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Triple Net Farm Land
Posted on 6/13/19 at 6:18 pm
Posted on 6/13/19 at 6:18 pm
I'm looking at some opportunities to buy some farm land. The property is leased to a long-time reputable farmer. The rent is 23% of the gross crop revenue and landowner owes no expenses except a portion of crop insurance.
Anyone on the board looked at these opportunities? I'd like to get some rent comparisons.
Anyone on the board looked at these opportunities? I'd like to get some rent comparisons.
Posted on 6/13/19 at 6:20 pm to Fat Harry
In NE LA I’ve seen and been told of returns of 2-3% the last few years when new owners buy. I should almost all are from out of state, large cities, and I assume they are looking for a “safe” place to park several million.
Posted on 6/13/19 at 6:48 pm to Fat Harry
Where is the land (LA delta/Midwest/hill dirt), is it irrigated (or capable of being irrigated), what is the price-per-acre, what crops have been/will be grown on it, what are the base acres, and how much are you looking to put down on it?
It’s a terrible time to buy, fyi. With all cash and no borrowing it’ll be hard to beat 3%.
It’s a terrible time to buy, fyi. With all cash and no borrowing it’ll be hard to beat 3%.
Posted on 6/13/19 at 7:11 pm to Fat Harry
Overall, right now is not a good time to buy farmland from my research and personal experience
Posted on 6/13/19 at 8:18 pm to eng08
quote:
returns of 2-3%
I cannot fathom this. There are other “safe” investments that easily net double that.
Posted on 6/13/19 at 8:23 pm to StealthCalais11
Me either, there were several tracts around family, each a thousand or so acres at 5k an acre...
Posted on 6/13/19 at 9:30 pm to jimbeam
I haven't been keeping up with farm land prices, still high as eagle snatch?
I figured prices would be falling by now and that there would be some foreclosures to pick up.
I figured prices would be falling by now and that there would be some foreclosures to pick up.
Posted on 6/14/19 at 7:00 am to StealthCalais11
quote:
cannot fathom this. There are other “safe” investments that easily net double that.
Please name some then. I’ll save you the hassle, no there aren’t. The dentist got blasted for asking about this a couple weeks ago. Plus, farm land generally you can use recreationally to do things like fish, shoot guns, camp, etc. It’s more then just an email showing how many shares you own. It’s a diversification of assets away from equities.
Posted on 6/14/19 at 7:43 am to baldona
quote:
It’s a diversification of assets away from equities.
It’s a concentration of assets with a big bet made on weather.
Ive found farmers tend to be the most risk averse clients, yet they are investing in one of the most risky asset class.
Posted on 6/14/19 at 7:43 am to Decisions
quote:
Where is the land (LA delta/Midwest/hill dirt), is it irrigated (or capable of being irrigated), what is the price-per-acre, what crops have been/will be grown on it, what are the base acres, and how much are you looking to put down on it?
Land is in the MS delta, it is irrigated (too irrigated right now due to the high river seepwater), crops are cotton, beans and corn. 160 acre tract. They want a little over $5k/acre.
Posted on 6/14/19 at 8:20 am to GREENHEAD22
In our area, it’s still all either
1. advertised as hunting property (or at least priced that way) and we know no body down here is killing chit
2. Getting snatched up by cane guys, who are actually making money apparently
1. advertised as hunting property (or at least priced that way) and we know no body down here is killing chit
2. Getting snatched up by cane guys, who are actually making money apparently
Posted on 6/14/19 at 9:05 am to jimbeam
quote:
Getting snatched up by cane guys, who are actually making money apparently
Not if you ask them though
Posted on 6/14/19 at 9:48 am to Fat Harry
quote:
The rent is 23% of the gross crop revenue
Usually for NNN commercial properties, the rent to sales ratio is somewhere between 5% and 10%. Anything above 12% is dicey. I don't know anything about farming but that number would be a huge red flag if the property was a restaurant, drug store, gas station, etc.
Posted on 6/14/19 at 10:49 am to Fat Harry
quote:
Land is in the MS delta, it is irrigated (too irrigated right now due to the high river seepwater), crops are cotton, beans and corn. 160 acre tract. They want a little over $5k/acre.
I don't think I have seen any land in Mississippi that gets 2-3% at over $5,000 an acre. I could be wrong. I have been calculating 2-3% on some $3k pieces.
Posted on 6/14/19 at 11:03 am to Fat Harry
Years ago we had leased farm property and it was 20% gross rev.
Posted on 6/14/19 at 11:07 am to baldona
GSE bonds will net more than that
Municipal lower floaters with the LC that guarantees the bond will pay more than that we
Both with almost zero risk
There have been several quality bond offerings the last 36 months that have little overall risk.
Of course there are tax free / exempt municipal bonds - if you conduct your due diligence, there are solid opportunities available.
There are still covertibke bond hedge plays out there that have little risk but offer solid returns.
Municipal lower floaters with the LC that guarantees the bond will pay more than that we
Both with almost zero risk
There have been several quality bond offerings the last 36 months that have little overall risk.
Of course there are tax free / exempt municipal bonds - if you conduct your due diligence, there are solid opportunities available.
There are still covertibke bond hedge plays out there that have little risk but offer solid returns.
quote:
Please name some then.
Posted on 6/14/19 at 12:41 pm to jimbeam
As much as it sucks just may have to cave and become cane farmers.
Posted on 6/14/19 at 12:50 pm to GREENHEAD22
That’ll be the frickin day
Posted on 6/14/19 at 12:57 pm to jimbeam
Yea I knew that would get ya.
Posted on 6/14/19 at 1:49 pm to Fat Harry
quote:
Land is in the MS delta, it is irrigated (too irrigated right now due to the high river seepwater), crops are cotton, beans and corn. 160 acre tract. They want a little over $5k/acre.
If it’s close enough to the levee to have serious seepage I’d assume we’re dealing with primarily silt loam soils then. For prime irrigated land in the delta that price is pretty standard (though not a deal).
23% across all crops is interesting. In most leases down here you typically see 25% for grain and 20% for cotton (due to cotton grossing more) so that could potentially be a plus.
If you aren’t borrowing any money and are using post-tax dollars you’ll need ~$160 an acre to achieve 3%. That wouldn’t be difficult with prime, irrigated land. He’d likely need to average at or over 1,100 lb of cotton, 185 bushels of corn, or somewhere in the 70’s on soybeans.
Obviously if you’re borrowing the money these numbers get much worse very quickly.
Also, by “base acres” I’m referring to what the historical crop mix has been on the place and thus what crops you could potentially be paid on if there is a government program. You should check on that either at the local FSA office or with the seller. It’s important. Pro tip: the more cotton base acres the better. It’s historically paid more than the other crops.
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