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July 27, 2020
There has been an increase in the number of first-time buyers who want to own farmland since the Covid-19 outbreak. They see farmland as a safe, long-term investment that is different from other real estate or financial instruments. For any buyer of farmland and especially for the first-time buyer, it is important to thoroughly know what they are purchasing.
Sorry to say, there are real life examples of land investors who purchased farms without knowing the critical details of the property. Investments have been made in what looked like a good farm at a reasonable price that turned out to not be so good after a few years. For instance, not knowing or proving the water rights, water availability, or condition of pivots can turn an irrigated, higher priced farm into a dryland, lower priced property. This becomes a financial hit for the investor who didn't know what they were buying.
There are several different ways for the first-time buyer to help themselves make a sound investment in agricultural land. One is for them to do their homework and study soil productivity, soil fertility, conservation measures, yield histories, water rights and allotments, and the condition of any improvements. Also, as a purchase price is being negotiated, it is prudent to research comparable sales in the area to help determine a fair price for the farm.
The other avenue that a farm buyer can take in insuring they make a good investment is to seek the assistance of a trusted advisor. The trusted advisor should be the boots on the ground who has the knowledge of the local land market and who has the expertise to compare and contrast farms. Based on the investor's goals, the trusted advisor can guide them to a sound investment in farmland that will grow in value over time and be the long-term investment that pays dividends each year.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|