Buying Land

[jimh406]

I don't think you'll make much money off of leasing, in general. However, I think I'd look more into the details of the politics in Colorado before investing. Just based on what I'm reading/hearing, it's not a good place for people with money unless you are wanting to give it away. YMMV.

I wouldn't buy any property that you don't want to live on unless you are simply attempting to diversify or buying a second home. In that case, don't forget you have to pay additional taxes when you sell. On the other hand, putting money in your Roth or switching your 401K to a Roth will grow tax free. I'm not a financial advisor though, so just some thoughts.

 

[Gut Shot]

That really depends. Tillable is going out of control right now due to corporation farming. If you found say an 80 acre property with even just 30 acres of tillable, you can absolutely have a net profit from the rent. In the last 5 years alone in my area, the tillable I rent has gone from $175/acre up to $425/acre this coming season. At that rate, its a paycheck of $12,750 while only likely having to pay around 2k in taxes.

Purchasing land right now in a good agricultural area right now is about as good of an investment as you can make right now. The going price for tillable acreage is soaring out of control as corporation farm operations are able to outbid every property hitting the market right now and honestly most aren't even hitting the market as they are seeking out and offering "too good of deals to pass up" to many of their neighbors right now.

You show me 80 acre parcels where $12,750 annually even comes close to paying the mortgage and I'll show up with my checkbook.

 

[seeth07]

don't forget you have to pay additional taxes when you sell

You can have a plan to easily get around this if you are willing to be flexible at retirement and how you managing living at properties you own before you sell.

 

[seeth07]

You show me 80 acre parcels where $12,750 annually even comes close to paying the mortgage and I'll show up with my checkbook.

It doesn't need to pay the mortgage. It needs to pay the interest on that mortgage and that will depend on each individual and how much capital they are willing to start with. Remember, this is about investment talk so ideally you are paying for this up front with cash and you have zero mortgage.

 

[Forkyfinder]

You show me 80 acre parcels where $12,750 annually even comes close to paying the mortgage and I'll show up with my checkbook.

Itd be an insane investment if that were the case. What you would be betting on as the investor:

Inflation. Increase in value in land relative to inflation. Increase in lease rates. And maintaining low maintenance and taxes and tax advantages. Seems like solid bets to me.

If it costs you money, but after 10 years pays for itself, and a better and better annual postive return, and then after 30 years you sell it - you had one hell of an investment.

 

[Gut Shot]

Itd be an insane investment if that were the case. What you would be betting on as the investor:

Inflation. Increase in value in land relative to inflation. Increase in lease rates. And maintaining low maintenance and taxes and tax advantages. Seems like solid bets to me.

If it costs you money, but after 10 years pays for itself, and a better and better annual postive return, and then after 30 years you sell it - you had one hell of an investment.

You are speculating, not investing.

You understand there are actual numbers that you can run to determine ROI and Cap rate right? A good investment looks different to different people. If you are willing to tie your money up for 30 years gambling that it might pay for itself in 10 with rent (it won't), that's on you.

 

[belshawelk]

Not much money is leasing out land for cattle/crops. IF and only IF you have a premier hunting property can you make money leasing to an outfitter. BUT for premier hunting property we are in the millions to buy and hunting leases are in the thousands. Perhaps 10 of thousands but you better live a long time to get your money back.

 

[seeth07]

If you are willing to tie your money up for 30 years gambling that it might pay for itself in 10 with rent (it won't), that's on you.

but you better live a long time to get your money back.

You make your money on a rural land investment due to its appreciation, not renting. Rents just help pay bills/taxes and even can help cover interest if you mortgage. Show me a rural property with good hunting/fishing and/or has good tillable acreage from 15 years ago that isn't about double that price now.

 

[Treeshark]

Show me a rural property with good hunting/fishing and/or has good tillable acreage from 15 years ago that isn't about double that price now.

This speaks to my point earlier: a 100% gain over 15 years would not be what I would consider a good investment.

 

[seeth07]

This speaks to my point earlier: a 100% gain over 15 years would not be what I would consider a good investment.

It is almost exactly 5% annual. Extremely minimal risk. Not counting anything else you attempt to make off of it such as rents.

 

[Mallardsx2]

The real money shot right now is buying land where it abuts federal land. Those parcels will 5X in value over the next 30 years.

 

[Treeshark]

It is almost exactly 5% annual. Extremely minimal risk. Not counting anything else you attempt to make off of it such as rents.

Low risk depends on if you’re financing it or not.

I don’t mean to disparage the OP, but I’m guessing that he doesn’t have $1m cash burning a hole in his pocket with this idea.

 

[Gut Shot]

You make your money on a rural land investment due to its appreciation, not renting.

Which is what I said in my original post about properties with upside and flipping them short term. The OP asked about buying to lease, not buying to sell. The numbers on ag leases are abysmal.

 

[Forkyfinder]

You are speculating, not investing.

You understand there are actual numbers that you can run to determine ROI and Cap rate right? A good investment looks different to different people. If you are willing to tie your money up for 30 years gambling that it might pay for itself in 10 with rent (it won't), that's on you.

Yes. I know exactly what a roi is.

If you bought a ranch in eastern MT or invested in sp500 30 years ago, which gets you more money? I know the answer. Comfortably.

 

[seeth07]

Low risk depends on if you’re financing it or not.

If you are financing, is it really an investment? Do people really take out loans to put money into a bond or the market?

 

[Treeshark]

If you are financing, is it really an investment? Do people really take out loans to put money into a bond or the market?

Would be nice if the OP chimes in- it’s hard to imagine he wouldn’t be financing at least some of it.

 

[Gut Shot]

If you are financing, is it really an investment? Do people really take out loans to put money into a bond or the market?

Businesses do it every day. The money invested, even if financed, just has to be less than the income produced. A construction company buys an excavator for $1000/month loan payment and maintenance. That excavator just needs to produce more than $1000/month for the company.

The OP (assuming he's borrowing money) is in the same boat. He buys a property (his business is marketing that property for rent) for $1k/month, it needs to produce more than $1k/month for him.

 

[Forkyfinder]

Businesses do it every day. The money invested, even if financed, just has to be less than the income produced. A construction company buys an excavator for $1000/month loan payment and maintenance. That excavator just needs to produce more than $1000/month for the company.

The OP (assuming he's borrowing money) is in the same boat. He buys a property (his business is marketing that property for rent) for $1k/month, it needs to produce more than $1k/month for him.

The point is - you wouldnt borrow the whole sum of money.

 

[npaden]

This would be hard to get it to math out in Colorado unless you found the perfect property with the perfect landowner tag system. Like something in Unit 61 or 76 or someplace like that. Even then it is going to be a very low return. I essentially do this except instead of leasing it out to others I use it for my own recreation and while it technically doesn't cost me anything I'm not sure that it makes me anything either.

If you just want to boil it down to math I would be better off taking that same amount of $ and investing it and using the earnings from it to go on a hunt somewhere every year. Somehow in my mind I can justify owning the property but I have a hard time justifying going on a guided hunt.

 

[seeth07]

Businesses do it every day. The money invested, even if financed, just has to be less than the income produced. A construction company buys an excavator for $1000/month loan payment and maintenance. That excavator just needs to produce more than $1000/month for the company.

The OP (assuming he's borrowing money) is in the same boat. He buys a property (his business is marketing that property for rent) for $1k/month, it needs to produce more than $1k/month for him.

That is a good point but even in those scenarios, most of the time it won't make sense unless the terms of the financing are favorable or the production is. In our scenario here, the production isn't very favorable so it would require one heck of a financing deal (or not financing any or most of it).