't as far away as I thought it was" or "Well, you know, Plano's good and all, but Allen's just another few minutes up the road, and it's got more room", then they were able to expand up towards 380 and McKinney. And now they're getting used to McKinney being "Well, yeah, there's a lot of stuff there now, isn't there!" and they are starting to get used to the idea of crossing that imaginary line into Melissa (pop 800, now pop 9200) and Anna (pop 800, now pop 13,000). And eventually those two places will expand sufficiently that Van Alstyne will grow, and after Van Alstyne grows, then it will be Sherman's turn.

It will happen eventually. But that might take another 20 years, depending.

The point being, if I had acted on that "inside information" and tried to buy up huge patches of land in and around Sherman... I would still be waiting for the payoff where I could get-rich-quick. :)

It's not necessarily indicative of your part of North Texas. Some expansion is very straightforward--- like with the Weatherford area.

But yes. I picked up a 2.5 acre parcel of trash land in my part of North Texas. The taxes were under $5/year, because it was taxed based on the production value of land--- $160. But it turns out, they had extended the idle land ag exemption for way too long. (The cap is, like, 2 years or something.) If I wanted to do something to earn it back, I'd have to actively put it in production. They ask what percent of the property is dedicated to what pursuit... in terms of the area in use, rather in terms of the percent of the time. So now all of a sudden, the value is set at $14k, and I now owe $300 each year for 2.5 acres of land that are just lying fallow.

You could also consider a wildlife exemption to keep your costs down until you're ready to flip it... but that's its own set of rules and regulations and management.

Thank you Robert J.

Buy it right, and you should be fine. That's the trick. In my area...it took me about 10 years to find a row crop farm that I could buy under market value.

Lease it to a farmer.

It's cash flow negative...but I don't care.

Thank you every one for the great information! I am saving this post!

Deanna -- You must be near me! I am in Allen, TX, looking at land around Van Alstyne to Sherman, along 75. And small town like Princeton, New Hope that's not yet developed but near 75/5/121 freeway.

McKinney and west of 75 is already too expense.

Sounds like I need to call the county Tax office and figure out AG exemptions and how to qualify as well.

May be I should get few smaller lots to spread out the risk instead of one big continues land. I don't have the cash for 50 acres :(

I have never bought rentals in a small town though, do they typically take longer to lease up? Renting out farm house with big land is a good idea as well, if tenant is willing to maintain it.

It sounds like you are talking about peculation rather than investment.

I agree with Ned - buy land (if any) that you can rent to a farmer in the meantime.

A good rule is to usually figure out who you want to rent to, and then buy the house they want to live in. So if you're wanting to rent to students, it's important to invest in the university's bubble, not on the wrong side of the interstate or a thirty-minute drive away.

But in your case, if you want to speculate--- then you need to figure out what will draw people to your desired area, and make it a profitable/non-headache-inducing endeavour until your area gets built up as planned.

I've done really well with bare land. It's a long term hold while you wait for civilization to grow out around it.

Oh yes, I second "How to find and buy your place in the country"!!!

Thank you again for sharing your thoughts! Truly helpful and informative!

Sadly the local little league was looking to sell about a 50 acre lot that would perk.

I offered them about 110 for the acreage in hopes of developing it earlier this year. They were looking for a price four times that amount.

SO now there is still a large unmowed field.