Do I look at this wrong? I don't have $400,000 sitting around to invest, so whatever I invest in needs to cashflow, or have the potential to do so going forward, and that is priority #1. anticipated appreciation in 20 years won't help make payments in the interim, especially if values drop in the mean time before appreciating in 20 years time.
So instead of concerning myself with appreciation, I look at what will be most likely to pay for itself. I don't know much about productivity in your area ( dry, I believe from a previous thread?) , so I probably overestimate pasture potential, but if I could buy 3 to 5 pasture quarters for the same price as 1 quarter of crop land or one house, the pasture would be the no brainer for cashflow. It requires virtually no inputs, upgrades or maintenance to maintain its value, the house will require the most. A tenant can quickly ruin the value of the home, same with lack of maintenance. The house will have bills to pay(large taxes, heat, power, roof/siding/appliance wear and depreciation, style becoming outdated needing renovations, etc.) whether it is occupied and making money or not. The pasture could sit idle and only cost a few dollars in taxes.
As for the crop land, around here in big swamp country, 5 quarters of pasture land will produce at least 5 times as much biomass as 1 quarter of crop land, but maybe not as flexible in potential uses year in and year out, Making the payback on the pasture much faster in theory. I expect it is opposite in your area, or values wouldn't be so far apart. So my input into that argument is likely worth what you paid for it.
Otherwise, a rising tide lifts all boats in the macro economic picture. In more normal times, the annual ROI can quickly swamp the appreciation:
If one investment can give a 3% annual ROI, and the other a 5%, the difference (compounded, assuming it goes back into more land) is $322,000 vs. $661,000 over 20 years. If you can make 10% ROI over 20 years, it is almost 6 times the initial investment. I am calling the last few years of exponential appreciation not normal times, but perhaps I am wrong...
So instead of concerning myself with appreciation, I look at what will be most likely to pay for itself. I don't know much about productivity in your area ( dry, I believe from a previous thread?) , so I probably overestimate pasture potential, but if I could buy 3 to 5 pasture quarters for the same price as 1 quarter of crop land or one house, the pasture would be the no brainer for cashflow. It requires virtually no inputs, upgrades or maintenance to maintain its value, the house will require the most. A tenant can quickly ruin the value of the home, same with lack of maintenance. The house will have bills to pay(large taxes, heat, power, roof/siding/appliance wear and depreciation, style becoming outdated needing renovations, etc.) whether it is occupied and making money or not. The pasture could sit idle and only cost a few dollars in taxes.
As for the crop land, around here in big swamp country, 5 quarters of pasture land will produce at least 5 times as much biomass as 1 quarter of crop land, but maybe not as flexible in potential uses year in and year out, Making the payback on the pasture much faster in theory. I expect it is opposite in your area, or values wouldn't be so far apart. So my input into that argument is likely worth what you paid for it.
Otherwise, a rising tide lifts all boats in the macro economic picture. In more normal times, the annual ROI can quickly swamp the appreciation:
If one investment can give a 3% annual ROI, and the other a 5%, the difference (compounded, assuming it goes back into more land) is $322,000 vs. $661,000 over 20 years. If you can make 10% ROI over 20 years, it is almost 6 times the initial investment. I am calling the last few years of exponential appreciation not normal times, but perhaps I am wrong...
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