|
Post by Freeborn on Dec 29, 2019 9:57:23 GMT -6
If you were to buy a farm in an agricultural area what metrics do you guys use to evaluate the value of agriculture land and also the non productive land that would come with a farm purchase?
With Ag land are you focused on CPI (Crop Productivity Index)? Does the terrain effect value, what other measurements do you use to assess value? How about the non productive land that would be purchased as part of a Ag land purchase, do you use tax assessed value?
What steps do you use to determine if a sale is fair, reasonable, a good deal or a terrible deal?
|
|
|
Post by Bob on Dec 29, 2019 11:23:26 GMT -6
If you were to buy a farm in an agricultural area what metrics do you guys use to evaluate the value of agriculture land and also the non productive land that would come with a farm purchase? With Ag land are you focused on CPI (Crop Productivity Index)? Does the terrain effect value, what other measurements do you use to assess value? How about the non productive land that would be purchased as part of a Ag land purchase, do you use tax assessed value? What steps do you use to determine if a sale is fair, reasonable, a good deal or a terrible deal? There are just too many retarders for me to consider ag land. Not my field of expertise. I can't compete with guys that may have deeper pockets, pursue negative returns, have a higher use (like a hog barn, commercial application), or have programs to back them up not available to me. Anywhere there are public and private programs to help, it seems mal-investment follows. Ag land is one of them. That's just one cat's opinion.
|
|
|
Post by Freeborn on Dec 29, 2019 11:48:05 GMT -6
If you were to buy a farm in an agricultural area what metrics do you guys use to evaluate the value of agriculture land and also the non productive land that would come with a farm purchase? With Ag land are you focused on CPI (Crop Productivity Index)? Does the terrain effect value, what other measurements do you use to assess value? How about the non productive land that would be purchased as part of a Ag land purchase, do you use tax assessed value? What steps do you use to determine if a sale is fair, reasonable, a good deal or a terrible deal? There are just too many retarders for me to consider ag land. Not my field of expertise. I can't compete with guys that may have deeper pockets, pursue negative returns, have a higher use (like a hog barn, commercial application), or have programs to back them up not available to me. Anywhere there are public and private programs to help, it seems mal-investment follows. Ag land is one of them. That's just one cat's opinion. Lots of personal stuff about you but unrelated to this question. Lets focus on the question as posted and we may both learn something. Bwoods and Mo know this stuff and have been successful in this space. I figure as long as I can get into the revenue stream supported by these programs it can support the higher land costs.
|
|
|
Post by Bwoods11 on Dec 29, 2019 12:18:51 GMT -6
I basically go by comparable sales. Crop productivity makes a big difference, as well as location. My county may have $5000 per acre crop ground in one Township and $4000 in an another. Aggressive farmers buy up everything in some areas. Light sandy soil sells for less unless you can put an irrigator on it.
As for non crop. Woods, oaks seems to be the best, with swamp selling for much less. A combo in the right area, however can be the perfect hunting farm.
|
|
|
Post by Sandbur on Dec 29, 2019 12:30:59 GMT -6
Foggy asked about terrain. From what I see, most irrigation needs relatively flat land.
If you are looking at ag acres, equipment is getting bigger and ag land from an older farmer with small equipment might end up being non rental acres for a purchaser.
Smaller fields might be good for hunting, but not good if you lose the ag credit on the whole parcel.
|
|
|
Post by Freeborn on Dec 29, 2019 12:32:15 GMT -6
I basically go by comparable sales. Crop productivity makes a big difference, as well as location. My county may have $5000 per acre crop ground in one Township and $4000 in an another. Aggressive farmers buy up everything in some areas. Light sandy soil sells for less unless you can put an irrigator on it. As for non crop. Woods, oaks seems to be the best, with swamp selling for much less. A combo in the right area, however can be the perfect hunting farm. So do you go to the County to determine crop productivity for the land your assessing? Don't you look at the CPI or something similar to determine land quality and potential rent value? You mention location, do you mean values are related to the general area the land resides in? If this is the case can land with the same CPI but located in a different area sell for less. Would rents also be less?
|
|
|
Post by kl9 on Dec 29, 2019 12:32:55 GMT -6
Topography, CPI, how it lays play a huge role in value of land. One farm might sell for 6k an acre but a mile down the road might be 3-4. How is access for big equipment? Close to bigger woods for wildlife damage? Is there a big dairy op in the area that could drive up the price of the land? Does the topography set up so the land can drain well? Do you know any producers that can look at it with you ?
|
|
|
Post by kl9 on Dec 29, 2019 12:39:54 GMT -6
I will add that you’re at a disadvantage as a buyer not being a producer. You will likely have to have a bigger down payment to make it cash flow than would a farmer as well as there wouldn’t be government programs available to you I believe. I don’t know much about those programs though
|
|
|
Post by Freeborn on Dec 29, 2019 12:52:30 GMT -6
Topography, CPI, how it lays play a huge role in value of land. One farm might sell for 6k an acre but a mile down the road might be 3-4. How is access for big equipment? Close to bigger woods for wildlife damage? Is there a big dairy op in the area that could drive up the price of the land? Does the topography set up so the land can drain well? Do you know any producers that can look at it with you ? Good advise, thanks! No specific properties yet but i want to get a better understanding so I can get comfortable with what i am looking at and the numbers I'll be dealing with.
|
|
|
Post by Bwoods11 on Dec 29, 2019 12:58:20 GMT -6
Jerry —yeah I check with FSA for soil types... you can also get the soil types online. Now, let’s say you have a 85 CSR which is good, but it floods every third year. You have to factor that in.
Rents vary so much. Depends on the area. Good soils and size of the farm make a big difference. Recent rent auction of 1500 tillable acres in my country drew 65 bidders and the winning bids averaged 257/ac cash rent.
|
|
|
Post by mnfish on Dec 29, 2019 13:02:05 GMT -6
I would love to know in the risk assement of a potential land aquisiton, what is the algorithm you guys use to evaluate potential exits.
|
|
|
Post by Freeborn on Dec 29, 2019 13:03:36 GMT -6
I will add that you’re at a disadvantage as a buyer not being a producer. You will likely have to have a bigger down payment to make it cash flow than would a farmer as well as there wouldn’t be government programs available to you I believe. I don’t know much about those programs though Yep, I'm figuring on a larger down payment. You would think prime farm land would be hard to make work but there are properties that would fit. I know sellers are often faced with wooded areas they need to sell and they often package them with AG land to help them sell. Farmers don't want the woods so they skip this part of the sale instead taking the prime Ag land. If I can pick up a parcel with a 50/50 split it would be what I am looking for.
|
|
|
Post by Bwoods11 on Dec 29, 2019 13:10:01 GMT -6
...50/50 farms are the best hunting in my opinion. They can be a good buy as hunters may not want that much farm ground and farmers too much non crop. That is what I usually buy, some I flip. Most of what i have now, I’ll keep. To be honest, I just go by “gut” .. it’s what I do. I don’t analyze it like I could make more in the stock market. You can’t hunt or recreate on your stocks so I make sure I have both real estate and stocks.
|
|
|
Post by Freeborn on Dec 29, 2019 13:14:58 GMT -6
I would love to know in the risk assement of a potential land aquisiton, what is the algorithm you guys use to evaluate potential exits. First rule of thumb is to only buy something you can afford even if you find yourself in a bad financial situation. You can run a sensitivity analysis where you factor in the financial impact of negative events. Run your model with 1, 2, 3, 4 events and see how your finances work out. If I were to buy a second place it would be not to large and have enough down to have it cash flow. If the rent was to end then i would have to make up the rent which I can do. Hopefully there is not a collapse of the Ag industry.
|
|
|
Post by Sandbur on Dec 29, 2019 13:31:20 GMT -6
We have had land bidded up higher than it should be when two large area producers are in a bidding war. Two-four miles away can be a different situation and it might be difficult for non local people to sort this out before an auction. It could lead an assessor to increase valuations also.
I have seen this happen where a producer wants to convert to a full center pivot irrigation system, or where manure spreading acres are needed close by... which can now mean several miles.
|
|