Farmland: Am I Insane?
A bit of clickbait title, but I have mulling this over in my head for sometime. 

I live in Southern Ontario, and there are some 50-100 ac farms/woodland (not many, land prices are high) that can be got for under $400k. rents can be as high as $250/ac (per year? per month?) What attracts me, is that taxes are quite low. 

I don't know much about farming. Citiot who hasn't lifted anything heavier than a venti latte, and the thought of waking up at 5am makes me want to puke. 

I am curious to see if anyone else here has any similar experience, and if it has been a good / profitable enterprise.
[{"id": "fqmfa9l", "text": "The 250 per acre is  per year. \n\nThe return % on land is going to be far less than most other real estate like an apartment building.", "replies": [{"id": "fqmmgfw", "text": "It is, and that's on good ground. You won't get 250/ac on wood lot, no farmer will rent a farm to clear it, with farm land rent there is never a true guarantee that your improvements on that ground will stay for you and not just be work you did for free that goes only to benefit the next tenant. Another thing is that with crop prices the way they are right now you need pretty good yields as a farmer to make a profit on 250-300/ac rented ground", "replies": [], "depth": 2}], "depth": 1}, {"id": "fqmfd4q", "text": " [https://ag.purdue.edu/agecon/Pages/Purdue-Agricultural-Economics-Report.aspx](https://ag.purdue.edu/agecon/Pages/Purdue-Agricultural-Economics-Report.aspx) \n\nThis is the absolute best free agricultural resource available. Read through a couple of issues of this and I think you'll find some of your questions answered and learn a few new things on the way.\n\nBuying farmland as a long term investment is a very popular strategy for some very wealthy people in my area. The returns are pretty low comparatively, but the risk and management costs are also pretty low.", "replies": [{"id": "fqmoh73", "text": "Thanks for the resource, very informative! What attracted me is that the mgmt costs are low, and depending where you are, a potential conversion to housing / employment.", "replies": [{"id": "fqmpeln", "text": "It's a low downside, high upside market. Lots of guys I know buy and hold. \n\nFYI- Financing is usually tougher on farm land. Banks usually are looking for more money down than most investments.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqmfzhl", "text": "I don't own any but I have considered it myself. If you are looking to generate cash, it is a poor investment. We are also at the end (IMO) of a long rise in prices for all asset classes, so growth in the land value is also a questionable proposition.\n\nIn Michigan it seems you're doing alright as a landowner if the lease payments cover taxes. Alternatively you can take on some risk and do crop shares with whoever works the land for you. Generally come out ahead but you've taken on the risk of bad crops etc. (Anyone please correct me if I'm wrong).\n\nOther negatives, as farm yields improve, we continue to be massively oversupplied on row crops. There are also trends toward indoor (warehouse) cultivation of crops which will only increase over time. Not for row crops but I view it as a trend indicator.\n\nPositives - long term, climate change may make some southern US farmlands non-viable, and most studies suggest a net benefit to the upper-midwest and areas like yours. I have also considered buying some large tracts of land in the UP of Michigan as a long-term, multi-generational play on that. \n\nTLDR It should not be a large part of your portfolio, especially if you need to grow your portfolio considerably over time.", "replies": [{"id": "fqmm6rq", "text": "Warehouse cropping only works on fast growing, high value produce. Practically speaking that means lettuce (sorry, \u201cmicrogreens\u201d) sold to high end restaurants (where the sheer novelty of the product brings people in the door). The infrastructure costs for raising general produce that takes months to grow are insane.", "replies": [{"id": "fqn91c1", "text": "Agreed, that's where it is now. My \"big picture\" view is that agriscience will continue to improve yields &amp; shorten grow times for other products indoors, and we'll start to see things like strawberries grown in vertical farms closer to market, slowly move down the value chain. Definitely it hits a point where some crops would never make sense indoors.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqmgkux", "text": "I sell farms in Niagara region. Feel free to dm me any questions.", "replies": [{"id": "fqmo8sw", "text": "thank you! will do. though prices are higher down there. Are you seeing sales for future potential housing?", "replies": [{"id": "fqmsaqr", "text": "Yes, it a bit of a complex issue and easier/better to speak about on the phone or via email (I will dm you my email with phone) but in short there is ample land that is zoned for new development. Current uses can vary as well-but many farms in fort Erie for example will have mixed zoning zero include the new development as well as agriculture.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqmkta3", "text": "Buying to let farmland is never really going to see much in terms of return. Land being let is usually valued as what can be earned from renting the land for 14 years (at least that\u2019s how Valuers in the UK operate), assuming the worst that you only get 50 acres for that $400,000 the value when you start letting the land would be actually $175,000 so before you even see a rent payment your portfolio would take a \u20ac225,000 hit.", "replies": [{"id": "fqmo3pk", "text": "Is this 14 year period done to calculate the depreciation on the soil? Is it safe to assume that after a long term lease, the land would be pretty unusable to grow in for a couple of year?", "replies": [{"id": "fqmx4u5", "text": "Soil degradation is a separate issue but one that shouldn\u2019t happen if the land is farmed correctly- but there is recourse as a land lord if soil degradation happens. The 14 year period is used as a suitable time period for paying back on your investment into the property but the value it creates really is only going to happen if you decide to buy, rent out and then sell with a sitting tenant; you can always remove the tenant but time etc to recover the full value vs quick sale should be something to consider.\n\nThe method is not just used on farmland here in the UK but I studied the method in that context and it\u2019s more simplified than how it is really done(I can\u2019t remember every step but remember most of the basics). It\u2019s sometimes seen as a benefit to have devalued land as there are tax laws in the UK that mean you pay less tax having a tenant on the land in the event you sell or pass away and the land is inherited. I\u2019m sure there will be relevant laws in Canada that will be similar.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqn9q3b", "text": "This podcast episode may be helpful:\nhttps://podcasts.apple.com/us/podcast/capital-allocators/id1223764016?i=1000453420473\n\nIf you don\u2019t want to have to find the farmland yourself or if you want in on a syndication deal, check these guys out:\nhttps://farmtogether.com/ways-to-invest", "replies": [], "depth": 1}, {"id": "fqnitb2", "text": "Unless you plan to make your great, great, great grandkids wealthy AND hold it that long, don\u2019t bother. If you can stomach the low returns and leasing to farmers, then have at it.", "replies": [], "depth": 1}, {"id": "fqrsyqn", "text": "I managed a ~$50mm GAV vineyard in a prior life. The cash returns really suck and you can get cleaned out quickly if stuff goes wrong (crop failure, replant, etc). I don\u2019t think the deal ever took a distribution in 20 years of ownership. The land appreciated but it really doesn\u2019t go up that fast. Honestly unless you\u2019re the end user (ie timber operation, farmer, etc) they\u2019re not great investments from a financial standpoint. Oh and you can\u2019t get much leverage on them so you\u2019re taking unlevered returns.", "replies": [], "depth": 1}, {"id": "fqtpu23", "text": "Thanks everyone, looks like I might be insane after all...", "replies": [], "depth": 1}]