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Esteemed Advisor
sw363535
Posts: 4,539
Registered: ‎07-18-2011
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Re: A 5% return on this makes for expensive rent question

[ Edited ]

Wow is right.  Saw a bid this week in sw ks of 4500 per acre.  Our water is not cheap.  That is at least 50% blue sky.

 

Same ground selling for the 3rd time in the last few years.

sw
Senior Contributor
highyields
Posts: 790
Registered: ‎06-04-2010
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Re: A 5% return on this makes for expensive rent

IF and when the land market cracks, are the funds going to keep their money in the farmground?   Farm ground you can't just say sell and its gone like something on paper if the market starts to move on you.  

 

this so called "investors" really aren't what I call investors,  their market chasers.   They find a bull market and jump on for the ride, their returns look really good at first.  A good investor is a guy that goes out and finds the next big thing.  when the stock market was going good I was going to invest in a mutal fund, the last 3 years before I would have place my money in them was average 25% gain.   Then things went south.  4 years later their return was down to -15% per year.   I'm not even for sure if they are in business anymore.   I remember people having lost ALL their retirement in the stock market mess.    If you want to do something smart do the investing on your own, don't let someone else handle YOUR money.   

 

That 21900 ac acre deal,  Sioux County doesn't count in my book.   Its always crazy up there.  I'm not for sure how or why but thats the way it is.   I've been told they never have a missed crop except maybe this year,  there are ethanol plants, feedlots, hog outfits, its just a rich area.  

 

 

Senior Contributor
GoredHusker
Posts: 1,709
Registered: ‎05-13-2010
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Re: A 5% return on this makes for expensive rent

The last time the local area got overrun with investment money, they did not keep their money in farmground.  This is what actually led to prices falling to roughly a quarter of what it was in 82' because there was so much land that hit the market at the same time  the locals couldn't handle it all.  Back then, there was several quarters that were owned by people that didn't even live in the U.S.  These people might have come out a lot better because of currency conversions, but I don't know.

 

If one would graph these land prices and see the parabolic move, it would probably scare the daylights out of them.  Technical traders would look at that graph and scream sell sell sell.  Locally, land prices have for the most part tripled in the last three to four years.  If we'd happen to have another dry year next year, it sure would take a lot of starch out of those buying dryland acres.  Currently, dryland acres are selling for as much as irrigated acres sold for three years ago. 

 

I don't know how close we're getting to the chopping block, but a local farmer who over the years has made very good decisions has put some of his ground up for sale.  It's obvious he's looking for an investor to buy it as he is requiring a first option lease on the property once it sells.  This guy has made a lot of correct decisions over the years, so I'm wondering if we're not getting close? 

Esteemed Advisor
sw363535
Posts: 4,539
Registered: ‎07-18-2011
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Re: A 5% return on this makes for expensive rent

Gored,

 

My guess is 12-15% interest rates would change the curve quickly.  And the "feeling" of integrity and turn around in the economy could put us in a whole different perspective quickly.  Things will never change fast until we all believe it.

sw
Senior Advisor
kraft-t
Posts: 10,784
Registered: ‎05-10-2010
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Re: A 5% return on this makes for expensive rent

I doubt very much that $21000 high productive land is worth $11000 per acre more than a highly productive $10,000 per acre farm. Location location location and a competive bidder that will pay up to one dollar less than you.

 

You might consider that some folks buy things not because they are a great investment. They want to buy certain things because they can. Yep that $80k investment in a mercedes is a choice and maybe not a good choice.

 

Those of us that have been lusting for the 80 next door for decades may not worry about it being a bit too high. It will fit in so nice with my 240 acre farm.  

Senior Contributor
highyields
Posts: 790
Registered: ‎06-04-2010
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Re: A 5% return on this makes for expensive rent

location, location, location, is probably the reason it sold for 21000,   I don't know the details, I wonder if anyone does.  

 

what ever happen to that ground last year that sold for $20000 I heard that the guy couldn't get the money for it?  is that so?  

 

 

Senior Contributor
k-289
Posts: 1,760
Registered: ‎05-13-2010
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Re: A 5% return on this makes for expensive rent

South of North Platte Nebraska  4  NRD districs are opted to buy @18000 + acres with @ 115 of it pivot irrigated for $83 million--- North Platte Telegragh ag news had the article --- it maybe  interesting how this will be wrangled out --- 

Senior Contributor
highyields
Posts: 790
Registered: ‎06-04-2010
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Re: A 5% return on this makes for expensive rent

Is that still dealing with that Republican River deal with Kansas?   Don't know if your from Kansas or Nebraska. But I was in college law class when that was going on, the main court case.  It was a mess, Nebraska screwed up and now it cost them.   That was the general consensus then in Lincoln.   It was a bad deal for the farmers out there too.  I knew some of the guys that where pulling out of the ditches out there at the time and they couldn't raise a corn crop on the amount of water they where allocated.  



If you use $83 million and the 18000 acres thats around $4500/ac can you buy ground for that out there?  
Then what is the NRD's going to use it for?  At one time there was talk of having to plant it back in grass, grass acts like a sponge when it rains/snows.   Thus helping fill the ground water back up, 
You could plant it in grass then do lease it out of rotation grassing or something I guess, bring some money into the NRD's   Since Nebraska uses property tax to fund schools counties gov.  do NRD's have to pay property tax?  thats 18000 acres off the tax roll.   if thats all in one or two school districts thats a chunk of change for that school. 

 

 

 

Senior Contributor
k-289
Posts: 1,760
Registered: ‎05-13-2010
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Re: A 5% return on this makes for expensive rent

That tax role item will be a big discussion point along with care and maintenance ---

Senior Advisor
kraft-t
Posts: 10,784
Registered: ‎05-10-2010
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Re: You folks are forgetting

As global warming becomes a reality those northern states will be able to double crop just like the south. Plant corn in the spring and soybeans in the fall. 200 bushel corn followed by 60 bushel beans and that makes that land worth nearly twice as much.

 

I suspect the guy has plenty of money and "free" fertilizer worth about $200 per acre on a annual basis. He doesn't need the annual income or he doesn't care about it. The land purchase is not a short term investment but an intergenerational investment. If I had a million laying around, I might buy one of those less valuable 80's like for $10K per acre.