Introduction to investing in Rural Land
In the aftermath of the volatile climate of 2020, investors are looking for safe ways to invest for the future. This is leading many to consider things like rural land investing. While the economy is in unseen territory and the stock market offers only high entry prices and volatile returns, there is something to be said for investing in rural real estate, if only as a hedge against inflation.
Rural and farm land has provided a consistent option for people when compared to commercial or residential real estate or stock market investing. Drylands are maintaining a steady pace while irrigated land and ranchland are seeing values soar. Why is this happening? In such an uncertain time, why is rural land still such a good option? Here are a few reasons:
● Farms and ranches offer steady returns from their various income streams
● There is a limited supply of land
● The world depends on agriculture and ranching
● There are numerous conservation grants and government incentives
The Challenge of Urbanization
In the U.S., despite the obvious essential role of agriculture, urbanization is taking away some of the best lands in the country. In the 20 years from 1992 to 2012, there was a loss of 31 million acres of farmland to development. Plus, an average of 14,000 acres of farmland is converted to commercial or residential real estate every single week in the United States, which only serves to continue to drive up the value and importance of the rural land available for agriculture that is still left.
Essentially, it’s a supply and demand issue, and the limited supply means that there is always going to be an increasing demand as long as agriculture is such an important aspect of the economy.
Investing Post COVID-19
Cities are seeing a mass exodus affecting both commerical real estate demand as well as residential demand. This demand previously directed toward city centers is now moving to the country. There’s an opportunity in the coming months to take advantage of reasonable land prices and low interest rates before the market responds to the high demand side pressure.
How Rural Land and Farms Earn Income
When land is purchased as an investment, you have one of two choices. You can farm the land yourself, or you can rent or lease it to someone and let them do the work. Of course, there is also the option to do a combination of these efforts, such as using a small part of the land for your own agricultural efforts and then leasing the rest to another party.
How do you decide which way to go? To help you, let’s explore the different options a little more in-depth to see what each offers.
● Own/Operate: Owning and operating your own farm or ranch land allows you to have more control over the property, offers additional revenue streams, and means you’re not renting someone else’s land to farm.
● Rent to Others: Agriculture is one area where most relationships are long-term. More than 41% of all rural land leases have been rented consecutively to the same tenant for 10 years or longer. This gives you the chance to enjoy the land investment without the effort.
● Combo: You can own and rent your farmland at the same time. Partial leasing of the land is a great way to reduce your workload and still reap both sides of the benefits from investing in rural land. This is also a great way to ensure steady returns even if you aren’t certain that your own operations will be profitable at first.
Ultimately, the decision will be yours to make, but any of the three options will serve to provide a great option with rural land investing.
Financing Rural Land Investments
You need to make sure that you work with people who understand agriculture as an investment and the challenges that come along with the industry. Ag Lending Group is a Non-Bank Lender. We on behalf of our clients with multiple lenidng sources to find the financing solution that fits your unique situation. The model of our business aligns our incentives with the borrower, not the bank.
Ag Lending Group, Richard and Madison responded to my ******** inquiry following a referral from a friend and our completed application. They followed up with a personal fact finding interview . Ag Lending Group contacted their sources of Ag credit on our behalf. After several months of diligently working to offer a solution to our refinance , they secured a $ 3.6 million package for us They were hard working, professional, knowledgeable , and honest in all phases of the transaction Highly recommended by us in all phases.”
While the finite nature of farmland in the U.S. makes rural land investing one of the most stable options right now, it’s still important to work with a lender that is experienced with the unpredictable nature of agriculture so that you can set yourself up for success on all fronts. Traditional banks and lenders don’t understand the unique needs of land investing or how to handle the uncertain industry that is farming.
If you are ready to learn more about investing in farmland or agriculture, contact the team at Ag Lending Group. We have years of experience in agricultural lending and operations and can help you secure financing and make the best investments in rural land, no matter where in the country you decide to put your money. Contact us today to get started.