Buying land: Making a bit of money off it?

[dilly]

2016 is looking to be a good year for our family financially so one of the things we are thinking about doing is scraping up enough dough to buy some land. One of our life goals is to own a place on some acreage with a little more breathing room, a bit of distance from neighbors, a decent shop, a small shooting range with a well constructed backstop, and a garden.

This is of course not a cheap prospect, but I know there are some ways people can make a bit of money off land. If I could afford 100 acres, I'd buy it, but 15-20 is looking a lot more feasible.

I figured this group of people would be a good group to ask for recommendations on how to make a bit of money off land. Hopefully, I could make enough to take the edge off of the increased cost of living in the country vs just buying a cloned house in the suburbs.

Does anyone have any ideas, or especially success stories of what they could do with land in order to supplement the income of a full time job?

[bedbugbilly]

Well . . . as somebody who owns land . . . let me say a few things . . . .

First, I admire and fully understand what you are trying to accomplish . . . a lot to be said for living in a more rural setting and having some "breathing room".

But . . . before you buy . . . . do your homework. Owning a quantity of land does not guarantee that you will be able to make an income off of it. We have roughly 200 acres of the farm left that we own after my folks passed and I settled the estate with siblings, etc. First priority is to pay the property taxes on it. Fortunately, I have about 189 acres that are tillable and I rent that out to be farmed. The income . . . which is a rental rate per acre - that will vary greatly by your location . . . . just covers the property taxes. Remember that when you buy land . . . in most locations . . . the property taxes that YOU will be paying are not what the current owner pays usually. They may have owned it for a number o years and their tax base was figured on what it was assessed at then THEY got it. YOUR taxes will probably be assessed on what you pay for it.

If you buy property and plan to re-sell it later . . . at a profit . . . . you will be taxed capital gains on the profit. i.e. . . if you buy an acre for say $2,000 and you turn around and sell it for $3,000, you will be taxed capital gains on the $1,000 profit you made. In our state, that will amount to a little under 25% capital gains tax (Federal and State) on the $1,000 profit.

You may be able to purchase land and even do it at a good price now, but then later when and if you go to sell, if the economy is bad, you may have problems selling it for what you paid for it. Just look at what has gone on in the last 7 years . . . here, a house that was worth say $200,000.00 before the big downturn is now only worth maybe $30,000 to $40,000. I have a commercial shop building that I have had up for sale for almost eight years . . . it is priced very reasonably but since commercial money for loans is tight or non-existant, there are no buyers . . yet my taxes, insurance, and other expenses go on . . . and on. At one time we had one bank in the area who was making any commercial loans and they wanted the buyer to have a 40% downpayment in cash available before they would even talk to them.

If I could find a buyer for the acreage we have, I would sell it . . . but there are none. Due to the Land Division Act in our state, for agriculture zoned property, you must sell a minimum of 200 feet road frontage and the parcel cannot be any deeper that 4 times the frontage - i.e. if you sold 200 foot frontage, the parcel could not exceed 800 feet in depth. This was done to help prevent the remaining agriculture acreage from being divided up in to narrow long parcels. lA 10 acre parcel used to sell for $60,000 to $100,000 before the down turn in the economy. These were being purchased by folks such as yourself who wanted some acreage, a place to build a house and shop, etc. Now, a ten acre parcel would sell for probably $30,000 to $50,000.

It all depends on what you want to do and how hard you want to work. . You could rent some of the acreage out to a farmer, you could plant, raise and sell produce yourself if so inclined and the market was there for it in your area (vegetable stand, etc.)., you could plant it to raise Christmas trees but that is a long term project as they have to grow, be replanted, etc., you could fence it off (at your expense and fencing isn't cheap) and rent it for pasture - but you'll need to have a water source for the animals to drink, etc.

I'm not trying to discourage you in any way . . . just do your homework and put a lot of thought in to it. Check with your local government (township, etc.) if you are looking at specific parcels and see what the tax base is on it and what you'd be paying every year in taxes . . . which always seem to raise but not go down. See what it is zoned and what the zoning allows. Don't expect that just because you have a few areas that you can run livestock on it or some such thing.

And remember that property is not really a "liquid asset". If you own it you have equity in it but if you need a sum of money in a hurry, can you get a loan against it (using it as collateral) and if it is already financed, that may not be a simple thing to do. In essence . . . don't bite off more than you can chew.

As far as buying such things as "wood lots" . . . where you may be able to harvest some timber from it . . . the IRS views timber as a "cash crop" but they only allow the harvesting of it over a specific time period between the selling of the cut timber . . . it's been a while but I think it is something like every 30 or 40 years? But, if the wood is not suitable for sawmill use, you could always cut and sell the firewood, doing a limited quantity each year to insure the regrowth.

Best of luck to you and I hope it all comes together for you so that you can have your little piece of heaven! :-)

[waksupi]

I'm not up on current timber prices, but something that has been done in this area a lot is to buy a big piece or timber, selective log, and pay for your land. I didn't have mine logged until I had lived here ten years or so, but I made more from the logs than I paid for the land. My land value here has went up ten + fold, so I think it is a long term investment, rather than flipping for land.

[Plate plinker]

Long term especially if there is no building activity in the area to push the price higher.
Naturally all areas of the country will be different. Some western states you can rent out the land for farming and cover the payments+ tax. Or rent out land to cattle ranchers for $1.00 a day for a steer or $1.40 cow&calf. It all varies on location and the deal. Good luck As a departed friend always said "It has to pencil out". That man made his million with a calculator.

[Wis. Tom]

Watch the renting out the farmland to pay the property taxes, as it may pencil out this year, but at $3 corn, the farmers around here are not spending. Just saying, as 2 years ago it was $9 corn a bushel, big difference.

[C. Latch]

Several years ago the wife and I went down that road.

Plans change, we still want to live on the farm, but it hasn't happened yet. We still want to make an income off the place, but it hasn't happened yet.

I spent many thousands of dollars starting an orchard, with the thought that by the time we got to build a house there, the trees would be bearing well, but the deer pretty much ate them. All of them.

Lesson learned: Don't bite off more than you can chew. You can't manage land projects if you're not nearby.

[kenyerian]

You might try raising gingseng.

[bearcove]

Small piece is best used to raise a steer or two and have good cheap meat. Make money? Not likely.

[rancher1913]

if you figure out how to support yourself on 20 acres let me know, we raise cows, pigs, chickens, huge garden, etc on a whole lot more than that and both my wife and I have to work off farm to keep bills paid. had a hydraulic motor go out of the hay grinder--almost a grand just for the part, worked up about 60 acres and planted it to triticale for feed, wanted it in 4x4 bales instead of the little ones my baler does---custom bill was over 5 grand, electricity is double what city folk pay---actually got charged 150 bucks penalty because we did not use enough electricity. my neighbor farms thousands of acres and he has to work off farm to afford health insurance, he was just gripping the other day that he had spent 150 thousand in repairs that year and only made 200 thousand, by the time he paid the fuel bill and chemical bill he was in the hole.
my advice is to save twice as much as you think you need and start small, don't borrow any more than you have to.wish you the best of luck.

[snowwolfe]

I just don't know how you can do all the things you want to with 15-20 acres including a shooting range then have enough land left to help you generate cash income. Most companies that buy timber won't even mess with a lot that small unless you have some seriously good expensive hardwood trees that are very old and in superb condition.
Even if you can't make any money buy the land if you can. Greatest feeling in the world having a nice piece of dirt to call your own.

[Petrol & Powder]

I know nothing about real estate in Missouri but I know a little about real estate in general.

You must look at the purchase as an investment and investments are nothing more than opportunities to make a profit. Taxes, purchase price, potential profits, resale value and length of ownership are all factors.

A very wise man once told me that you never make money selling land - You make money buying land.
His point was that land will never sell for more than market value but sometimes you can buy it for less than market value. The opportunity to turn a profit comes from buying the land below market value and re-selling it later at the current market value. In other words, the profit margin is gained on the front end and not the back end. He was a relator/farmer/teacher and an extremely intelligent man. The concept is the same practice employed by used car lots, pawn shops, auction houses, etc. You must buy the property for less than what it is worth. With that in mind I would recommend you seek out undervalued property that will catch up to market value in a few years.
Making money from agricultural enterprises such as farming or logging is almost impossible unless you can afford to spread the cost of the land over many decades OR you own the land outright. That is why people rent land to farm or purchase logging rights but not the land itself; there's just not enough profit in those operations to meet principal, interest and taxes. The only businesses that make money in those situations are the lenders.

Now, if you can buy a piece of land for less than market value, live on it for a set number of years while you offset the costs of the loan and taxes by farming/logging and then sell it for more than you paid for it at the end of those years; you can make a profit. That method requires that you buy the land cheap, have a second source of income and the ability to wait until the land value catches up with the market. Time, expenses and price are critical to that formula of success.

My advice is to do your research before you make a major investment.

[MUSTANG]

Might be able to rent out a couple of spots for Travel Trailers/Single wides if you have/install septic system, power, water. Can cause problems with privacy, and of course challenges of being a landlord; but if you need the cash flow for paying on the property, it could be an option.

[starmac]

For max part time profits with small acreage think MARIJUANA. lol
Seriously it will depend on the area you are talking about as to a lot of your options, but farming and ranching or renting to farmers or ranchers are not going to be much of an option on a 15 to 20 acre place.
However there are crops that fit small acreage, such as tomatos, but a 10 acre mater patch is not a part time type of deal.
There is any number of things that can be done to make a hundred or five a month on small places basically part time though.
I know several different folks that raise their preferred breed of puppies. It is not that expensive to build a certified kennels and buy breeding stock, nor does it take a lot of room or even time.
I know folks that raise rabbits, again fair profits on a little space for the time and investment.
I know folks that board horses for other folks, some full time, some smaller boarding stables that just add to their main income.
All of these and others can be part time businesses, and done right can make your land payments, but you are married to them.
I know people that deal in firewood, some cuts it off their own property, some cuts it off others, some just buy and sell.
I know folks that have used (and new) pipeyards, an acre holds lots of pipe. People have part time welding or mechanic shops, that pay the bills, other folks have small sawmills thet are run full or part time.
In other words the oppurtunities to make a place pay for itself is immence, but most can't be done just anywhere, you need to think about what you would like to do, what your skills are, do you like to deal with the public, yada,yada, then start looking for a suitable place.

[dilly]

Thanks for all the great ideas, guys. starmac, your post was really full of a lot of great ideas. I know that there is money to be made all around when one is industrious knows how to seize opportunity.

Just to be clear, I'm not really thinking I'll be able to quit my job and make a full living off of 15-20 acres. I just thought I might do something that would make up for some of the extra expenses (riding mower vs push, truck vs car, satellite internet vs cable, propane vs natural gas, etc.) associated with living out in the country. I wouldn't buy something we couldn't make the payments on with our regular jobs.

I have lots of questions. First of all, who pays for rabbits? What do they want with them? I can see they'd be easy enough to raise but I'm not sure where the money is.

What about a smaller amount of a more highly profitable crop? Mushroom farming, haskaps, white raspberries, or something that would catch peoples' eyes at the farmer's market come to mind. I figure if you had two or three small patches of two or three novel things, one of them would probably be kind of profitable and you'd probably have to change the roster every so often to keep up with trends.

Is there any money in beekeeping or do you need to have a whole lot of hives for that?

[jmort]

What part of Missouri are you in? Seems like there are some really good deals here in the Ozarks.

[bdicki]

I have lots of questions. First of all, who pays for rabbits? What do they want with them? I can see they'd be easy enough to raise but I'm not sure where the money is.

There is a guy that used to raise pheasants to sell to dog guys for training. When the government stopped the import of snowshoe hares from Canada he switched over to snowshoe hares to sell to the local beagle club members. $20 apiece I believe.

[dilly]

My wife and I both work in Springfield.

[jmort]

I am in the West Plains area, and there are a lot of options all around you, as you know. Not a big fan of Springfield, but have to make occasional trips there to shop. Was just there yesterday, as one of the national Banks I deal with has a few branches there and I needed to sign some paperwork in a branch. Was near the Bass Pro mega store. We only have an ATM for that bank locally, no branches. At least you have a multitude of options, that is for sure. Nice to be able to shoot on your own land and do what ever you want. The county where I am at has no building codes and basically they only care that you deal with the "black water" and even then they don't seem to care. One of the few areas of land-use freedom left. Buy land, do what you want, no permission needed. Had 20 acres in So. Cal. and for the fees and permits, you literally pile up $35,000 and light it on fire, and inspections and regulations so numerous, you could go mad in dealing with all the various departments/requirements. What a joke.

[snowwolfe]

I have lots of questions. First of all, who pays for rabbits? What do they want with them? I can see they'd be easy enough to raise but I'm not sure where the money is.

People who want them as pets.
People or restaurants who want to eat them

[starmac]

If rabbits interest you do a little research, there is a regular market for meat rabbits, it used to be that their was a premium for white rabbits,as they also sold the skins. A guy would need to research it well before jumping in. The ones that I knew also some to a few pet stores at a premium, around easter they would sell quite a few for a premiun, they also sold quite a few for snake food, also at a premium over wholesale meat prices. The guys I knew also had an earthworm business along with the rabbits, the two kind of go together.
There is actually some pretty big money in bees, but were not talking part time or even small scale, the big money is renting and transporting the hives around all over the country, also some big money risks in the business. There is probably some amount of money in raising them for honey on a smaller partime scale.

[dilly]

I guess that just surprised me because I know almost no one who actually eats rabbits, except probably a few people who hunted them when they were younger.

[AK Caster]

I guess that just surprised me because I know almost no one who actually eats rabbits, except probably a few people who hunted them when they were younger.

Rabbits are now considered to be expensive table fare :)

[kenyerian]

Check at your local feed mill and see if there is a buyer for rabbits. Back in the 90's our local feed mill had a deal set up that twice a month a buyer picked up rabbits to be processed and shipped to New York. They also had a buyer for goats.

[bearcove]

I have lots of questions. First of all, who pays for rabbits? What do they want with them? I can see they'd be easy enough to raise but I'm not sure where the money is.

There is a guy that used to raise pheasants to sell to dog guys for training. When the government stopped the import of snowshoe hares from Canada he switched over to snowshoe hares to sell to the local beagle club members. $20 apiece I believe.

My uncle raised rabbits for years. Sold to restaurants, worth way more than chickens and taste better.

[MUSTANG]

Another thought is asparagus. Not just your every day asparagus, but white asparagus which fetches a very higher end restaurants.

White asparagus comes from the process of etiolation (http://www.ibiblio.org/london/orgfarm/botany/botany-tutorial), which is the deprivation of light. Dirt is kept mounded around the emerging stalk, depriving it of light. The plant cannot produce chlorophyll without light, thus there is no green color to the stalks. We used to cover them with tarps elevated/propped up about 8-12 inches off the ground as soon as the first head started to emerge.

[Petrol & Powder]

Plastics Benjamin,......Plastics

[Rich/WIS]

Depending on soil conditions you might consider garlic. My neighbor has started on growing and selling it, there is quite a market for it regardless of where you live. One fellow here made a good deal of money with a couple of acres of vegetables, mostly tomatoes, sweet corn, cucumbers and onions. More work than growing garlic but he was retired and had plenty of time. Before you start anything remember that even a small operation will require equipment so figure the cost of that before jumping in.

The advice to "pencil it out" is spot on.

[MtGun44]

Subscribe to Backwoods Home magazine,

http://www.backwoodshome.com/

The magazine is full of ideas and reports from folks who wanted to move
to the country, had little money and figured out ways to build an affordable
home and make a living various ways that are not the normal working a 9 to 5
job route.

Good luck!

Bill

[jonp]

I'm not up on current timber prices, but something that has been done in this area a lot is to buy a big piece or timber, selective log, and pay for your land. I didn't have mine logged until I had lived here ten years or so, but I made more from the logs than I paid for the land. My land value here has went up ten + fold, so I think it is a long term investment, rather than flipping for land.
I bought 25 Acres of Sugar Maple for about $20,000 off a guy that wanted to sell. I select cut it, made $25,000 off the timber and sold it for $25,000. My only advice to people doing this is to not go for the big bucks and clear cut it. If you do that then the marketable value of the property go's way down. Who wants to live in a log landing?

As for growing stuff, garlic is good. I made much more money planting ginseng.

[Char-Gar]

My only counsel is to not buy land IF YOU MUST produce income from the land to make it work. If you are stretched that thin, you are stretched to thin. You may or may not be able to produce income, but don't count on it. If you do, there is a good chance the land will end up in foreclosure.

[AK Caster]

I made much more money planting ginseng.

How long does it take for ginseng to grow and be profitable?

[Clay M]

It can be a rough go trying to make money with land in the current economy.
In the early part of my life I made all my living with timber and cattle.
I did very well up until about the year 2000.
Now the land and timber markets are very depressed.
I fear the golden age of timber is over, for my lifetime at least.
I am hoping that the land markets will come back with the fall of the stock market, and nowhere much profitable for a person to invest money.

We will see..

[GhostHawk]

Char-gar nailed it IMHO.

Land is the ultimate long term investment.

My dad bought 360 acres from his dad, paid for it the first year with a bumper barley crop.
Since then he has worked for decades to remove weeds. As kids hell was 80 acres of soybeans to walk. Plain broadleaf weeds we could hoe and leave. But every wild oat got carried to the end and burned. By the time they came out with effective wild oat control his land was already wild oat free.

Currently the land is rented out to a pair of younger brothers that grew up a mile away.
They didn't offer the most for the acreage. It was the way they farmed their own that convinced dad.
Stewardship is the key.

I am part native american, and a part of me whispers saying you can not own the land, the land owns you.
You will be born, live, die, and your remains will be absorbed by the land. The land itself can not be destroyed.
It can be made a wasteland. But given time nature can heal even that. The land will exist after all who read this are gone. How can we say we "own" it?

We have "possession" of it for a time, and we need to be good stewards.

I will add that I do own 10 acres of my own. And that after taxes are paid I get a check for around 700$ each year. But it is prime farmground, well drained, does not often flood, rich soil, has in the past grown 70 bushels of Wheat per acre.

That 360 acres is currently valued at 1,000,000 dollars. And 160 acres 3 miles away is valued at 2 million.

Not that you could get that for it. Not that I would ever sell it.

Choose wisely, land can be the ultimate investment, or a ball and chain around your neck.

[blackthorn]

Around here, there are several small (one or two acre) parcels on the edge of our city (less than 100,000 pop) that have put up a good security fence and rent space to store travel trailers, campers, etc. They all seem to be full, or close to it. I have no idea how much they charge. These are inside city limits but I suspect they would be more profitable if they were located just outside the city.

[country gent]

Check in your area for any local farmers markets. These allow small producers to rent a space and sell produce on weekends. A truck garden type of farm can make money if done right.Sweet corn planted early every week or so over 3-4 weeks so it comes on early and thru the summer. Providing fresh roasting ears over several weeks. Squash, tomatoes, peppers bell and some others. Green beanns ( more work picking and stooped over but they sell good). Onions and potatos. Alot of work alot of time weekends are tied up also. Another way if the property is on a well traveled road is to put a stand out and sell there. Also dont forget a couple dozen laying hens and you can add eggs to your sale items. Theres alot of ways to suppliment incomes when you have property available, but its not quick. a crop in the spring may not startto produce for 2-3 months. Thats one plus to the chickens is they produce eggs year round once they start laying. Theres alot to consider and think about with this type venture. With livestock your tied up everyday feeding and watering gathering eggs and all the little chores. Some local super markets will buy garden produce from locals in season for the freshness and quality.

[MaryB]

Some of the local small growers formed CSA's. I get a half share from a friend and it includes a dozen eggs a month along with whatever veg is in season. The hens slow down in winter but she still drops off a dozen eggs every 6-8 weeks. She has a guaranteed income, the members take a chance on a bad year(but she has given partial refunds if it is really bad, like the year she got hit by a tornado) but farm fresh veg twice a month pays for itself over grocery store prices! I add it to what I grow and freeze/can a lot for winter use.

[10x]

Some of the local small growers formed CSA's. I get a half share from a friend and it includes a dozen eggs a month along with whatever veg is in season. The hens slow down in winter but she still drops off a dozen eggs every 6-8 weeks. She has a guaranteed income, the members take a chance on a bad year(but she has given partial refunds if it is really bad, like the year she got hit by a tornado) but farm fresh veg twice a month pays for itself over grocery store prices! I add it to what I grow and freeze/can a lot for winter use.

In Northern Alberta if you are living on the land you can expect to earn almost enough off of 160 acres to pay the taxes. Taxes on my 160 acres were $75 a year. Building a 1400 sq ft house pushed them up to $1800. The hay crop usually brings in $1500, this year because of drought it wasn't worth cutting.
As for living off the moose on the land (five or more depending on time of the year ) the hunting regulations are on a draw. It takes at least 3 years to get drawn.
160 acres of very poor land costs $100,000 or more.

[Petrol & Powder]

I agree, Char-Gar nailed it. The best way to make money with land is to sell it. That requires that you purchase it for a price that allows a profit, enough time to wait for that profit to develop and even that is not a sure bet. You can offset the cost of the land by producing something from the land but making a living off of it is tough if not impossible.

[snowwolfe]

As for growing stuff, garlic is good. I made much more money planting ginseng.

How do you plant ginseng and how long does it take for it to be a profitable plant?