Have you ever driven by a piece of property and thought…that used to be farmland..or I should have bought that twenty or thirty years ago when it was just dust.
Since I was very young I have watched the progression along a roadway and at one intersection in particular. Watching the changes go by there first as young passenger and then in later years as a college student and then as a working adult has been a true lesson in land investment. As development pushed outward from the city this main path from a small town to the bigger city changed and grew up over the years but two pieces of land did not change all that much. This is the story of those two parcels. I will call them Let it Happen and Forward Motion.
These two parcels of land have evolved but the same dirt is still there. They both have an interesting history and investment analysis. Both are at the same intersection and both are almost exactly the same in topography and size. If you are thinking of investing in land consider the two different investors in the Tale of Two Land Parcels.
Let it Happen – Parcel # 1
The wind is blowing and the wheat is waving in the wind. The investor stops and starts to railroad the farmer into a sales conversation as the farmer begins his harvest. The investor tells the farmer that he must sell now before all the big developers come in and take his land from him. The farmer says come back tomorrow after the crops have been brought in. Disgusted the investor leaves and goes home and starts putting all his eggs in one basket.
The investor comes back after the crops are harvested and begins his sales pitch again. Development is coming and I can split your land up and it will soon be stores and roads and….the farmer interrupts and says come back tomorrow I am analyzing my crop numbers and determining when is the best time to sell my grain. The investor leaves in a huff mumbling something about poor farmers and that development will come if he will just let it happen.
Once again the investor goes back to the farmer but this time the farmer is tired and old. There is nobody to continue farming and the farmer decides the inevitable has come and it will happen. The investor is thrilled but the price has gone up considerably. Still the investor jumps in all steam ahead and buys the land. He knows the development will happen.
The investor does not know anything about farming and lets the land turn to dust. He waits for the developers to call. He waits for the roads to be built. Nothing happens. Eventually the county requires the land to be mowed and treated for invasive weeds. The investor’s development for sale sign falls down in the wind. Fast forward another ten to fifteen years and the land is still being mowed and still sitting lifeless.
Forward Motion – Parcel # 2
The wind is blowing and the wheat is waving in the wind. The investor stops and asks the farmer if he could talk with him. The farmer says maybe later because harvest is about to begin. The investor leaves his card with his number and goes home to research and investigate the area.
The investor comes back to the farmer after harvest and starts asking questions. Many questions are asked even ones the farmer does not have answers for. The farmer is intrigued why this business suit cares about his operation and so they talk for hours. They realize they both care about the area and what happens to the land.
The investor goes back again and helps the farmer with his crop numbers and they talk grain prices. The farmer is old and tired and nobody is left to farm the land. So the investor and the farmer devise a plan and find a young new farmer who will continue farming the land. The farmer agrees to sell and the investor is thrilled. They are moving forward.
The investor learns more about farming and becomes an agricultural advocate and promoter of farmland investing. Other investors, developers and county officials call and ask how can they work together to build the new road through the land. The process is moving forward. Development has not yet come but the freshly painted development for sale sign still stands tall right in the middle of an income producing crop field.
Although the story may seem ridiculous to you, the land is really there and it did evolve exactly like that over the years. If you are considering buying land as an investment you must have a long term plan. I have yet to meet a land investor that has ever made a profit on selling land in the first ten years. There are many exceptions I am sure that you will be quick to point out especially in the residential and commercial land and lot markets. However, this is not a story of residential home or even commercial development. It is a story of investing in farmland for the long term and just maybe a possibility of future development.
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