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What’s Land Worth?

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A quick glance at land prices in the West.

Land -- God certainly isn’t making more of it. With land prices at an all-time high, many are calling it “a safe-deposit box with a view.” If you’ve got the cash, land certainly isn’t a bad investment, although I have a feeling these high prices don't often pencil out in the short term.

From cropland topping $10,000/acre in some areas, to pasture ground exceeding $3,000/acre, the cost of some ground is astronomical. Rent rates have also skyrocketed, with prices reaching $300/acre for cropland, and $100/acre for pasture, in my area of South Dakota. I know rates in many areas are much higher. 

I recently visited with a representative of Fay Ranches, a land brokerage company that has earned The Land Report’s Best U.S. Brokerages honor three years in a row. With agents located in Montana, Wyoming, Idaho, Colorado and Oregon, Fay Ranches a good grasp of land-value trends in the American West. 

For example, Fay Ranches just sold a 77,000-acre ranch property just outside of Laramie, WY, that was listed at a whopping $20.9 million.

But it’s not just ranchers who are making these big land purchases. Cattlemen have to contend with outside competitors like sports enthusiasts and urban investors, who are looking for an escape from the hustle and bustle of the city as well as promising place to park money. 

“Investors are looking for properties that can diversify their portfolio,” says Fay Ranches CEO Greg Fay. “They’re searching for a low-risk asset that will yield both financial and personal returns.”

Fay Ranches offered me a breakdown of their $1 billion gross sales from the last decade. The firm says most of the properties sold in the last three years have been purchased by folks from New York, California and Texas. With more 400 transactions since their inception, they have sold over 1 million acres, and logged more than $1 billion in sales in the last decade. The 2012 average price was $834/acre, with an average purchase size around 1,814 acres/property.

Do these numbers reflect the land values and sales in your area? Are land prices rising, falling or leveling off in your area? Have some people over-invested, and if so, do you see that property exchanging hands again? How can people smartly invest in land?

These are all some of the questions I’m mulling over as I review these numbers. Land is certainly a huge part of the ranching equation, and however you make it work in your area, share your story with us. Leave your thoughts in the comments section below.

 

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Discuss this Blog Entry 10

Pete H (not verified)
on Jul 8, 2013

The regional nature of land values is pertinent. As a friend once said about a wonderful ranch in North Texas when I asked why he didn't buy it he responded that it just didn't have "the romance". The areas this RE Brokerage have lots of romance....

Anonymous (not verified)
on Jul 8, 2013

Bay area California vineyard land can go for $125,000 an acre. $200,000 is cheap for a 5 acre rural homesite. Livestock can almost never cannot pencil out for land purchase here. For property taxes we at least have the Williamson act that taxes on ag value. And Prop 13 that ties values to 1974 prices with 2% increase a year. Otherwise 1% of value, plus bonds and assessments.

Anonymous (not verified)
on Jul 8, 2013

I live in the ridge and valley mountain region of central Pennsylvania. A typical farm is 160 acres with perhaps 40 to 60 acres of good crop land and the rest being wooded or steep land. A 154-acre farm, with nice, rolling tillable land and some wooded land, just sold for $540,000 to an "investor" who wanted to put his cash to good use. Another property, 154 acres with only 40 acres of pasture, encircled by steep wooded land ideal for deer hunting, sold for $540,000 to a man who wanted a get-a-way. For the first decade of the 2000s, wooded, hunting land was bringing more than tillable land around here. Then, when corn skyrocketed, tillable land caught up and surpassed wooded land.

on Jul 27, 2013

Are there any buildings of any value on the land or is this the price for acres only?

on Jul 8, 2013

I do agree that land prices are skyrocketing here in Uganda too due the growing population and the fact that its a young one too.(over 50% are below 25yrs) and the peace we have enjoyed in the region thus encouraging several countries citizens from the region to invest in Uganda

on Jul 8, 2013

I do agree that land prices are skyrocketing here in Uganda too due the growing population and the fact that its a young one too.(over 50% are below 25yrs) and the peace we have enjoyed in the region thus encouraging several countries citizens from the region to invest in Uganda

on Jul 8, 2013

I live in NW Iowa where we own a small acreage and my parents farm around 900 acres which thankfully they own all of now. Decent farmland usually brings $14,000 per acre, premium farmland has sold for more than $20,000, and pretty junky, rocky, hilly ground sometimes brings upward of $7,000 an acre. Pasture is nearly non-existent, and what has been available in the past has been plowed up for corn planting. I have tried to rent/buy some nearby rocky, steep pasture ground, but the new owner was only interested in tilling and planting corn. I don't think it would have mattered if I offered him twice as much as what he paid for the ground, he was still going to till it up and farm it. Hay ground also going away and hay prices still seem to be very high despite getting more rain this spring and having much better hay yields than last year.

on Jul 8, 2013

Cows will not pencil on pasture over $450 in Montana yet it's bringing $1000 in places here. It makes no fiscal "cents" at all unless one is speculating on the value going up. Land will come down when interest goes up

on Jul 8, 2013

Here in the North Texas suburbs of Dallas/Ft Worth many people have small acreages for horses and livestock - my 4 acres is assessed at a rate of $100,000/acre (land only - no buildings) & I will hopefully be successful in my application for an Open Space/Ag exemption for pastureland. It is a 5 yr process & over $40,000 in taxes alone. Sure, market value of this land is $150,000/acre+. So no, our cattle will never be cost effective but we sure enjoy the land & raising our own humanely treated, grass fed beef cattle.

Anonymous (not verified)
on Aug 30, 2013

The USDA puts out a very good report every year on the first of August. It covers the entire US and shows land value averages for every state for crop land, irrigated and non, pasture and some other categories. It is a very good report and pretty accurate, but it does not take into account for high value areas. Example in Tn. average rural acre is $3,800 however in one or two counties you will pay upwards of $10,000 and acres and in the east in the mountains the price drops down dramatically. go to http://www.nass.usda.gov/Publications/Todays_Reports/reports/land0813.pdf
for the 2013 report

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A fifth-generation rancher from Mitchell, SD, Amanda grew up on a purebred Limousin cattle operation in which she and husband Tyler are active. She graduated with a degree in agriculture journalism...

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