May 21, 2024

Farmland investment supports growth and profit opportunities

PITTSFIELD, Ill. — Current market trends are driving strong demand for farmland, and that can create positive growth and profit potential for Illinois and Indiana growers.

Higher commodity prices combined with historically low interest rates are making farmland an attractive investment for farmers looking to start or expand an operation, as well as for investors seeking farmland to rent out. And farmers looking to sell, in most cases because of retirement, are benefiting as well from strong land values.

“Real estate is a great investment opportunity for sustained growth, especially compared to the volatility that can be experienced with stocks and other financial options,” said Andrew Malott, a Land Specialist serving northwest-central Indiana for Whitetail Properties Real Estate, which specializes in farm, ranch and recreational properties.

“Also driving demand for rural land is the fact that it’s an investment you can physically experience and enjoy with family and friends, creating memories for years to come.”

Malott noted that investors and landowners are seeing an average 2.5% to 3.5% rate of return, per year, in his area.

“As for farmers, growers, they should expect more return, especially if their ground is owned free and clear,” he said.

Similar trends are being seen by Tyler Sellens, Whitetail Properties Land Specialist in west-central Illinois.

“Land in general has always been a very strong investment in terms of appreciation and return on investment,” he said. “A stock market investment is just a piece of paper with numbers on it. Land is something real and will always be there.”

Sellens added he is also seeing increased interest from city dwellers, many who want more open space and are purchasing smaller rural tracts for hobby farms or livestock.

To realize maximum value, Sellens said sellers should consider key factors beyond just keeping their property well-maintained.

“Take a look at your soil conservation practices, as well as any farm improvements that may be needed prior to selling,” he advised. “Also, fall and winter are the best times to sell, when there is open tenancy for next season and farmers have the cash flow to purchase more land.”

For prospective buyers of farmland, Malott said there are several questions to ask.

“Is the farm irrigated? Does it have drainage tile? What are the farm’s soil types and fertility levels? Also, consider if this will be a good fit and investment for your operation, and how much money you will need to put into the farm to make it profitable,” he said.

A farm’s production history, accurate property valuation, any recent farm improvements and the cash rents that can be charged to a tenant are also important for buyers and sellers to document.

Benefits Of Auctions

For most farms and other income-producing land, auctions are the preferred sale format because competitive bidding among farmers and investors can drive up the purchase price, in many cases, even above beyond appraised or perceived market value. An auction can create excitement in the marketplace and reduce time on the market.

On the other hand, some farmers prefer a traditional sale, where property is listed by a real estate company for a specific price. Farmers who favor this approach feel this format gives them more say in the outcome of the actual sale price.

Whitetail Properties works with farmland buyers and sellers through both traditional and auction sales through its network of local Land Specialists in 38 states.

Auctions are handled by the company’s Ranch & Farm Auctions division, which enables rural land buyers to bid concurrently live on-site, live online and by phone-in bidding in real time.

Regardless of the sales format, farmers will benefit if, as expected, the current hot rural land market continues. And that means an ongoing opportunity for farmers to strengthen their financial position through investment in land.

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