Keeping up with an accelerating market

One of the most common laments we hear from farmers these days goes like this, “I0 years ago I had the chance to buy that property and thought it was too high, I wish had that to do over again”. Now we aren’t trying to say that no one has ever regretted buying farm land. I’m sure there were some who did so in the late 1970’s, but even then if they held on to it they would have come out way ahead. Given that farmland has only gone down in price three times in the last 100 years it’s been one of the best investments of all time.


But right now we are living in unprecedented times. The velocity with which cropland is selling now is staggering. It’s not unusual that cropland moves quickly this time of year because everyone wants to get set right before planting season which is just around the corner. But when you add in the high commodity prices it makes for a very volatile industry.

If you are considering buying cropland you should be prepared to move quickly. We will help you identify the land and come up with potential renters for you. If you need to finance part of the land you should be making arrangements for it now. There is little likelihood that you can leisurely view several properties, then mull it over and make an offer in a few weeks. The good properties will be gone and only the less desirable ones will be left.

We are particularly fortunate in this part of the country because when you compare the price per acre for land in this area versus other cropland say in Iowa, there is a large gap between the productive value of the land and the price.

For example prime Iowa land is now going for over $9,000 per acre and it will produce 275 bushels of corn. Land down here may not produce 275 bushel corn, but an acre of ground south of Kansas City may produce 185 bushels of corn. If land were based solely on productive ability that ground compared to Iowa ground should sell for $6,000 per acre. But there is still a lot of land in this area available for under $3,000 per acre. We believe there is still opportunity to take advantage of that gap and realize some excellent appreciation in the next few years.

We have been frustrated several times in the last few days by hearing about a good property, and then trying to get the word out to any potential buyers. Sending out a weekly newsletter is not a quick enough notification in this market. So we have opened up a twitter account and if you want to know about hot properties just follow us on twitter. We will not be putting every new property on there, but if we think it's a particularly good one we will send out a tweet so you can react and contact us if you are interested. If you are not currently receiving our newsletter, let us know and we'll add you to our list.
If we can help you identify and purchase cropland, negotiate with renters, or be of help in any other way let us know.

Email Info@RuralKC.com

Phone 913-837-4665

Web site http://www.ruralkc.com/

Blog http://www.ruralkc.com/template24/nextpage.asp?mnu=174730

If you want live updates when we come across a particularly hot property you can follow us on twitter. http://twitter.com/#search?q=ruralkc

Top Ten Exercises To Become A Better Equistrian

Straight from the horse's mouth.........................................................................

10. Drop a heavy steel object on your foot. Don't pick it up right away. Shout, "Get Off, Stupid! Get Off."

9. Leap out of a moving vehicle and practice "relaxing into the fall."

8. Learn to grab your checkbook out of your purse and write out a $200 check without even looking down.

7. Job long distances carrying a halter and a carrot. Go ahead and tell the neighbors what you are doing; they might as well know now.

6. Affix a pair of reins to a moving freight train and practice pulling to a halt. Smile as if you are having fun.

5. Hone your fibbing skills. "See, Hon, moving hay bales is sooooo fun!"

4. Practice dialing your chiropractor's number with both arms paralyzed to the shoulder and one foot anchoring the lead rope of a frisky horse.

3. Borrow the US Army's slogan: Be All That You Can Be: bitten, thrown, kicked, slimed, trampled, frozen........

2. Lie face down in a puddle of mud in your most expensive riding clothes and repeat to yourself, "This is a learning experience, this is a learning experience, this is......"

And........the number one exercise to become a better equestrian:

1. MARRY MONEY!!!!!

Thanks for reading our blog. Have a quality week. Happy Trails.

Will the housing market be back?

Working in the agricultural part of our business has been exhilarating and exciting. But we also sell a lot of rural homes and rural home sites, and that has been a struggle. One of the comments we often get from our sellers is that, “I’ll wait it out until the market gets better”, or “I’ll wait until the market returns”. I often wonder how do they know that it will, or when it will get better?


Linked below is an article from Yahoo that makes me wonder why the optimism in the housing market? As this article makes clear last years bump was due almost totally to the tax incentives and when the market returned to normal it fell back into a slow slide. Out of the 20 largest cities only Washington and San Diego reported increased housing prices last year.

So if one needs to sell, the issue is about how to price your house and how to set your expectations. They should be based on reality, not blind hope. It may be that if you don’t have to sell at all then this might be a good time to sit tight if you have years at your disposal. If you do have to sell you might want to price yourself at the market’s current price level or even beat it.

If you think the market is going to decline you might want to compare your home against others like it on the market and make sure that yours is priced at the lower, if not lowest end of the market. If we are going to get there anyway you might as well be the one that sells your house rather than the one who keeps chasing the market down.

The good news of course is that there has not been a time like this to be a buyer in recent memory. So if you are going to sell and then buy again, take your lumps on the selling side and make up for it on the buying side. The toughest situation is for retirees who have planned on using their home equity as part of their retirement plan. That is going to be tough to replace.

It may also be time to look ahead and determine how you can make up for the recent losses most have suffered. If you are in a position to do so we recommend that you at least consider buying farmland. It's a lot more fun in that market.

http://finance.yahoo.com/news/Home-prices-fall-41-near-2009-cnnm-2016472877.html?x=0

Water Rights Missouri versus Kansas

Many people don't know what a difference it makes when crossing the state line when it comes to water rights for cropland irrigation. Here for example is a summary of Missouri water rights law:

"Landowners have the right to make reasonable use of the waters upon, adjacent to, and beneath their property."

That's it. Notice that there no provision for permits, or applications, or really controls of any sort. In fact the only area of the state where I could find any effort at all to even address water rights is in SE Missouri.  There is a SE Missouri Water conservation district where the bulk of cropland irrigation is done in Missouri and it says:

"The commission shall require all water users in the district, with irrigation wells 6 inches or lager in diameter to report the number, location,and annual water usage of the wells. The commission may establish annual fees to be paid by irrigation well owner not to exceed five dollars per well unless a higher fee is approved by qualified voters, and then not to exceed twenty-five dollars per well"

Note that in Missouri you do not have to get permission or file for a permit to drill a well. You are only required to report location and usage and the maximum cost for that is $25 per year.

Ok now let's turn to Kansas. I don't have time to give all the details so I've added a link that will allow you to read it:

http://www.ksda.gov/appropriation/content/240

But to put it in brief before you can drill a well, or pump from a stream, or build an irrigation lake you must:

1. File an application
2. Receive a permit
3. Complete Diversion works
4. Develop the water right
5. Have a field inspection
6. Receive and comment on a draft certificate of appropriation
7. Have the Certificate authorized
8. Report Annually on water usage

Now I don't do this to pick on Kansas or to say that they are unfair. It's just a matter of climate. Kansas, especially in the Western two thirds of the state does not receive enough rainfall to replace all water used for irrigation, while Missouri does. So Missouri does not face a potential situation where water usage will overwhelm the resource. Kansas has to strictly control water usage because so much of Kansas' water comes from aquifers that are being drained faster than they can be replenished.

I am also told that it is easier to obtain permits in eastern Kansas where waterfall is more prevalent, than in the western part of the state. But it is no where near as easy, even in eastern Kansas, as it is right across the state line in Missouri. I've been told anecdotal tales of the frustration of farmers in Eastern Kansas watch as water flows through their land and as soon as it crosses the state line they watch a Missouri farmer start pumping irrigation water out of the same stream the Kansas farmer can't touch.

In our next blog we'll talk about how this difference in water rules and regulations may affect investors and the decisions they make.

We struggle to keep up with inventory

We try to work as hard as we can to keep up to date on cropland properties that are for sale. There are a lot of challenges in doing that because they don't all fit neatly into a nice MLS feed, and often the sellers don't want them advertised publicly because they want their business kept private. If you want an up to date, (ok as up to date as we can keep them) list of cropland properties that come on the market then just call or email us and we'll send you out the latest.

But in the meantime we have just become aware of three new listings that look to be great investment opportunities. If you want more details on any of these give us call at 816-899-2330, or email us at info@RuralKC.com

152 acres in Linn and Sullivan Co. Missouri - $325,000
This $325,000 property is 3 parcels along the Linn Sullivan county line. The price is attractive for the are and there is current cash rental agreement that is returning 4.87%

156 acres in Carroll Co. Missouri - $599,000
This is a productive piece of bottom ground along the Grand River, with 120 acres in cropland, and is returning $25,800 in cash rent. It also has the potential to return more with waterfowl hunting leases.

335 acres Grundy Co. Missouri - $775,000
This outstanding property has a cash rental of $42,000 returning a very nice 5.42% ROI.

What about properties that aren't on the market?

A significant number of the cropland properties that we sell are not officially on the market. Sometimes the seller doesn't want people to know the property is for sale until it is officially sold. Sometimes they don't want signs on their property, or they just don’t want the world knowing their business. But if the right buyer were to come along they would sell the property. In the real estate world these are known as "hip pocket" listings.

We find about these types of listings in a couple of different ways. Sometimes the seller contacts us directly as they know we keep a list of potential cropland buyers and are hoping we can easily, quickly, and quietly, find them a buyer.

But the more common method and the one that gives us the best information about the ground is when potential tenant farmers contact us about a property they are, or would like to rent. They usually know not only the value of the property and its potential for production, but they can also usually commit to a rental rate that helps us know the true value of the property, making it easier to find a buyer.

If you are a tenant farmer and know of a property you’d like to rent, or are concerned that a change of ownership may keep you from working ground you have been renting, please call or email us and we’ll work with you to find the right buyer for that ground

By law we cannot advertise properties that we don’t have a listing agreement on, but we can privately let potential buyers know about the existence of these properties. The best way to be kept informed about these opportunities is to be a member of our newsletter list. If you aren’t already a member just send us an email at info@RuralKC.com, or call us at 913-837-4665 and we’ll be glad to put you on the list and keep you up to date on “hip pocket” as well as listed properties.

A little off topic today Valentines Day

One of my favorite days of the year is Valentines Day. I get the biggest kick out of watching men at my local grocery store buying cards and flowers. There they/we/I stand gazing at these cards. We are so out of our element and have no idea what will work. We stare with glazed eyes at these cards with the same level of understanding as if you were trying to explain algebra to a cow.

Eventually we give up and make a choice, generally the more sappy the better.  Now we have to get the flowers. What other than roses is safe to buy? I'm told all of these different flowers mean different things, but I have no idea what. I'm particulary concerned ever since an incident when I was 11 when I was trying to buy my mother a big spread of flowers for Mothers Day and unknowingly bought a Memorial Day wreath. I will never forget my mother trying to stifle a laugh as she looked into my sincere but clueless face. Oh well.

So I do what I normally do and get some roses. Better safe than sorry. Then I go and stand in line with my fellow clueless males. The checkout ladies are all grinning at our discomfort as gnarly guys with balding hair and overalls, stand in line with execs in suits and trench coats, as we all try to stave off domestic disaster by not forgetting this high risk day.

But the best is yet to come. Because by about 2 PM this store, all the flower stores, all the card shops, all the candy stores, and even Wal-mart are out of everything. Now what do you? My advice having been in this situation more than once is to consider gift cards, and lots of them. Now is the time to guarantee that romantic dinner, that trip to the movies, or that extravagent gift, because you have been outed.

I so look forward to the morning of the 15th because good or bad the highest risk time is over and life can return to normal.

Buy High..... Sell Low....????????

Occasionally we come across an article that would seem to deserve further publicity.  Such is the case with the article below we found by Paul Breden. Paul is a long time Land real estate Broker in the Carolina's:

On Monday, December 13th, an amusing investment article appeared online. Entitled “5 Experts: where to invest in 2011” – the “experts” cited in this Fortune article offered up a most obscure, milk-toast recipe for building wealth. Using generic phrases such as “global investors, emerging markets, labor costs, debt and the asset bubble, and asset-class synchronicity”, they seemed to be teaching an entry-level college economics course – rather than giving specifics about where to invest.



One comment went like this: “Gold is close to $1,400 per ounce. Is it a good buy at that price?” One of the five “experts” replied “We have no view on the future direction of the price of gold.” Really? Considering that gold hit a low just under $300 per ounce in 2001, and reached a high of $1,415 on December 13th, it would seem that buying gold today is akin to following the “Buy High – Sell Low” theory being pushed on TV by gold companies.


So… what else did the experts advise for 2011? Their comments included:


• There’s downside risk with fixed-income


• Look at asset-class synchronicity


• The whole world isn’t decoupling


• Look at debt and the asset bubble


• You can get totally lopsided in commodities and equities


• Is it a bubble or not a bubble in Treasuries?


• I take the group-hug approach…when investing in financials


• …eat more meat, chicken, beef and pork…creates more demand for grain


• All the flows we see are into bond funds


OK – you get the drift of this informative group professing to give you great investment advice for 2011. Now let’s take a look at the real world of dollars and cents – the one that’s called “Buy Low – Sell High!”


The so-called experts left out the most tangible, durable, risk-free, and always marketable asset – LAND. That’s right – plain old raw land. Think about it – you can buy it, sell it, bequeath it, give it away, borrow against it, play on it, improve it, live on it, earn income from it, or just watch it appreciate while you sleep. Best of all, it doesn’t call you in the middle of the night to say it’s disappeared or gone bankrupt.


So… how do you invest in land? First and foremost, you “buy low – sell high. In other words you make your money when you buy – not when you sell. Why? When you’re buying, there are always properties priced below fair market value. It’s your job to find them.


Because most raw land is owned by individuals, the reasons for selling are as diverse as their personalities. All are selling because of some change in their circumstances, i.e. they’re short of cash, they’re moving to another state, they can’t pay their mortgage, experiencing a divorce, or motivated by a death in the family. The price they ask is based on personal need, more than some fancy business formula. It’s up to you to determine which property offers the most value, yet is priced at the low end of the food chain.


Often, the ones priced lowest per acre are also the ones owned by sellers with the most pressing motivations. They’re also the owners with the most emotion attached to their motivation to sell. Thus, it’s best to make your offer to purchase through their agent, not directly with a “by owner”. Keep it businesslike, yet cordial – and leave emotion out of your buying equation.


As an aside, by making a low offer on a property whose seller is under pressure to move the property, you are not taking advantage of them – you are actually helping to solve their problem at the same time you are making a profitable purchase. The circumstances that caused them to sell and their price are solely theirs – you didn’t cause their circumstances. By purchasing their property, you actually relieved their pressure, making it a win-win transaction.


Finally, the reason for buying below fair market value is because it is rarely possible to sell for more than fair market. Buyers recognize properties priced above the market, and will walk away. On the other hand, there are always properties priced below the market, as cited above. By buying below the market, and later selling at “fair value” – a tidy profit is assured.


Oh – one more thing. Don’t get attached to the properties you buy. Remember, you’rebuying them to build wealth, not for “bragging rights” to show off to your family andfriends. The ugliest, most poorly located land parcels may be the most profitable.


Want to be financially independent? Get out and start digging for land!

Keeping up with available cropland

One of the challenges we face in finding the right cropland for our buyers is that there is no central location to search for cropland and when there is you find that you don't always get the information you need to make a decision. For example you can find cropland from multiple areas such as:

1. Various aggregated advertising web sites on the internet
2. Local MLS's
3. Local brokers web sites
4. Newspaper ads
5. Word of mouth

But all these pose various problems in searching for good cropland.

1. First of all cropland moves so swiftly these days that the information is often out of date and you find that the property has already sold. 
2. The information is often incomplete, such as what are the expected rental rates, or how much of the land is tillable.
3. There is usually no information about how the land is rated by the USDA
4. Most importantly it never tells a buyer about land that is not on the market, but that is still available for sale.  

In trying to represent our buyers we run into these issues on a daily if not hourly basis and so in order to help us keep up to date, and to best provide information to our buyers we are attempting to keep a master sheet of available cropland for sale. There we try and track all the information a buyer would want to make a good decision. Such things as USDA aerials, soil information and ratings, slope of the land, and estimated rental rates, the potential for development for non agricultural uses, and most importantly information about land that the sellers don't want advertised but that is likely available for sale.

Now does this work perfectly, no because no matter how we try we can't keep up with every sale that occurs. But it's a better alternative that what we face everyday. And if one of our clients finds a property that is not on our list we can usually get all the important information within 24 hours.

If you would like to receive a list of the properties we are tracking or if you want us to do some information gathering on a property or area you are interested in just give us a call or email us and we'll get back in touch as quickly as possible. In Missouri call 816-899-2330, in Kansas 913-837-4665, or email us at info@RuralKC.com

Is there a season for buying cropland?

While cropland is bought and sold all year long the greatest amount of activity and the easiest time to arrange contracts is between harvest and planting season. After the harvest, and before the next planting season, roughly November to March is when most farmers and sellers like to make their plans for the next season.

The closer we get to March the more commitments have already been made regarding rental contracts for the upcoming season, and both buyers and sellers have to start getting more involved in planning for Spring planting than for buying or selling any more land. They have to make decisions about buying new equipment, purchasing seed, fertilizers and chemicals. So the further in advance of the next planting season they can do that the better.

In both Kansas and Missouri verbal contracts legally extend for another year unless written confirmation is provided to change the terms of the agreement 30 days prior to March 1. So a new buyer of cropland may find themselves unable to negotiate a new rental agreement until after this years harvest is complete.

Buying cropland that is currently planted also means that the results of this years income will have to be negotiated as part of the purchase contract. If it's a cash rental how much of that will go to the new buyer? If it's a share crop contract how will the crop be split between the new buyer and the original seller? None of these are deal killers and those types of negotiations happen every day. But normally all of that is avoided if cropland changes hand between November and March.

If you haven't attended one of our seminars we still have one more scheduled next week in Lee's Summit on the 8th of February. We are also willing to provide a seminar at your convenience. If you have a group of investors, or even just want to discuss this with us individually we can schedule a time and location convenient for you.

If we can help you purchase cropland please let us know. If you've attended one of our seminars you know that we have an extensive list of available properties and the ability to find property that is both on the market and that is not currently advertised anywhere. If you are interestead in purchasing cropland We can assist you with negotiations and make sure that the price you pay, and the rent you receive is at least at current market levels if not better. Please call us at 816-899-2330 in Missouri, 913-837-4665 in Kansas or email us at info@RuralKC.com.

The weather wins

We have had to reschedule our seminar for this evening in Lee's Summit for next Tuesday the 8th. If you haven't already done so please visit the web site we set up for this and register to attend. http://www.kclandseminar.com/