Investors are going after rich farm lands and are planning on investing and/or acquiring these assets. Why is that? Aside from the fact that they generate money effortlessly, these lands produce food which is a man’s main necessity, meaning to say there’s always a market where the returns are foreseeable. Inflation hedging is another reason why farm lands and the agricultural commodities it produced are sought after by investors.
Madison, MS -- (SBWIRE) -- 09/02/2014 -- When it comes to returns on investment, there are two ways to make money on a piece of farm land: capital appreciation and income. Capital appreciation means if there has been an increase in the land’s market value the investor can sell it immediately. Income from farm lands can be derived through cash rent, crop share (where the landlord and farmer split the earnings on crops sold) or custom farming.
The amount per area (usually in acres) cultivated defines cash rent. Lower end farms can generally be sold for around $500 an acre, and can expect a cattle farmer to rent it for $20/acre annually. In contrary, high quality land with rich clay loam can be sold for $2,500 or higher per acre on the market. Evidently, grain farmers can find this attractive and they will be willing to pay up to $100/acre annually to rent. They can never be at loss if they push it to that level for an experienced farmer can be very productive with good soil and can easily generate over $400/acre of output (harvested crops) on top quality farmland.
The alternative to cash rent as mentioned earlier is crop share, where after the crops are collected and sold the land owner gets a share of the total sales, usually about 20% to 30%. In most cases, landowner makes more money in crop, though it is also more risky on his end because if the farmer has a bad year for whatever reason (locusts, flooding, commodity price crash, etc) then the landlord will share the burden. Cash rent on the other hand pushes all these kinds of risks onto the farmer because the landlord still gets paid as per the contract no matter what happens to the crop’s performance.
Custom farming can be an option for investors who have agricultural background. This is a process wherein landowner or investor hires a farmer as a contractor to operate the farm. Depending on the agreement, the contractor is obliged to perform specific tasks like swathing and transportation, or operate the entire farming process from seeding to harvesting. The input costs like seeds and machinery is shouldered by the owner, and the contractor just acts as an employee. The advantage of custom farming for land owners is they receive all the income from sales and have full control over the entire farming process. But the disadvantage of custom farming is it puts the financial and management risks completely on the owners.
If one is looking for Mississippi land for sale, make sure that the land meets the guidelines mentioned above for the returns is certain and that it won’t be a waste of hard earned money.
About Sartain’s Heritage Properties LLC
Sartain’s Heritage Properties deals exclusively in land. Since 1954 they have assisted their clients in achieving their financial goals weather it’s buying, selling, leasing or building and development of tracts, they can assist their clients in all aspects when it comes to land needs. They employ the most powerful internet, regional and local marketing tools available to ensure that property is seen by the buying public. With access to hundreds of listings across Mississippi & Louisiana, their knowledgeable staff can help their clients reach their goals.