True costs?

[ASRG]

Okay forget all the various ways we manage our cattle herds...like feed/breeds/feeding methods/etc.
Consider the cost of the land alone?
For instance if you are grazing/haying land worth $1,000/acre vs $4000/acre (or for that matter growing crops) which one costs more?
If you had the money, instead of the land, and invested it wisely....what kind of return would you get? I have a savy old neighbour who says about 7.5% year over year(mostly bank stocks paying dividends). The Alberta Trust fund earned 8.5% last year.
But say 7.5%? For a general figure of 3 acres/cow/year for hay production and grazing.....you would need $225 on the $1,000 land and $900 on the $4,000 land!
Wouldn't it make more sense to sell the land and rent grazing and buy hay?

[15444]

Does it really matter? Whether your buying land at 1k or 4k an acre, your not paying it back with cows alone. 1000 acres (which doesn't raise much for cow numbers) at 4k would have an annual interest payment of $120,000. Even at 1k, it would be $30,000 - which should easily consume any profit possible.

Thankfully land is only worth $100 to 300 around here. Maybe tops of $500 to 600. Some dumb-dumbs come in and get suckered into paying the seller his retirement bonus of about 1k an acre and then wonder why they lose it all and are gone within 10 years.

Land doesn't appreciate around here on any measureable basis. It does on government paper, but not in the real world.

[kato]

160 acres at $4000 is $640,000. For one quarter! At our ages, we'd be sitting on a beach somewhere. Trouble is that land is not worth $4000. an acre here, not even potato land.

[per]

As a land speculator there is a need to maintain and keep the fire hazard in check. Pretty hard to pay what the market says some land is worth with cows or iron.

[grassfarmer]

ASRG, In answer to your question I would say NO.
NO - you would not be better off selling the land,
renting pasture and growing hay. First I'm dubious of
anyone that claims to consistently average 7.5%
annual return in the current marketplace. I trade
some stocks too and the volatility has made for tough
sledding in recent years - really since 2008. Not
many people could honestly claim to have averaged
7.5% year in year out in my opinion.

Secondly if you did assume 7.5% annual interest and
you compounded the interest your principle would
double every 10 years approx. Well guess what - my
farm property has done roughly the same -
realistically doubled in 12 years and I've been making
annual income on it as well.

[ALLFARMER]

15444 if you can buy land for
100$/acre?????????

$16,000/quarter ?!?!?

Will the cows have to pack a lunch?

[ASRG]

grassfarmer: I do understand land appreciation and admit it usually pays quite well over a certain period.
The fact is sooner or later we all must quit, and probably convert our assets into cash. We can pass it down to our children, if they want it. Mine don't.
I have been slowly getting out of the cattle business and ripping up land. I have a 1/4 that is unfit for crops or hay and the best rent I can expect is probably around $35/acre. Last spring the hutterites bought the section right beside this land for $3910/acre ( I live close to Red Deer). Because I have a house on this 1/4 I doubt I will have much trouble selling it in the 750-800K range (which would work well with the capital gains excemption).
Royal bank shares have paid an average dividend of 6.5% over the last 20 years(according to the said neighbour), so at 6.5% on 750K I could recieve an income of $48,500. At present I rent the house out at $1,000 month ($12K/yr) and if I was renting 159 acres at $35/ac my total income for the rest of the 1/4 would be $5565 for a total of $17,565, less $2700 property tax, $14,865.
I would further not have maintenance to fences/house.
On the other 3 quarters I own I have a good renter, mostly in crops or capable of growing crops, and I would probably continue with that arrangement for awhile. My house is on this land as well as a rental trailer. I would like to see the farmers son renting this land, buy it eventually, but I don't know if he could ever swing the price.
These things are never easy, but time marches on.

[15444]

Allfarmer, @ $100/acre, the land won't be even remotely suitable for crops. It will likely have some rock outcroppings and a fair bit of low, marshy land. Likely also be cleared, so you can't use the timber for revenue. Worst thing about that price is you have to compete with the American hunters for it.

But could it run a pair for every 4-6 acres? Very likely at least.

A neighbor's place, good land (just needs a dozer to it) 320 acres, just sold for 70k. Even has a house and well on it. Sold through the bank, so I was out of the loop and missed out on it.

[grassfarmer]

Royal Bank shares were $50.65 on Jan 31st 2008 and
they were $61.20 on Thursday. That's around 3.5%
annual with the interest compounded according to my
math. Still a better return than many bank accounts
are paying.

[freewheat]

I have some plain old fashioned mutual
funds that have returned 9% average over
the last 15 years. Some years returned
20%, some -12%. There sure are places to
park money that offers a decent return. I
always am surprised when guys say there is
nowhere to put their money other than
land. I disagree.