Rural Farm Lots are Becoming the Promised LandJuly 12th, 2011 by melissa
Those in the industry are well aware that land is a solid investment due to the money it can bring in from residential or commercial development, as well as endeavors like ranching or farming. With the fiscal potential that land brings to the table, land values do not tend to plummet the way housing values recently have. Buyers and investors see the plethora of opportunities that come with acquiring land. This past March, the FDIC recently held a symposium on the booming farmland prices nationwide, stating, “Since 2000, U.S. farmland values have roughly doubled in nominal terms and have risen 58 percent after inflation. A favored asset class in an era of high commodity prices and ample liquidity, U.S. farmland is attracting heightened interest on the part of local farmers and international investors alike, pushing prices to all-time highs.”
This seems to be a constant over the years. With the options investors have on how to profit from purchasing a piece of land, the possibilities are quite plentiful. According to Landthink.com, while recreational land and residential building lots have suffered some losses, farmland has not only remained strong but continues to steadily increase. “Most years increased 3-7% in value, with recent years showing as much as a 11-15% increase in value from year to year,” Landthink.com reports. “If you take the history back even further it shows that between 1960 and 1978, farmland prices in Kansas doubled twice. Decreases in value show up in the 1980s, which is expected, but no apparent large scale crashes have appeared in farmland values for nearly 50 years.”
And don’t think that it’s only those in the farm business competing at auctions. Jason Henderson, an economist with the Reserve Bank of Omaha, recently stated to the Associated Press, “We’re starting to see more interest in farmland purchases by nonfarm investors. It’s more attractive than other kinds of fixed income investments, CDs, stock market investments. It looks like an attractive rate of return for some investors.” Meaning, investors from all walks of life are getting in on the action.
As with any other type of property auction, potential buyers need to practice their due diligence when seeking to buy land via auction. A proper inspection is always imperative, particularly if the land is located near water so as to avoid drainage issues or inheriting swampland. Since land is currently a hot commodity, bidding can get competitive. A price range should be planned beforehand and stuck to – bidders need to avoid letting the excitement of the auction take them to a price they can’t afford. Most auctions require the full amount of money immediately or within a short period of time, so it has to be a sum that can be realistically produced.
For now, the allure and popularity of attaining land seems to show no signs of slowing down. Throw in the rising costs of food and oil, both of which strongly affect the farm industry and the national economy, it should make for an active and intriguing upcoming year in land auctions.
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