Farmland may turn out as the best investment for the next twenty years Sam Adelton Feb. 7, 2007
To becoming a smart investor, you must understand cycles. The asset classes appreciate based on cycles over the long term as inflation lower the value of currency with which you measure the value of the asset class.
The farmland is the last asset class in the world that is lagging behind the inflation cycle by twenty years. It has to catch up like the residential real estate market and industrial metals.
The surge in new construction residential single-family homes and developments in previous farmlands have created a shortage. Some municipalities have adopted to pay for keeping developments away. The shortage of farmland can be a reason for future appreciation in the asset class also.
There are more fundamental reasons. Farmland real estate tax is very low. Real estate taxes will be a major damper for real estate investors in the next twenty years. The Federal budget deficit will somehow get converted into the real estate taxes.
The grain prices are on the rise. The El Nino and droughts all across the world has pushed the grains into a new bull cycle. On top that grains contain starch. They are now precious because of possibility of ethanol production that can act as an alternative to crude oil based products like gasoline or diesel.
With steep grain prices, shortage of available farmland and low real estate taxes make this asset class a big appreciation target. The best of all this is the fact that farmlands are undervalued compared to all other real estate asset classes.
