Farmland is an investment that lasts long and proves to reward greatly over time. What happens when we no longer want to be patient with that investment and get our money fast? Often, we and up losing out on a lot more than just cash. Keeping farmland instead of selling it can provide you and your family with a prosperous future. Why should you keep your land and not sell it?
1. 40% of farmland in the U.S. is rented
There is a reason why nearly half of landowners in the U.S. are renting their land and not selling it—it is a fantastic investment. Land ownership is an investment that continues to provide steady returns regardless of market turbulence. While the profits don’t typically spike, they also don’t significantly dip. An article by The New Food Economy explains, “A quarter of the land in Iowa is owned by the same owner for the last 40 years; half has been owned for over 20 years. So owners are after long-term returns.” This is the reason why so many landowners stick with the choice that keeps their finances safe because slow and steady wins the race. Click here for more information about why Tillable thinks land ownership is such a great investment.
2. Your children will thank you
We all know owning property is a great investment for your retirement, but we don’t often think beyond that. Sure, we all plan to leave our children and grandchildren a certain amount of money after we are gone, but what about leaving them a steady income? There is a great deal of value in leaving your children with a way to support themselves for years and in turn invest that money into your grandchildren’s future. For more information check out this article that details the ins and outs of transferring land among family members.
If you are a landowner you know there are emotional ties that bind you to your land and chances are, your family feels the same. There is pride in keeping your land well-kept and performing to the highest standard. These feelings permeate the foundation of family and impact generations to come. Why throw away something that your family worked so hard to build?
3. Down market
It is no secret that we are currently in a down market, but what does that mean exactly? It is the period of time after a market top during which a security’s price trends lower. This is great for buying property but not great for selling it. According to this article, the number of lots selling in 2019 is 16.2% lower than the year before. If you are interested in selling your land for a profit— unfortunately right now is not the best time for that. Why not sit tight, get a great farmer, and ride out the real estate roller coaster while also making income?
Selling may feel like the best way to get your money fast—but what comes with that process is a lot of fees. First, you’ll need to have your land appraised. A simple farmland appraisal can cost upwards of $1,500 depending on the size of the land. You will spend upwards of 1000 dollars just to determine what you want to sell for. The larger piece of land you have, the more difficult it becomes to sell it all at once. Often, landowners are forced to split their land into more “sellable” amounts, making the process longer and more difficult. You end up paying broker fees each time you sell a chunk of land which cuts into your profit. On top of that, you will pay taxes on each transaction. Another option is to sell your land at auction. This is yet another example of a process that will cost you some hefty fees. Many times selling at auction requires a fee to be a part of the auction. Also unless you have a reserve, you may not get the amount you expect. In a down market, the potential pool of people available to purchase land is smaller. You may think it is a quick fix for your need for money now, but remember a percentage of that money is out the door as soon as you are.
5. Selling is permanent
Like any investment, when it underperforms we lean toward panic. While farmland is the least volatile investment, the market crash of 2008 has left a bad taste in all of our mouths when it comes to real estate ownership. Perhaps the best choice we can make is to take a deep breath, evaluate the risk, and wait before selling an investment that means so much to you and the farmer. Unlike renting, once you sell your land there is no going back. You can’t change your mind once the land is performing better; once it’s gone, it is gone. Maybe you are a landowner who enjoys farming your own land but need a break—don’t sell the farm, lease it so maybe one day you can farm it again. Do you want to hear it straight from the experts? Check out what other farmers/landowners had to say.
Whether you plan to pass down your land or are simply enjoy the profits, renting farmland proves to be the best choice when compared to selling. Renting land will always have challenges, but that is what Tillable is here to help with. Tillable looks to take care of landowners with expertly managed farmland leasing as well as upfront payment, and to facilitate long-lasting relationships with farmers; you can learn more by reading about our Hassle-Free Lease.
Here's a related topic!
Corbett and Mason ask attorney Dennis Composto, Esq. how he helps his clients make a decision as to whether they should keep or sell an asset.