Advantages of Real Estate
“One of the best performing types of investment properties lately has been land, specifically farmland or rural land that can be used for recreational activities.” (Kiplinger’s March ’07)
Owning a large parcel of rural land—especially a farm or ranch—is unlike owning a single family home in a residential neighborhood. Whether you’re looking over crop fields or timber draws, ownership of an expanse of land offers a certain attachment to the property. This personal investment often prompts a constant desire to improve on the holding and become a steward of the land.
Absentee land owners control about 50% of privately owned land in the US. From the paper giants to the corporate farms, land is not renewable, no one is making land. The best investment on this earth is the earth we walk on. Land is not getting any cheaper, it might have its flat years, but as a rule of thumb, history tells us it usually doubles in value about every ten to twelve years.
Why purchase rural land? If you are a serious sportsman, it is a no brainer both financially and recreationally. As part of any long term diversified portfolio, land is a more secure investment with a fairly predictable rate of return than are potentially volatile stocks and mutual funds. This allows you to leave something of great value to potential heirs.
Yet not only does land ownership reap financial rewards, but recreational ones as well. If you are a serious sportsman, the purchase of rural land will give you the freedom to hunt whenever and with whomever of your choosing. In addition, most recreational hunters have less time and face greater difficulty seeking permission to hunt private land. Owning your own farm or ranch will provide you with a secure recreational outlet.
As an example of a farm purchase in Kansas back in January of 2004, consisting of 250 acres, 110acres of tillable farming, 115 acres of timberland and 25 acres in CRP. The purchase price was $280,000.00 and the buyer put down $140,000.00, his yearly mortgage payment comes to $13,200.00. A 1000 sq. ft. log cabin was built a year later along with septic system, well, shed and gravel road to cabin. Total cost of $90,000.00. In May of 2007 the property was appraised for $700,000.00. The current landowner has the following yearly expenses and income.
Expenses: Income:
Mortgage: $13,200 CRP: $ 1,700
Taxes: 1,700 Farm Lease: 9,900
Insurance: 1,400 *Hunter Lease: 4,000
Utilities & Maint: 1,000 **Timber: 1,500
Food Plots: 1,500 ***Outfitted Hunt: 3,000
Total: $18,800 Total: $20,100
*Based on four hunters, friends of the owner taking a one week lease in November.
** Based on a five year harvest of 15 walnut trees per year at $500.00/tree
*** Based on the savings of a yearly outfitted hunt along with non-resident license.
Not only has the present non-resident landowner more than doubled his net worth in the ownership of the property, but also earns a positive yearly cash flow.