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Buying 60+ acres...good investment?

  Aloha!  I am looking to purchase a 60 acre lot for around 100K.  The land is leased to a farmer for around $50 an acre right now, with about 50 acres being tillable.  Obviously, the land is pretty rural, about 15 minutes to the nearest town, but overall in a nice location close to a lake and on a paved road.  My question...(obviously highly speculative in nature) I am 30 right now and will "retire" from my job in 12 years.  Would I be better off buying the land now, or investing the $1,000 per month that the land would cost me (15 year land contract at 6%) in a mutual fund/stocks.  I have always wanted a small hobby farm, and it is in the location I would like to settle down in.  I just don't want land to triple in price in the next 12 years.  My job has me in Hawaii right now, so I will not start improvements until I retire.  Thanks in advance.
  • July 27 2014 - Cadillac
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Answers (2)

You need to consider this as a purchase for future use rather than an investment.  If you plan to retire there and build yourself a small hobby farm after retirement then maybe you should do so.  The land may not be there for sale in 12 years.  Total interest paid on a 15 year land contract @ 6% is about $51,000.  If you are going to receive ($50 x 60 acres = $3000 annually x 15 years is $45,000) annual income on the lease then you would deduct $45000 from the $51,000 and figure you are only paying out $9000 interest and $100000 for the land.  You are purchasing the land for around $1600 an acre.  That is a good price for tillable land around here.  Farm land is getting harder to find.  Farmers are needing more land but they really want to lease it not buy it.  Therefore your potential for increased income on the annual lease is likely to be higher in the future.  It may not be a good investment If you do not plan to move and develop the land for your use after you retire.   
  • July 28 2014
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It is highly doubtful that land will triple in price.  Historically, the stock market has beaten real estate in terms of return.

Also, regarding the lease: Is that $50 per acre annually or monthly?  Monthly seems too high to be true, so I assume it is annual.  If so, that's only $3,000 per year, which is a paltry 3% return on your investment.  It's better than nothing, but it's a terrible investment.
  • July 27 2014
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