Money in Bank vs Owning land? I think the tides have turned.

[farmaholic]

Jazz, Like... Good responses.

[redbull81]

You may want to check your math again.

Well its sort of a best of both worlds. You want to keep your land, but you want to increase your return or diversify your holdings. There are a number of ETFs offering covered calls on banks which basically doubles their dividends but gives up long term increases. Great for cashflow, but not appreciation.

Couple things about stocks though, the move sometimes a lot based on nothing. You have to ignore the day to day stuff.

Second thing, stocks can compound. There is no more powerful investment on the planet. SK3 $650k invested at 5% return would just about triple in 10 yrs. Your land wont triple again in your lifetime.

A 5% annual return would not even double in 10 years let alone triple.
Check out the Rule of 72 for quick way to figure out amount of time needed to double your investment with a given % return.

[AlbertaFarmer5]

A 5% annual return would not even double in 10 years let alone triple.
Check out the Rule of 72 for quick way to figure out amount of time needed to double your investment with a given % return.

5% annually compounded would yield 62% after 10 years.

Would need 11.6% to triple in 10 years.

In this environment, there are no guaranteed return no-risk investments that will yield close to that.

[SASKFARMER3]

And you guys believe Alberta and Sask land will double by 2027. To 1.6 mill and 1 mill in Sask. Fm. Like that will happen.

The whole example is why would a investor put money into land if they can make 100 a acre return selling the property.

[jazz]

Sorry, not triple, but a close double before taxes.

Land in my area has tripled in 10 yrs but is that sustainable? Its build on low interest rates and speculative demand, not really profits. The equities market reflects real revenues much closer although there is speculation in there too. I'm not talking buying Tesla or anything.

I am a strong believer in diversified income especially for a certain size of farmer. Trying to set my my place up with fixed income (rent), investment income (stocks) and business income (farming). 3 legs of the income "stool". I am way to dependent on mother nature and fickle markets and CN/CP to have all my eggs in one basket.

[jazz]

There is one guaranteed investment return - paying off debt.

[bucket]

Jazz

Dumb question....but once you start earning money from rent or other investments ...what is the incentive to farm?

[Klause]

Anyone can go buy dirt.


There's millions of acres of it works wide and lots comming into production.


Lots of places where you can own land...

And that's something to keep in mind.


Dirt will feed your family in tough times. But in Canada you don't own dirt. You own a tenure from the crown...


Thats why expropriation works so easily.


Successive social justice governments will erode land rights more and more. The aboriginals don't need direct title. They just need to stop all development or slow it to the point where it doesn't pay anymoere to develop anything - sound familiar?


Land is a great physical thing to hold. But in 5 years buying it will be more fun than today.

[AlbertaFarmer5]

Land is a great physical thing to hold. But in 5 years buying it will be more fun than today.

But will it really be more fun? If events conspire to drive the price of land down so far that it is "fun" to buy, that likely be a combination of higher interest rates, banks reluctant to lend without large down payments and substantial equity, and low or negative profitability in not only ag, but all the other commodities which make our economy hum, and helps prop up the price of land in many markets. I think it would be more fun to buy at the peak of the euphoria than at the depth of the depression, although the fun might not last as long buying the highs.

I started buying land in the second half of the nineties, and have been promised that prices will drop and interest rates will rise ever since, someday I will regret not listening, but if I'd listened, my most ambitious years would be long since behind me by the time I ever got to take advantage of the cheap land. Bought a piece in 2012 from a local farmer who was convinced that was the peak, and it was time to get out.

[jazz]

Jazz

Dumb question....but once you start earning money from rent or other investments ...what is the incentive to farm?

Well because, sometimes events conspire and you do make a profit. At the very least you are paying down an asset that might be more valuable in the future. While you are paying it down, its positive cashflow ability should be increasing...technically.

I assume klause is referring to land coming into production from the old soviet bloc countries. Thats the probably only place where land can be brought online unless you think we are going to knock down amazon forests. If there is new land coming online, its being farmed by much less efficient farmers than us and its probably in politically unstable areas or places much more susceptible to weather. Its not a threat, but I agree the threat from our own govt is much bigger.

[jamesb]

I would agree that the best opportunities come when things are the bleakest. In those times it is very hard to have a good return and a good plan is one to survive till things improve. In the 90's land could be on the market for years as no one could see that things would improve. We rented some neighbours land for taxes for a few years. They just wanted out. The lowest land prices we paid in the 90's was $65000 for a half section. Neighbouring land to this sold for $160000 per quarter this past year.
Yes I know we have entered an era where the "land investor" is competing with the farmers for the control of the land but as a farmer my desire that the land value goes up is of far less consequence that the need to generate a profit on the land to provide a living. We have gone through a decade of strong land values and I feel that the investors today are going to be disappointed for the next 10 years. The reality is that most farmers are willing to accept a extremely low return on investment. Investors simply will not stand for low returns for any length of time. We are starting to see the investor sell the land back to the traditional family farm in this area.

[Klause]

Well because, sometimes events conspire and you do make a profit. At the very least you are paying down an asset that might be more valuable in the future. While you are paying it down, its positive cashflow ability should be increasing...technically.

I assume klause is referring to land coming into production from the old soviet bloc countries. Thats the probably only place where land can be brought online unless you think we are going to knock down amazon forests. If there is new land coming online, its being farmed by much less efficient farmers than us and its probably in politically unstable areas or places much more susceptible to weather. Its not a threat, but I agree the threat from our own govt is much bigger.

4 million acres - Ontario due to climate change.

Kazakhstan - 10 million acres
Russia - 22 million acres.
Argentina - 2.2 million acres

Less efficient? Are you kidding? Kz, Argentina, Russia are half as expensive to grow crops here and their yields surpassed ours long ago.


Canada is the highest cost lowest return production area in the world. If you can't see or believe that you need an education in geography and politics.

Efficiency needs to be measured in dollar in = dollars out. Bot how many acres one person can farm.


Sebody had that chart of cost per but of wheat to produce for the major production areas... They should post it here again .



Oh, and none of those areas are rainforests.


We didn't even talk about the massive ag development happening in Africa thanks to Chinese investment or Chinese technology that's turning baren deserts into farmland.