As 2016 set underway, farmland continued to be a hot investment for those with deep pockets. From the pension behemoth TIAA-CREF, which raised around $3 million for its farmland investments in 2015, to the wealthy individual and foreign investors who are snatching up farms for sale across the nation, the push towards “real” assets continues to go strong.
The Wall Street Journal called farmland “gold with coupon.” Not only do you get the counter cyclical pricing gold offers to most stocks and bonds – – a real benefit in down markets – – but also income from rents paid by the farmers. The major appeal of investing in farmland is its trustworthiness. Farms, be they an almond farm in California, a cattle ranch in Wyoming, or cotton farm in Texas, fill an essential need in society: that of food and clothing. Since there will never come a time when people don’t need to put food on the table or clothes on their backs, the long-term value of farming will never dissipate. But the price of a farm for sale may.
According to the farm real estate values published by the USDA each year, 2015 saw the smallest increase in value from its prior year in the past five years Some regions even saw a decline in the price of a farm for sale. Since 1990, U.S. farmland capital values have risen an average of 4.6% year over year according to the National Council of Real Estate Investment Fiduciaries. Since the turn of the 21st century, many parts of the nation have seen soaring farmland values. Until three years ago.
A fall in grain and soybean prices saw farmland value drop by as much as 9% across parts of the corn belt and 1% to 3% in the soybean region. While this can mean bad news for those looking to sell, it bodes well for prospective buyers.
Nearly 920 acres across the U.S. make up the nation’s over 2.2 million farms. One third of these are operated by full owners. The total real estate value of these farms is approximately $2 trillion. Whether you’re looking for horse property in California or Nebraska ranches for sale, there is bound to be a farm for sale out there for you. And if you’ve considered making a farmland purchase in the past, now could be a time to snatch up your dream farm for sale while the price is still depressed.
Whether you’re looking to buy or considering putting your farm for sale, of the recent trends reported by Agriculture.com to be aware of:
- Smart buyers seek quality not quantity
When looking at farmland real estate, don’t settle for less than prime quality. A good quality farm is one that has what it takes to weather down years in the market price of its commodity. While an initial lower purchasing price may be appealing to a buyer, settle for less at your own risk. - Location, location, location
Location goes with quality. When selling, it’s still possible to make money in a down market, but you’ve got to have quality land in a good location. Before buying a farm for sale, consider if its location will stand the test of time. - It’s good to want to keep up with the Joneses
Farmland typically changes hands only once each generation. Because of this, farmers are more likely to jump at the opportunity to purchase a farm for sale next door when one arises. If you’ve got two or more neighbors after your farm for sale, you’ll fare a lot better at auction. - Sellers revel in low rates
Part of the push towards “real” asset investing is from wealthy investors who are tired of getting abominable interest rates. As discussed above, those with significant money to invest such as TIAA-CREF and farmland REITs are buying up farmland across the nation. More and more farms have been selling to these large institutional investors as opposed to individual farmers. Good news for sellers as these wealth investors are after quality farmland for sale to supplement their other holdings.
As a world-wide leader in agriculture production and supply, the U.S. is full of quality farmland. The trick is knowing where to look and when to make your move.
