There may have never been a better time to investigate Texas land as an appealing addition to your investment portfolio. The value and demand for land are increasing, and there are many good reasons for this upsurge.
Covid-19 may be gone, but it shifted how we live and work, making it possible to move away from crowded cities and work remotely. The concept of open spaces, simplified living, and connection with nature have all boosted the appeal of rural living.
In the most recent U.S. Census, Texas came in first among all 50 states in population growth, with 4,000,000 new residents needing a place to call home. Surging costs of city living exclude many from living within the metropolitan area and are causing people to look for options where they can stretch their dollars further.
Additionally, only so much land is available, and limited availability helps land appreciation in Texas.
Looking for all the details on purchasing Texas land? Gaines Slade, a Texas land and ranch investment expert, lays out the benefits and risks for you to consider.
Benefits of investing in Texss land
Whether you’re a fourth-generation soil tiller or have never set foot on a farm, you can still benefit from investing in Texas land. Across the nation, land return data has 50 years of annual value increase at an average rate of 6.1%, with only five years of loss in all that time. The numbers are even better since 1991, during which time the average returns have been 11.5% annually. Just under two-thirds of land is worked by their owners, and the rest is leased to farmers by individual or corporate owners. Consider the following benefits for your portfolio.
- Land is a low-volatility investment. It offers a steady rate of growth, evidenced by a long history of success, providing you and your family with a long-term, stable route to wealth accumulation. In seasons of economic uncertainty, farmland is dependable.
- Land provides protection against inflation. In 2022, we watched inflation rise to levels unprecedented in more than a generation. Yet, farmland’s appreciation continued to outpace inflation all the while. Income is generated in two ways with farmland: the value of the land itself and the crops produced.
- Land allows you to diversify your portfolio. The value of farmland is not dependent on the stock market or other investment options. It appreciates on its own without being significantly impacted by other economic factors.
- Land is outpacing every other investment category, save S&P (13%) and Real Estate Investment Trusts (14%).
- Land value is appreciating in Texas and in a few places more than the hill country, where acres of farmland sold for $7,157 in the first quarter of 2023, an increase of 15.62% in a year’s time.
- International population booms in developing nations are predicted to lead to global food shortages. American farmland will be in greater demand than ever as farmland availability diminishes on a global scale.
Risk of buying land
Investing in land is not without risk. These are some of the predominant ones of which you need to be aware.
- The elements pose just as many rewards as they do risks. Even the best-nurtured soil and the best-timed strategy of planting, tending, and harvesting crops is susceptible to the elements.
- A drought or other severe weather conditions can lay waste to a year’s hard work. Invading pests or diseased plants can diminish yield.
- Extremely high yields from a successful harvest may flood the market with more crops than the market can handle, causing prices to drop in order to sell.
- Farmed commodities can fluctuate in value based on external factors, such as global events and natural disasters as well.
- Land has slow liquidity. In other words, if you are in a situation in which you need accessible money, you may not be able to get it quickly from your land. The sales and closing transactions can take a substantial amount of time.
- Land may depreciate. Several factors, such as diminishing demand, advances in production elsewhere. Or, the loss of a market for selling the crops could lower the value of the crops.
Making the most of your investment
Are you intrigued by land and ranch investment strategies? A wide array of options can help you maximize your investment.
You may be planning to live on and work the ranch yourself, and you’ll be in good company doing so, as two-thirds of ranchers operate their own land.
You may also want to lease your ranch to ranchers. One option is to utilize revenue share, which gives you a percent of the crop yield at the end of the year. The more dependable option is cash rent, in which the farmer pays you an annual leasing fee in advance at a predetermined rate per acre.
Even within ranch land, you have options to diversify your investment. Look for farmland in more than one region or that produces different crops. This way, if one crop or area is adversely affected, you’ll maintain stability through your other properties.
Partner with the professionals
Options abound for taking advantage of agricultural market trends and portfolio diversification through investing in land. In order to discover which property and which approach works best for you, call on the professional expertise of rural real estate agent Gaines Slade. He will introduce you to all that Texas Hill Country land has to offer and answer all of your questions. Give him a call today.
