Posted by kyhayman on October 31, 2007 at 20:47:53 from (205.188.117.74):
In Reply to: buying farmland.... posted by need your advice on October 31, 2007 at 19:46:32:
Land is hard to beat as an investment. Particularly the way the market is behaving lately. Look at the rallies, every one driven by a cut in interest rates, and every rate cut means drop in the dollar, and an increase in the price of crude oil. With that said, I havent seen any banks loaning money on land with 10% down. Most I have been hearing 20-50% down. The banks havent forgotten the 1980s.
For that location, can you afford not to purchase it. When I purchase land, I do like it to cashflow the interest. Never yet seen it cash flow the principle (well, there have been a couple of farms I bought that did, but I had to sell off part of it for building lots to get the price per acre down). 4000 dollar an acre land at 10% would be a $400 rent or profit, and I dont see that happening. Even at 8% thats 320 dollars. Not doable in my book, BUT...... can you afford to see it go into houses, mega dairy farm, dense pack hog houses, or 'recreational vehicle use'.
My philosophy has always been I dont want all the land, but I want every piece that joins me. One of the biggest regrets I have was not buying 135 acres that joined me in 1995 for 1350 an acre. I couldnt make it cashflow, but I should have worked extra for it. Its now tied up in a corporation, part of a 2000 acre block they own.
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