I'm hoping one of you guys has done the hard work and is willing to share some knowledge with me.

I'm trying to calculate land values on agricultural land based on Rent value. Land locally is renting for $150 an acre, its marginal farm ground, decent but not good and certainly not great.

Mortgage rate would be 7.62% We would have to finance about 50% of the value of the land. From a financial stand point what do you think the value of this land should be as an investment?

I would say 6000-7000 an acre and i am not considering any insterset rates you would borrow on. I think that is irrelevant. If you could net 2percent of value in land rent i would say that is a good investment with the added future appreciation

Dont mean to be rude but i think you think this land will go down in value. And i could but its going to take many years at this interst or higer and we may see that. But the land is likely to sell before that and we may not see a bad downturn

How many acres? I assume from previous posts you are buying it for an investment. Is it possible someday the land would be developable?

One thing to remember is length of loan and the fluctuations in rent prices and can you make up the difference with other income if you can’t get enough cash rent to cover the payment and taxes.

40 to 80 acres. Locally it's one housing allotment per 40 acres, there is some value in selling that allotment but it will not be developed beyond that in the foreseeable future.



You're not being rude. My main gripe/concern is that better land is $1,500 per acre less 10 miles from my place because there's a handful of farmers here insistent on bidding each other up, I don't see "land" tanking, I just see the potential for the locals to quit trying to cut each others throats.

Frankly 2% is not enough for me to buy and hope for appreciation. My money is better spent doing something else, buying and renting a house for example. I want 4%+ yearly.

Appreciate the opinions, it's hard to spend 6 figures when you've worked really hard for it.

You get what you pay for. Always better to buy quality over quantity. In the long term quality will sell and marginal may not. If you could produce something with the land you would have a better return than buying it to just lease out. Buying marginal land just to lease and have someone destroy it would not be anything I would do. I am getting over 2% from my bank on a checking account.

I'm hoping to farm it myself eventually, I know enough to know not to let someone destroy it. I also have a poultry barn that produces quite a bit of manure (hundreds of tons a year) so I can fertilize cheaper than most.

My eventual goal is to grow enough silage and corn for my own cattle but currently I'm running another business and would rather focus on that so leasing it for 5 years makes sense.

If you can comfortably put down 50 percent and have the opportunity to buy it.do it

You are thinking of buying it sooner than latter because why ? Is it contiguous to your property ? If so buy it no matter the cost. If you want to use the land in 5 years then buy it now even if it has a marginal return. Because the end goal is to own it for your use. Who cares about the marginal return. Maybe interest rates drop and you can refinance it or better yet pay it off.

Historically up until the last decade. Land rent per acre was typically about 3-4% of value for the year. So 2500 acre land rented for from $75 to $100 per acre depending upon pressure as that was for similar yield potential.
We have seen things move away from that the last decade with commodities hitting a couple all time highs and land sales escalating rapidly.
Around here with the big custom equipment for haying, silage etc. small fields, odd shape fields rent for much less then larger open fields. Needing to have acres for spreading manure also impact rent prices and land prices here. We typically have higher rent prices for our yield potential and land value around here due to pressure to have a solid feed supply with carryover and spreading liquid manure. The going rate for average to average plus land here is 6-8K per acre with rents from $175 to $325. Fewer acres being sold the last 3-4 years around here. Poor investment options the last years, building costs have gone way up and several are putting land in trusts so family members can continue own and get a rental payment.

Bryce

The two most common ways to value land are;
Comparable sales approach, and income approach.
Comparable sales approach is by far the most common, it's pretty self-explanatory.
The income approach figures in things such as the income that can be derived from the property, capitalization rates, etc.. your local farm bureau, extension agency, or even a local bank may have resources to help you come to a value using the income approach.

If you think of it in the inverse- you can determine what you're willing to pay per acre to attain your desired goal and outcome.

Example:
If your goal is to have the rental cover your P&I and/or taxes you may fall a little short at $6,000 an acre purchase price.
Hypothetically- If you bought 80 acres at $6,000/acre for a total investment of $480,000 and you financed 50% at an interest rate of 7.62% your monthly payments would be appx. $2,700/per month with incoming revenue from rental of appx. $1,000/per month.

I have never had a farmer not pay and I have leased to several (I do know people that have not been paid), some farmers hunt you down to get the check in your hand and the rest you hunt down to get your money. I have no land entered in CRP programs, so speaking out of turn but I believe that rate is about $163/per acre and maybe a more guaranteed revenue stream if you’re reliant on income? Just something else to consider. Good Luck

Appreciate it everyone. Locally they are asking 6,500 with rent currently at 125, that's not ideal. The land is less than a mile away but it's hilly, sandy though they did put in an irrigation well before listing. At auction it went for 4,600 ish and they no saled it.

BBWI brought up a great point, since I only need a bit of land finding something odd shaped or small is probably the best bet as far as getting a return in my lifetime. Whatever I buy I hope to never sell.

Keep in mind that they no saled the land at 4600 an acre. Could be they only had a bid of 3000 and 4700 was the reserve off sale price. You can never tell with auctions unless you are on the inside. There is a reason it did not sell. Remember what I said, you get what you pay for as far as quality. Now if you just gonna use it for manure then buy the cheapest land you can buy close to you that you can work.

The reserve price is 6,500. Bids went to 4,600. I know the folks selling it.

Why did they auction it rather list it thru a real estate agent for a set price ?

We don't see too many land auctions here currently. When the prices were going crazy here 2013-2017 (that is up rapidly) auctions were common and bidding was high. The highest prices within 15 miles of where I live were reached with live auctions. The highest was 14k per acre for 140 acres with the buildings. Many others 10-12.5K. Those were specific parcels located between 4-5 very large dairy farms. Most other acres were 5-8K. Those prices still are the norm here, but as stated before less is up for sale as rents are high and rent bidding can go on every 1-5 years and you still own the assets. Heirs can inherit the acres with the stepped up basis and no taxes and RE taxes on farmland in WI is very low per 1K.

Bryce

We can rent fairly cheaply for AG use @ the moment. But buying is outrageously expensive. 10,000-15,000 $ @ the bottom end and up from there for buying.

I wish our land prices were reasonable like some of you in Minnesota.

You gotta remember you get MN winters and Politics that go along with it.