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Honored Advisor

Re: Farmland investors talk of possible Iowa bubble

I am not trying to argue, either...just saying, either way, you are as deep in debt.  To me, it is of great value - not just monetary, but in peace of mind - to hold onto what you have already worked and paid for.  There are some times when more risk is simply too much to lose. 

 

Maybe my different mindset has to do with watching a family member use his home's equity to try to float a failing car dealership, decades ago.  The only way he kept his family from living in a cardboard box was to borrow a BIG sum of money from my mother.  (I do not know who else he tapped out, along the way. )

 

That was basically the same amount they had both inherited from the sale of their family's farm.  So, he blew his cash, and hers, then lost his home anyway, and still ended up losing the dealership and selling cars at someone else's dealership until he was eighty years old. 

 

It is entirely possible to borrow more money than you can ever reasonably repay, even in today's more conservative lending climate.  I saw people lose farms and homes in the 1980s that had been their families for generations, simply because some lender said "Yes". 

 

People tend to look too much at best cases when it comes to repaying loans, instead of averages or worst case scenarios.  The worst case - which CAN happen, is an evolutionary bottleneck, which can narrow in unpredictable ways...and if you cannot cross through the eye of that needle,  you lose whatvever you have placed at risk. 

 

If you want to collateralize an investment property, then that may be okay...but, when you leave your family homeless, it's not.  It is when we get to telling ourselves that some debt is "good' debt, and other debt is 'bad": debt, that we fool ourselves with a rationalization. 

 

Debt is debt...and in many ways, it is a form of bondage.  You are beholden as long as you owe anyone anything.   It is liberating when you know you own it all, free and clear. 

 

Granted, I've used debt to finance businesses in the past; but, at my age, the likelihood I'd do so again is pretty damned slim.  Don't know how old you are, and what your cash position is, but if we can't buy it outright now, we will very likely do without. 

 

 

 

 

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Senior Contributor

Re: Farmland investors talk of possible Iowa bubble

Shaggy98- every farm I have bought I believe going back to 1986, I have offered an existing paid off farm as secuity for the bank loan. It is far better to do this I believe and hang on to your cash. Just my opinion and it is worth the amount of money you paid for it.

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Senior Contributor

Re: Farmland investors talk of possible Iowa bubble/Faust

That's what I thought Faust, you were there and didn't mention too much about a possible Farmland Bubble. Just like the Des Moines paper to get things out-of-whack!!!!!! Well, we need to take this article with a grain of salt I believe.

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Senior Contributor

Re: Farmland investors talk of possible Iowa bubble

Without debt or borrowing money to buy farmland in the late-1980's, I could have never acumulated close to 1,600 acres of Iowa farmland. The debt is paid-off now, but without borrowing around $1 Million dollars in 1986 there was no way for me to buy all that farmland. Yes, being in debt is risky, but taking risks is how you get wealthy. If I didn't do this I would be still sitting in a 6*10 foot office cubicle chasing purchase orders for a big company and being a wage-slave.

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Honored Advisor

Re: Farmland investors talk of possible Iowa bubble

We took ag huge leap faith in the early nineties, borrowing to buy and build the hog farm in NC.  That turned out fine, and has given us great numbers on our net worth, too.  Still, it felt good to have a paid- for home and small acreage to return to in VA, if it had not.  

 

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Senior Advisor

Re: Farmland investors talk of possible Iowa bubble

Kay, you are correct by saying it is wrong to hang your family out to dry, but I would like to think most have more common sense than that.  Paying cash is still king and always will be, but it is hard to accumulate that amount of cash for a land purchase.  I believe every debt is a bad debt, but some are more secure than others.

 

FYI, I have no debt at this time, and I like it this way.  My dollar is worth a dollar, not $0.94, but if I want to add to my operation, I know I'm going to have to take on debt to do it.

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