AF - the twist one your auction thread
prompted me to post this one.
Land has taken a dive in the past and
possibly could again, but it has
generated a fairly steady return over
time in the prairies. At this point in
our locale, land prices are probably
beyond what they can return,
particularly if you consider the risk of
interest rate increases.
Like everything else, the interest may
look like cheap rent, but the principle
repayment may cramp your cash flow.
Will land keep going up - possibly,
hopefully probably.
The other driver (since 4% is not a
fantastic return) depending on your plan
is that it's sale qualifies for capital
gains exemption up to $750K. Husband
and wife team that is $1.5 mil basically
tax free retirement plan and the
interest is a tax deductible operating
expense.
That may work for some farms/ranches,
but not others. We don't personally
plan to sell our land base to fund
retirement, but things can change
dramatically between now and then. I
think that mentality is a part of the
reason for larger corporate farms. Mom
and Dad have to sell to fund retirement,
kids buy at inflated values (fair
market), farm can't cash flow...
Larger operations or operations with a
different retirement plan for the
operators can dollar cost average the
higher priced land in and continue on or
sell below market, etc.
I would also suggest that a lot of
estates are being sold because the kids
don't want to live cash poor/asset rich
because they may value the life more
than the asset.
prompted me to post this one.
Land has taken a dive in the past and
possibly could again, but it has
generated a fairly steady return over
time in the prairies. At this point in
our locale, land prices are probably
beyond what they can return,
particularly if you consider the risk of
interest rate increases.
Like everything else, the interest may
look like cheap rent, but the principle
repayment may cramp your cash flow.
Will land keep going up - possibly,
hopefully probably.
The other driver (since 4% is not a
fantastic return) depending on your plan
is that it's sale qualifies for capital
gains exemption up to $750K. Husband
and wife team that is $1.5 mil basically
tax free retirement plan and the
interest is a tax deductible operating
expense.
That may work for some farms/ranches,
but not others. We don't personally
plan to sell our land base to fund
retirement, but things can change
dramatically between now and then. I
think that mentality is a part of the
reason for larger corporate farms. Mom
and Dad have to sell to fund retirement,
kids buy at inflated values (fair
market), farm can't cash flow...
Larger operations or operations with a
different retirement plan for the
operators can dollar cost average the
higher priced land in and continue on or
sell below market, etc.
I would also suggest that a lot of
estates are being sold because the kids
don't want to live cash poor/asset rich
because they may value the life more
than the asset.
Tomorrow I am taking all the tires off and
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