Could you make good money by selling your farmland? Now is the time to find out.
If you want to get the best price for your farmland, now could be the time to sell. Here are four reasons to consider selling in 2021.
It can be hard to know when it is the best time to sell or buy farmland because there are many factors that go into getting the best price. But getting a good return is almost always a top priority for every seller.
The good news is that this is an excellent time to consider selling farmland, and ensure you get a maximum return on your investment. If you’re thinking about selling your farmland, here are four reasons why 2021 is a great year to consider a sale.
Low Interest Rates. We are currently in an era of historically low interest rates, which has helped fuel the farm market in a few ways. First, it gives purchasers more buying power because their debt service payments will be reasonable, allowing them to pay more for the farm itself. Second, lower interest rates allow farmers to borrow money at reasonable levels for operating loans, which allows them to be more aggressive on paying farm rents. And higher rents give investors more room to pay more for farms. Third, low interest rates help shine a light on the attractiveness of farmland as a low-risk investment. For example, a CD right now will only pay .25 – .35% annually. A high-quality farm in central Illinois will pay out 2.5 – 3%. The farmland may appear to have more risk because it has the potential to lose value, but history has shown us that a high-quality farm has very little risk of decreasing in value.
Improved Commodity Prices. We have seen corn and soybean prices climb dramatically since last fall, which should make farmers more profitable in 2021 and the coming years. This helps farm values in a few ways:
1) The more income farmers have, the more they are able to spend on acquiring more land.
2) With higher income levels, they can also afford to be more aggressive on cash rents to landlords.
If you’re looking to acquire a farm, and need a certain return on your investment, then the higher the rent that you can achieve, the higher the price you can afford to pay.
Lack of Inventory. There is tight supply of farms available right now, and there is a very strong demand (mostly due to interest rates and commodity prices as mentioned above). It’s a simple supply and demand issue — the demand is so much greater than the supply that available farms are barely making it to market before they sell. Auctions are garnering a lot of interest from multiple buyer groups (local farmers, local and regional investors, or national and international investors), and prices are being driven up to levels that we saw at the period peak of values in 2012-2015.
An additional motivator for purchasers is the potential for inflation that is likely headed in our direction due to the amount of federal stimulus dollars flowing into the economy, and the prospect of additional stimulus packages. Historically, farmland has been a favored inflation hedge by investors because they can take advantage of rising prices and also receive an annual income stream.
It’s a great time to think about selling your farmland, and we’re here to help. Give us a call to learn more about working with a partner who is focused on helping you have a great experience – and earn the best price – for your farmland. Murray Wise Associates has a strong track record of exceeding client expectations – with more than $5 billion in land and agribusiness transactions in our 30+ year history.
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