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Where to Buy Farmland?
You are here:   Blog  »  Agricultural Real Estate  »  Where to Buy Farmland?

March 11, 2019 

A landowner recently asked me where was the best place to buy farmland right now. For such an easy sounding question, it is actually a much harder one to answer. First, the land buyer must be clear in their goals. Do they want to buy and hold long term or buy and sell after holding for a shorter period of years? Are they looking for the best quality farmland that normally has the higher price tag, but better performance in downtrending markets with a better upside appreciation potential? Is the land to be for income purposes or also for recreational use? Does it matter to the buyer to have close proximity in order to visit the farm or can the land be almost anywhere and the owner use professional management services to oversee the operations? Of course these questions come in conjunction with the overriding one question that has to be answered. How much do they want to spend?

After these questions, there comes the one that all land investors should have in mind from the start. What return on investment (ROI) do they want? As we know, the ROI on commodity crop farmland has declined over the past number of years with the lower grain prices. Permanent crop farmland will usually generate a higher ROI than grain crops, but the land costs more, fixed and variable input costs are much higher, and management is much more intense. Investment in permanent crop type farms is more expensive and specialized, so the average land investor probably will not go that route, but concentrate on grain producing cropland.

To give a good answer of where to buy farmland, one has to understand all of the above and more. Then there are the inherent differences in regions for productivity, values, and market activity. Once you add in the characteristics of the individual farm property and the local land market dynamics, you find more items to take into account when investing in farmland. All of this points to the necessity of having either a good knowledge about land investing or the need for a trusted land advisor or broker working on the behalf of the buyer.
 

   

Randy Dickhut 

Senior Vice President - Real Estate Operations 

 

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