Above: “Land stretching out so far and wide…” Farm ownership may be a lucrative investment as well as a popular fantasy.
BY STEVE DINNEN
Iowa is teeming with farmland. And every year, by dint of the retirement or death of a property owner, much of it is for sale. So is it now your time to turn a plow?
According to data compiled by the National Council of Real Estate Investment Fiduciaries, the total return (cash income plus price appreciation) from farmland in 2017 was 6.2 percent. That’s below returns for investor real estate and the S&P 500. But on a 10-year timeframe, farmland is the top earner.
Randall Hertz, at Hertz Farm Management Inc. in Nevada, says most farmland buyers are themselves farmers, or people who grew up on a farm. But he often gets queries from people who are interested in diversifying their portfolios, which explains why he is working on a deal near Madrid for a client based in New York, or with an East Coast bond trader.
To judge the value of their investment, these and any investor have much due diligence to perform. First off is learning a property’s CSR – or corn suitability rating. This is a numerical ranking that indicates how good the land is for, obviously, corn. The higher the CSR, the better the land. (There also is a Productivity Index that some farms use when corn is not the go-to income generator).
Commodity prices obviously play a role, though Hertz said that land values tend to lag some of the ups and downs of commodities. Regardless, you’ll likely surprise yourself with the price tag.
“It always appears to be expensive,” Hertz says of farmland.
Among the many factors to examine, you’ll want to now how flat the ground is, how well it drains and whether it is tiled to drain excess water. Maybe there are some soft factors that will help you make up your mind. Are there trees on the land for hunting or a pond for fishing? What about distance from Des Moines, so you can drive out a take a look now and then. If you won’t personally farm it, you’ll need a farm management company such as Hertz to tend to those duties.
This isn’t a cheap undertaking, Hertz says. While prices “run all over the place,” he suggests a minimum entry of $400,000 to make it worth your while.
For a look at some spreads currently available, refer to rlifarmandranch.com. Bear in mind that Iowa farmland is extremely productive, and pricing reflects that.
According to data compiled by the National Council of Real Estate Investment Fiduciaries, the total return (cash income plus price appreciation) from farmland in 2017 was 6.2 percent. That’s below returns for investor real estate and the S&P 500. But on a 10-year timeframe, farmland is the top earner.
Randall Hertz, at Hertz Farm Management Inc. in Nevada, says most farmland buyers are themselves farmers, or people who grew up on a farm. But he often gets queries from people who are interested in diversifying their portfolios, which explains why he is working on a deal near Madrid for a client based in New York, or with an East Coast bond trader.
To judge the value of their investment, these and any investor have much due diligence to perform. First off is learning a property’s CSR – or corn suitability rating. This is a numerical ranking that indicates how good the land is for, obviously, corn. The higher the CSR, the better the land. (There also is a Productivity Index that some farms use when corn is not the go-to income generator).
Commodity prices obviously play a role, though Hertz said that land values tend to lag some of the ups and downs of commodities. Regardless, you’ll likely surprise yourself with the price tag.
“It always appears to be expensive,” Hertz says of farmland.
Among the many factors to examine, you’ll want to now how flat the ground is, how well it drains and whether it is tiled to drain excess water. Maybe there are some soft factors that will help you make up your mind. Are there trees on the land for hunting or a pond for fishing? What about distance from Des Moines, so you can drive out a take a look now and then. If you won’t personally farm it, you’ll need a farm management company such as Hertz to tend to those duties.
This isn’t a cheap undertaking, Hertz says. While prices “run all over the place,” he suggests a minimum entry of $400,000 to make it worth your while.
For a look at some spreads currently available, refer to rlifarmandranch.com. Bear in mind that Iowa farmland is extremely productive, and pricing reflects that.
