6 ms·

Is land a better place to park wealth than stocks I wonder. As they say "They're not making any more of it".

xyzelement 6y ago
I doubt there's a notion of "better" here and I doubt this land represents a meaningful chunk of his wealth. It's more about diversification on one hand and perhaps a good opportunity to buy this land on the other.
sumtechguy 6y ago
It is a decent place to park money. Cash has inflation effects. Land is a lot less susceptible to that.
- nickthemagicman 6y ago
  Thats what I was thinking. It's less susceptible to 3% per year inflation. I heard London had a lot of empty places from the rich buying up all the houses just for money parking purposes and not living there.
binarymax 6y ago
Depends on the land and property tax assessment. I’ve been mulling buying some land since interest rates are so low now...but it’s hard to see the value of return when you factor in mortgage fees and property taxes.
- bluGill 6y ago
  You have to run the numbers over 30 years. Over 30 years the rent will increase (as will taxes), but the payments stay the same. Then the payments go to zero and you get a big payoff. If you can't commit to at least 30 years it is probably bad (you can change your mind as conditions change, but 30 years should be the plan) . You want to share-crop for part of the price. It gives you incentive to ensure the farmer is farming the land as opposed to mining it for the nutrients before leaving you with dead land. Because you share some of the risk (and will have to cover it in bad years - there will be bad 5 year stretches so make sure you can budget for this!) you can get a greater return long term.
saalweachter 6y ago
When I ran the numbers, it looked like farm land yields + crop prices + land prices made for a bad long-term investment relative to stocks. Assuming there isn't some ideological reason the Gates are buying farmland, it's probably better viewed as a hedge/diversification -- it may not be a very good investment, yield-wise, but it is decoupled from a lot of other investments.
- mywittyname 6y ago
  Small farming is a decent side-gig. Like rental properties, you can earn a good hourly rate on your labor with some capital investment. But the return on purely hands-off investing is minimal or negative. I know a few people that run small, ~5-acre farms that grow soybeans or corn. From what I gather, they work the equivalent of a few weekends over the summer and earn a few grand an acre after costs. The gotcha seems to be equipment; it's so expensive that one would need huge tracts of land to cover the costs. One guy I know paid someone a % of yield to handle the plowing/harvesting. While my cousin keeps an old, depression-era tractor going and uses that. I imagine some might just lease out the land and collect just enough to cover property taxes. This seems like a pretty common setup in the midwest. If you travel down some rural back roads, you'll come up on small 2-5 acre plots surrounded by houses. More than likely, these are owned and managed by someone nearby as a side hustle.
  - saalweachter 6y ago
    Are you sure on the few grand per acre? Corn yields were ~180 bushels / acre for 2020, and corn prices were [will be, since it is still being sold] $4.85, which comes out to $873 / acre. You might clear a few grand for the entire small field, but even with a second planting of winter wheat I have a hard time imagining making four figures per acre after expenses.
    - kickout 6y ago
      Unless it a specialty crop like pumpkins or is an organic operation, not a chance this happens with corn or soy farms. Your numbers are good. Total operating costs for a corn acre in 2019 were ~700 dollars. https://www.ers.usda.gov/data-products/commodity-costs-and-returns/ https://www.ers.usda.gov/data-products/commodity-costs-and-r... Better link: https://www.ers.usda.gov/data-products/commodity-costs-and-returns/interactive-visualization-us-commodity-costs-and-returns-by-region-and-by-commodity-field-crops/ https://www.ers.usda.gov/data-products/commodity-costs-and-r...

I doubt there's a notion of "better" here and I doubt this land represents a meaningful chunk of his wealth. It's more about diversification on one hand and perhaps a good opportunity to buy this land on the other.

sumtechguy 6y ago

It is a decent place to park money. Cash has inflation effects. Land is a lot less susceptible to that.

nickthemagicman 6y ago
Thats what I was thinking. It's less susceptible to 3% per year inflation. I heard London had a lot of empty places from the rich buying up all the houses just for money parking purposes and not living there.

binarymax 6y ago

Depends on the land and property tax assessment. I’ve been mulling buying some land since interest rates are so low now...but it’s hard to see the value of return when you factor in mortgage fees and property taxes.

bluGill 6y ago
You have to run the numbers over 30 years. Over 30 years the rent will increase (as will taxes), but the payments stay the same. Then the payments go to zero and you get a big payoff. If you can't commit to at least 30 years it is probably bad (you can change your mind as conditions change, but 30 years should be the plan) . You want to share-crop for part of the price. It gives you incentive to ensure the farmer is farming the land as opposed to mining it for the nutrients before leaving you with dead land. Because you share some of the risk (and will have to cover it in bad years - there will be bad 5 year stretches so make sure you can budget for this!) you can get a greater return long term.

saalweachter 6y ago

When I ran the numbers, it looked like farm land yields + crop prices + land prices made for a bad long-term investment relative to stocks. Assuming there isn't some ideological reason the Gates are buying farmland, it's probably better viewed as a hedge/diversification -- it may not be a very good investment, yield-wise, but it is decoupled from a lot of other investments.

mywittyname 6y ago
Small farming is a decent side-gig. Like rental properties, you can earn a good hourly rate on your labor with some capital investment. But the return on purely hands-off investing is minimal or negative. I know a few people that run small, ~5-acre farms that grow soybeans or corn. From what I gather, they work the equivalent of a few weekends over the summer and earn a few grand an acre after costs. The gotcha seems to be equipment; it's so expensive that one would need huge tracts of land to cover the costs. One guy I know paid someone a % of yield to handle the plowing/harvesting. While my cousin keeps an old, depression-era tractor going and uses that. I imagine some might just lease out the land and collect just enough to cover property taxes. This seems like a pretty common setup in the midwest. If you travel down some rural back roads, you'll come up on small 2-5 acre plots surrounded by houses. More than likely, these are owned and managed by someone nearby as a side hustle.
- saalweachter 6y ago
  Are you sure on the few grand per acre? Corn yields were ~180 bushels / acre for 2020, and corn prices were [will be, since it is still being sold] $4.85, which comes out to $873 / acre. You might clear a few grand for the entire small field, but even with a second planting of winter wheat I have a hard time imagining making four figures per acre after expenses.
  - kickout 6y ago
    Unless it a specialty crop like pumpkins or is an organic operation, not a chance this happens with corn or soy farms. Your numbers are good. Total operating costs for a corn acre in 2019 were ~700 dollars. https://www.ers.usda.gov/data-products/commodity-costs-and-returns/ https://www.ers.usda.gov/data-products/commodity-costs-and-r... Better link: https://www.ers.usda.gov/data-products/commodity-costs-and-returns/interactive-visualization-us-commodity-costs-and-returns-by-region-and-by-commodity-field-crops/ https://www.ers.usda.gov/data-products/commodity-costs-and-r...