Farms, not houses? (Long)
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Farms, not houses? (Long) (by Richard [MI]) Nov 29, 2021 12:00 PM
       Farms, not houses? (Long) (by Deanna [TX]) Nov 29, 2021 12:50 PM
       Farms, not houses? (Long) (by Nicole [PA]) Nov 29, 2021 1:08 PM
       Farms, not houses? (Long) (by Dee Ann [WI]) Nov 29, 2021 1:57 PM
       Farms, not houses? (Long) (by Robert J [CA]) Nov 29, 2021 2:32 PM
       Farms, not houses? (Long) (by Landlord ofthe Flies [TX]) Nov 29, 2021 3:11 PM
       Farms, not houses? (Long) (by Bonanza [NC]) Nov 29, 2021 3:30 PM
       Farms, not houses? (Long) (by #22 [MO]) Nov 29, 2021 5:43 PM
       Farms, not houses? (Long) (by 6x6 [TN]) Nov 29, 2021 7:48 PM
       Farms, not houses? (Long) (by T [IN]) Nov 29, 2021 8:19 PM
       Farms, not houses? (Long) (by ned [AL]) Nov 29, 2021 11:08 PM
       Farms, not houses? (Long) (by Deanna [TX]) Nov 30, 2021 9:51 AM
       Farms, not houses? (Long) (by T [IN]) Nov 30, 2021 10:23 AM
       Farms, not houses? (Long) (by Nicole [PA]) Nov 30, 2021 11:52 AM
       Farms, not houses? (Long) (by Jim in O C [CA]) Nov 30, 2021 3:46 PM

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Farms, not houses? (Long) (by Richard [MI]) Posted on: Nov 29, 2021 12:00 PM

There's been a lot of things going on with the housing market lately, especially with all the anti-landlord stuff that seems to be sprouting in many areas. It's nice to get good returns on our houses and apartments, etc that we rent BUT ---if we really look at the returns we get, percentage wise, just how much risk are we taking to get these returns?

We get the appreciation and some cash flow if we can collect it. BUT, we pay high property taxes (in many areas), we pay for repairs and improvements. Even though we get to take depreciation, the govt hammers us for recapture at, what, 25 percent on our taxes? We get to pay high insurance when sometimes payouts are denied. We face high liability claims for a thousand reasons.

So, how much higher percentage returns do we get factoring in the risk?

For me, my highest returns come from buying cheap mobile homes on land that need repairs and fixing them up and renting to C level tenants or seniors on fixed incomes. These tenants have more problems which means higher risk.

The problems I see right now are these:

1. Increasing anti landlord laws passed.

2. Increasing material and labor prices to do upkeep and repairs.

3. Huge increase in deadbeats that have free lawyers on speed dial.

4. Tenant friendly groups that are anti landlord.

5. Increasing demands for low income (free) housing.

As a result of these, I'm strongly considering farmland. Not any old piece of land but productive farmland, where ever it may be. At least at this time, you can get lower taxes and often a farmer will lease the land to grow stuff on. As things get "tighter" in the current economy and situation, prices are going up as well.

Some advantages of farmland:

1. Rioters can't burn it down.

2. No tenants. No repairs. Low insurance.

3. Can potentially provide food for your family.

4. If necessary, you can pull a RV on it and live on it.

5. For a fraction of the price of a decent house you can get several acres.

Even if the land is not prime for row crops, there are many options that can work.

If decent housing is returning 8-12 percent net and C level housing is returning maybe 15-18 percent net after taxes, what does farmland need to return given the reduced risk?


Farms, not houses? (Long) (by Deanna [TX]) Posted on: Nov 29, 2021 12:50 PM

My uncle has farmland on the MD peninsula. The farms in that area tend to be very patchwork-- five acres here, three acres there, and so on, all leased to someone who will work it. Versus, like, 600 acres of contiguous flat land like you get in Texas or Kansas.

One of the problems that the MD landowners were running into was that the tenant-farmers would work it every year with permission... and then at the end of x period of time, they were starting to put in claims for adverse possession. "I've been working this field openly for 20 years, so now it's mine" kind of stuff. And the landowners were like, "What are you talking about? I hired you! We had an agreement!"

I don't know the details about who actually lost their land, but it was enough for a lot of the landowners to work their own land for a few years. It's been grapes, cattle, and corn in the past; this year, he's DIY'ing pastured poultry. (The laws covering processing and marketing vary greatly by state.)

Row crops are fine, but they require a whole lot of know-how, and often require specialized machinery. We're too dry for corn in my area, but we do well with wheat, hay, pecans, and cotton. I was talking to someone the other day ago whose family used to run one of the local dairies. In one of my old towns, there was a small egg plant nearby. I was chatting with a local animal trader the other day ago, and he raises quail and partridges and bobwhites. (The quail were easy to sell to a high-end DFW restaurant, until he got wiped out by disease; the partridges are much harder to find buyers for; and the pen-raised bobwhites have plenty of market because they've been wiped out by disease, but they require a Game Bird Breeder's Permit around here.)

Agriculture is good business, if you have the knack for what it is you're raising, but it's definitely not easy or hands-off. People are used to cheap food. Even if you raise it for personal use, it's more to control what it consumed, and to make sure it had a good life and a bad day, rather than saving money. One wrong storm can knock out your entire year's harvest--- like the year we had no plums or apples because a storm damaged all the blossoms.

But definitely jump in. Don't try to do everything in one year, or else you'll overwhelm yourself and fail. Check out your local state laws about what you're allowed to do for yourself, what you're allowed to sell, how you're allowed to sell it, and other restrictions. Figure out what people are already raising successfully in your area, and get yourself plugged into the system so that you have all those brains and experience to draw from. Trying to hit a target number is a good thing--- but setting yourself up for the best chance of success and everything-not-dying is probably a bigger priority, presuming that it's still side gig territory and not your family's livelihood depending on its success. Once you can get the parts working, then you can figure out how to make financial sense... but, for example, suppose I tried to go make my money in 10 acres of tomatoes, I know I have zero chance of success, because I have a terrible time getting my tomatoes to actually fruit instead of merely flowering. ;)

Farms, not houses? (Long) (by Nicole [PA]) Posted on: Nov 29, 2021 1:08 PM

I'll respond later because I'm headed out now but farmland for farming is basically not profitable for a small time farmer. I cannot attest to anything more than about 250ish acres, considered large in my area.

First, there is more regulation than you can ever imagine.

Second there are MANY who feel your farmland should be for the greater good.

Thirdly, why are there so few family farms that they past generation has sold off to developers or the remaining farmers have fulltime jobs and do the farming on the side?

Farms, not houses? (Long) (by Dee Ann [WI]) Posted on: Nov 29, 2021 1:57 PM

Do some research on what the government pays to farms not to farm them. Of course that could always change...I don't know why they pay someone not to farm the land, but they do. I have relatives taking advantage of it currently. --75.11.xx.xx

Farms, not houses? (Long) (by Robert J [CA]) Posted on: Nov 29, 2021 2:32 PM

Raw land can't be depreciated like homes or apartments (27.5 year schedule) or commercial/retail (39 years). Without depreciation on the purchase, that's money out of your pocket you will never get back until you sell!

Farms, not houses? (Long) (by Landlord ofthe Flies [TX]) Posted on: Nov 29, 2021 3:11 PM

Also consider the perks of Ag exemptions to reduce property taxes. However if all your assets are the same plot of land, inheritance taxes may be an issue.

I'm looking at farm land for hay production, timber and wildlife refuge, to qualify for Ag exemption. Trying to determine profitability of such.

Farms, not houses? (Long) (by Bonanza [NC]) Posted on: Nov 29, 2021 3:30 PM

I am not sure about MI but here in NC you can tree farm. Plant the land in pine, thin at year 7 (make a little money), thin at year 14 (make a little more money) and harvest around year 21 ($3000 an acre maybe more now). Government will pay 50% for you to replant (CROP program). While you are waiting for your pines to grow, lease it out to hunters. Not sure what the going rate is up there or here for that matter but about 10 years ago it was $5 an acre per year which paid for the local property taxes.

Talk to a registered forestor in your area and see what they say.

Farms, not houses? (Long) (by #22 [MO]) Posted on: Nov 29, 2021 5:43 PM

Love the thought. I pondered land 10 years ago and when I did so, was 15 years late.

Deals on farm land are a lot tougher to come by, especially worse in the last few years....

Farms, not houses? (Long) (by 6x6 [TN]) Posted on: Nov 29, 2021 7:48 PM


Farms, not houses? (Long) (by T [IN]) Posted on: Nov 29, 2021 8:19 PM

Your theory is correct. But, now for the #'s....

Recent farm sold for 12,578/ac. Rents for $300/ac. Property taxes are $35/ac. Please tell me how well that cash flows....

Farms, not houses? (Long) (by ned [AL]) Posted on: Nov 29, 2021 11:08 PM

gotta buy it right...and dont expect cash flow...hope for appreciation...use leverage.... --70.92.xx.xx

Farms, not houses? (Long) (by Deanna [TX]) Posted on: Nov 30, 2021 9:51 AM

If you're counting on the ag tax exemption, be careful to check what the rules are in your area. In mine, I can't apply it to parcels that are less than (10? 5?) acres. Plus, agricultural taxes are based off the agricultural production--- so if you have unused/fallow land, you can't claim it for more than two years in a row around here.

Farms, not houses? (Long) (by T [IN]) Posted on: Nov 30, 2021 10:23 AM

The ultimate question for you Richard, where are you at in investing cycle? The only farmland that I heard actually cash flow from day one... Buffet buying farmground in 1983. Since then, never has. That farm I mentioned above, I was looking at putting down 5% and refinancing some paid off properties to buy it. The apartment and commercials properties would have to support the farmland purchase to the tune of 100K per yr. PASS... so; reason for my original question.

If you are in your 60's, don't want the calls or maintenance headaches. Then buy all means, sell it all and buy farm ground for cash. Make it will known to the farmers it is up for bids. Start a bidding war. Ultimate freedom of no calls or headaches. But if you are in your 40's like me...keep investing in multi and commercial stuff when the deals work. Or take your cash elsewhere. Myself, I'm looking at buy website domains and/or doing stocks with a good divy history and selling calls with it too.

Farms, not houses? (Long) (by Nicole [PA]) Posted on: Nov 30, 2021 11:52 AM

I had a long winded post but it's not showing up.

No rioters but forest fires and field fires happen.

I've got several tenants,none of which are residents on my farm. They ALL think their rights are above the others - none of them have anything to do with each other and have completely separate area but they still manage to cause a bit of turmoil.

Do gooders think your farm should be accessible to the public.

Idiots on four wheelers can destroy several acres in an hour.

There is a lot of maintenance - fields need to be kept in check, woodland needs monitored for disease/blight and to keep deadwood in check. Lanes and trails need to be kept open and maintained. Invasives are a HUGE problem in my area.

You may or may not be able to put an rv on the property to live in, depends on the municipality and your timing.

you can grow food but I am not having more than a tomato plant. Food growing requires an entirely separate set of skills. Prep the soil, be certain you've got proper drainage, keeping those critters out of your patch. Want to have animals? Have you ever dealt with the DEP? If not, you've got NO idea what regulation is.

I'd imagine everywhere for the last generation, probably two, family farms have declined. Why? They can't make ends meet. Many have fulltime jobs and farm in their "spare" time. Many rent their properties out to commercial farmers.

I receive significant real estate tax breaks. If I change the status of my property, there is a roll back period and all those discounted taxes are now due.

Insurance is what it is. Any buildings are insured and you need a significant liability policy.

Homesteading or having a gentleman's farm is a lifestyle, not an investment.

All that said, farm land isn't the best property for investment (land speculation is different). I would never sell my property nor change it's use. You cannot explain to someone how you can love land but you can. Unless you own and operate rural acreage, it's a big eye opener.

Farms, not houses? (Long) (by Jim in O C [CA]) Posted on: Nov 30, 2021 3:46 PM

I have a very wealthy friend that has 1000ís of acres of farm land both for cattle and growing stuff. No garbage disposal or water heater problems. They do sell crop insurance to cover the farmer for loss due to bad weather.

Investment is higher but so are the ROI.

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