As more Baby Boomers enter retirement, they have started to explore reliable investment opportunities that appreciate in value and allow them to leave something behind someday for their children.
The stock market tends to yield returns between 6% and 7%, but you never know when a financial collapse will wipe out even the most diversified portfolio’s value. Instead, many Baby Boomers in retirement or nearing retirement have decided to invest in land real estate.
Once you know more about the benefits of owning your own piece of land real estate, you may decide that it fits into your investment strategy as well.
Farmland Provides a Higher Return Than the Stock Market
All investments come with some level of risk. The numbers, however, show that people can earn more money by investing in farmland than the stock market. Over the last 20 years, farmland has produced a steady 12% annual return. That’s double what many people get when they invest in stocks.
Some people indeed make more than 7% from stocks. Most of those investors, however, do a lot of research and take big risks. Unless you have a professional background in researching and evaluating stocks, you will probably have better luck with land real estate.
Whether investing in the farmland itself or purchasing it as a quieter place to live in retirement away from the hustle and bustle of more urban areas, purchasing farmland as an investment has a great track record of paying off in the long-term. Even if you wanted to live on the farm but not manage the land, there are options like leasing out your farmland and hiring a farm manager that can pay off and take away any of the "work" that comes with it.
Land Real Estate Gives Baby Boomers Diverse Ways to Generate Income
Investors have several options when earning money from land real estate. The option that you choose will likely depend on how much money you want to invest in the land and how quickly you want to start earning a profit.
You'll also want to make sure to consider the intended use of the land before investing. For example, are you looking for a property with recreational uses like hiking, camping, or hunting for you to enjoy? Or are you looking for a property you can start your own hobby farm on and grow your own crops to eat? Is it purely an investment or do you plan to retire and live full-time on the land you buy? You have to know your goals before you can know which piece of land will best serve you. Using a qualified land expert can help you figure out your goals and which properties will help you meet them.
According to the United States Department of Agriculture (USDA), more than 30% of farmland is rented or leased. Many farmers don’t have enough capital to purchase hundreds of acres of quality land. As a farmland investor, you can start getting a return immediately by renting your land to working farmers.
In the wake of the COVID-19 pandemic, a lot of people want to move out of congested urban centers. Cities like New York and San Francisco once seemed appealing because jobs were plentiful in those areas. Residents also enjoyed the cultural advantages of living in places with thriving restaurants, theaters, and art communities.
After spending a couple of months trapped in a tiny apartment, suburban and urban areas look more appealing, especially when people can telecommute to work.
Buying land real estate now creates an opportunity to earn money in the near future. As more people choose to leave cities, rural real estate will become more valuable. Buying low and selling high makes it relatively easy for your investment to earn a tidy sum without much effort.
Once you own the land, improving your land can make it more valuable. You may consider upgrading the land by:
- Installing infrastructures that support water, electricity, and gas.
- Adding ponds to the property.
- Removing old buildings.
- Building new structures, such as barns, houses, and sheds.
Developing land requires an additional investment, so you will need to make sure you consider the extra money before renting or selling it.
Make the Most of Your Land Real Estate Investments
A lot of factors will influence how much money you can generate from investing in land real estate for retirement. You can’t control every variable, but you can focus on properties that are more likely to generate income during your retirement.
Choose Land in States With Low Prices
If you want to invest as little money as possible in land, you should purchase property in a state with low prices that already fits your needs. Some of your best options include land in:
- West Virginia
- New Mexico
Make sure to use a qualified land expert who can help you find the right property to meet your needs and long-term goals.
Know Land Before You Buy It
Before you buy land as an investment, you need to know that the property will attract renters or buyers. Some of the most important features to know about land before you buy include:
- The quality of the soil.
- The types of agriculture the land can support.
- Existing infrastructures and buildings.
- Previous uses of the land.
- Ease of access.
- Distance to the nearest markets and processors.
Learn About Your Funding Options
If you don’t have enough cash on hand to purchase land, you have other options for funding your investment. For example, you can use an IRA to invest in raw land. Talk to an experienced financial advisor and land consultant, though, to make sure you follow rules that will affect how you can use the IRA to buy property.
Get Help From an Accredited Land Consultant
If you are looking to buy land for retirement, make sure to work with a qualified land expert, like an Accredited Land Consultant (ALC) in your area who has experience and education in conducting these types of land real estate transactions.