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Should You Lease Farmland for Farming?

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You might immediately consider investing in the stock market when making financial decisions for your future. While buying stocks and bonds might increase your wealth, there is another strategy that many investors ignore. Farmland is a valuable limited resource that appreciates with time.

You diversify your financial holdings and increase your portfolio’s reliable assets when you buy Missouri real estate. If you still don’t think buying farmland in Missouri or Iowa is a wise investment, consider these eight reasons.

1, Values of Farmland are Increasing

The University of Missouri reports that land values are rising across the state, frequently faster than anticipated. Non-irrigated cropland increased by 2% to $5,555 per acre between 2019 and 2020. During this time, the value of pastureland increased even further, reaching 6% annually to $3,374 per acre.

Before investing, take your time investigating various sites because the value of farmland varies by location. You may opt to buy irrigated or non-irrigated crops, pastureland, timberland, or recreational/hunting land, depending on how you intend to manage your investment.

2. High Demand for Food

By 2050, the food we currently produce will need to be almost doubled due to the growing world population. Only 7% of the planet’s land can be used to grow food, and the vast majority of that area is already in use.

Demand for land rises along with rising food prices. The dearth of land ideal for growing food raises the value of your investment, whether you decide to farm yourself, lease your land to another farmer or rancher, or sell the land later for a profit.

3. An Inflation Hedge is Farmland Investment

US annual inflation reached a 13-year high as of September this year. This indicates that you are paying more for the same goods and services compared to last year. In other words, the dollar now has less purchasing power.

Gold, Treasury Inflation-Protected Securities, and real estate are the only investments that frequently keep pace with inflation. Farmland can act as a hedge against inflation and could assist in maintaining the value of your assets over time.

4. Some Taxes are Exempt for Farmland

Agricultural land investors are eligible for various tax deductions and exemptions. Compared to residential property, assessed at 19 per cent, agricultural property in Missouri is evaluated at 12 per cent of its market value. Federal tax deductions for mortgage interest on the rural property can help you pay less yearly taxes. A working farm on your property entitles you to several tax exemptions on your Missouri state taxes and exemptions from the federal government’s wealth tax.

5. Your portfolio can diversify with farmland

Both immediate and long-term wealth-building opportunities are provided by farmland. A physical asset, the land parcel itself, usually retains its worth in your investment portfolio. Its low-risk profile can assist in holding diversity and provide a counterbalance to some of your riskier stock market investments. A revocable living trust can be used to transfer land as a means of wealth to your heirs.

6. A good source of passive income is farmland.

You don’t have to be a farmer just because you own farmland. In Missouri, 60% of agricultural land is utilised for personal farming, 25% is rented to others, and 12% is used for non-farming purchases. Over half of the arable acres in the United States are rented out, according to the USDA, which estimates that there are 911 million acres of farmland in the country. On your property, there are three main ways to generate passive income:

  • Rent to renters who want to keep livestock or grow crops.
  • Rent to renewable energy firms looking to install solar or wind turbines.
  • Rent out your property to hunters or off-roaders who want to access it for fun.

7. The Farm is Stable

Farmland can be the solution if you want to add a reliable asset class to your portfolio. Farmland often experiences steady price growth rather than erratic price changes. Unfortunately, the housing market bubble and stock market meltdown have occurred more than once in our nation’s history. Your portfolio can experience stable growth by including farmland property in your investment mix, shielding it from market turbulence.

8. Farmland Is a Profitable Investment

Land is a tangible asset you can use while growing your investment, unlike stock certificates. Want to make a waterfront property investment? Missouri has more miles of coastline than California’s Pacific Coast because of all the beautiful lakes in the state.

Invest in some forested land a few hours away if weekend hunting trips are more your style. On the right piece of terrain, off-roading and ATV riding may also be enjoyable pastimes. You and your family can benefit from a wealth of leisure options by investing in land.

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