Mail Time!

From time to time I will answer some of the questions that you the readers will send my way.  I received a large inquiry recently and decided now is a good time to do it.

Carl in Omaha, Neb., asks: What type of opportunities exists when it comes to investing in cropland?

Brad: Many. There are different ways to improve return on investment (ROI). If it's just pure cropland you can share crop, cash rent or custom farm.  Different investors are comfortable with different options based on their knowledge of farming.  For example, a novice investor would probably start out with cash rent.  It's simple, the tenant farmer pays on lump sum and the investor knows what they're getting.  After awhile they may change it to share cropping which the investor would then be more involved in day to day operations.  They share the risk and income of the land.  Custom farming can be a varied option that I would only suggest to someone who knows exactly what they're doing and may even want to use a farm management company.  Other options could be to buy land with some timber and water on it to add hunting income off of it.  Or find land that has some conservation reserve program (CRP) as well.

Steve in Leawood, KS., asks: What's the process of identifying good investments?

Brad: I'll try answering that question without giving away all our secrets.  First we would identify what it is you're looking to do with the land.  Then we would scour our database and various websites to see what best fits.  The next step would be to have a local farmer that we trust give it his blessing and say he would like to farm.  The final step would be to match the price of the land with the estimated rental to achieve the highest ROI we can for you.  Now there's much more to it than that but that's the basic laymen terms to it.

Angela in Overland Park, KS., asks: How do you manage our risks?

Brad: This is simple.  We have many farmers that we work with in various areas of Kansas and Missouri that we trust.  They will tell us right off the bat whether the land we are thinking about is worth it or not.  Local farmers are the best way to find this out.  I can run my numbers and soil maps on land all day long and it my look great.  But a farmer is the most trusted way to finding good land.

Jenny in Des Moines, IA., asks: Isn't farmland heading for a bubble much like the housing market did?

Brad: No.  The reason I feel so comfortable about that is most cropland buyers aren't borrowing money to purchase the land.  They are cash buyers.  Often they are people who are fed up with the stock market and are looking to put their money into something that's more trust worthy.  Yes farmland has skyrocketed recently.  And eventually it will correct itself.  And what I mean by that is, instead of jumping up 20% in value it will drop back to increasing 3% to 5%.  Remember, land will almost always be worth more tomorrow than today.  It takes a global event to cause land values to drop.

Derek in Liberty, MO., asks: Are there any unique opportunities around the Kansas City area?

Brad: Yes.  I believe the sweet spot of cropland investing runs right along the Kansas Missouri border.  Is it the best pure cropland you can get?  No.  That's Iowa, Illinois and Indiana (the three I's).  However, if you are an investor, the best bang for your buck is the Kansas Missouri border.  Why?  The price isn't anywhere near the prices you'll see in the three I's.  So you can get more land for less and get a much higher ROI.

Danielle in Leeds, UK., asks: What's the best way to get started?

Brad: I had to answer an international question.  But it's a good one none the less Danielle.  The best way to get started is to contact us and set up an appointment.  Now with you we'll probably have to Skype or conference call but we will make it work.  This way we can find out what it is you're looking to achieve and try to find a deal that best suits your needs.  You can do that by calling us a 913-837-4665 or emailing us at info@ruralkc.com.