Are you nervous about investing in the stock market? You aren’t the only one. There is a real trend of the retail investor feeling the stock market is stacked against retail investor success.
Both real estate and the stock market can have their advantages. Yet, if you don’t want to have your money depend on the fluctuations of the stock market, you might want to buy productive land instead.
Some real estate holdings can make you money in the long run. For example, if you own an apartment building, you would receive checks every month from tenants, pay off expenses and keep the excess income.
Investing money in rural, productive land is also beneficial and can give you steady income while possibly appreciating. Keep reading to learn why investing in rural land is an excellent alternative to the stock market. Let’s get started!
Land investments can be deciphered simply
If you invest your money in productive land, the numbers and documents will be more transparent. Also, it will be simpler to understand when compared to stocks. Assets, liabilities and income can be assessed in clear ways by buyers.
You can get help from surveyors, lawyers, and consultants before putting an offer on a piece of land. These professionals help you research the land so that you don’t make the wrong investment.
The market for rural land is very transparent so your investments can be deciphered rather simply.
Productive land value has been growing steadily
Since the middle of the 1980s, the value of rural land has been increasing. The U.S. Department of Agriculture found a 13.5 percent average annual growth rate of productive land value.
In 1998, the average cost of an acre of land was $974, but by January 1, 2007, the average cost for farmland went up to $2,160.
More specifically, cropland grew from $1,340 to $2,700 within that same time period while the cost of pastureland increased from $489 to $1,160.
Clearly, the value of rural land has been increasing steadily. This shows that investing money in this type of real estate property may be better than banking on the stock market. Long term as long as the US government continues to run deficits and the FED prints money it is very likely that rural productive land will continue an upward price trend.
You might also find that investing in the real estate market is more comfortable in terms of your level of risk.
Owning productive property is a comfortable investment for the middle class
Often, you might have grown up with your parents talking about the importance of owning a home and property. Most people have been exposed to the idea of investing in real estate since childhood.
The upper class, however, may have grown up with their parents discussing stocks and bonds. Essentially, if you haven’t been exposed to the stock market, you may be more comfortable investing your money in real estate instead. The mantra of invest in what you know holds true.
Much more difficult to be defrauded in real estate investments
You will find that it is much more difficult to be defrauded when you make an investment in productive property. With the stock market, however, you really have to trust management and auditors at the company you are investing in.
With real estate investments, you can physically arrive on the scene. You can inspect the property and even run background checks on tenants. You can make sure the building is standing and not in disarray before you buy it.
You can decide which repairs are sufficient to take on yourself and whether the productive land is worth buying.
Essentially, you are much less likely to be defrauded in a real estate investment because you can see the property before buying it and you can inspect the land.
Real estate investment can be an inflation hedge
Traditionally, property investments have been used as an excellent inflation hedge. Land ownership can protect the buyer from a loss in purchasing power.
Inflation means that more money is created and the value of the dollar goes down while prices increase.
It’s important to be in control of your money. Inflation is likely to continue with government deficits and the FED and you will need to protect your financial holdings against inflation.
If you invest in real estate when inflation takes place, you will find that the value of your property holdings increase.
For example, you may have bought yourself a piece of property that cost $200,000 in 2010. That value may rise to $330,000 by 2020, which will give you an extra $130,000 in your pocket while enjoying income from the property the whole time. Another advantage is being able to roll the profit from one transaction into another one without paying taxes. A 1031 exchange allows you to put off paying taxes on the gain in the sale of the property. You can do this time after time. We have clients that have done this multiple times and have yet to pay any taxes on their gains.
So one major benefit for investing in real estate instead of stocks is the potential hedge against inflation and ability to avoid paying taxes on the gain.
The nostalgia of owning farmland
There is a certain nostalgia that you may have from owning farmland and the pastures surrounding it. Owning either row crop farming or an entire operation of livestock could bring you a sense of accomplishment and happiness.
Did you love riding horses as a child? Do you enjoy spending time with farm animals? If so, you may want to invest your money in farmland and enjoy the beauty of the landscape.
On top of the nostalgia and enjoyment you will have from owning great farmland, you will also be receiving an income from the investment. Productive land gives you the opportunity to make money off both income and potential appreciation!
More people have been investing in real estate since the recession
Ever since the housing bubble collapse during the Great Recession, the real estate market has been growing very quickly.
A 2014 poll found that millionaires have chosen real estate as a great alternative strategy for their investments.
There are multiple ways that wealthy individuals invest in the real estate market. Some do fix and flip real estate investing while others put their money in a real estate investment trust.
The traditional buy and hold real estate investing strategy is also still being utilized across the board. Since the recession passed, more people have been putting their money into the real estate market.
Whether you want to invest in a fix-and-flip or put your money into a holding real estate investment, you will benefit from land ownership. Instead of merely having stocks, this will be a more tangible buy that you can enjoy.
We hope you agree that purchasing land is a more worthwhile investment than the stock market. Do you have any questions about putting your money into productive land investments or marketing a property? If so, you’re welcome to contact us and if you are considering purchasing productive land I would strongly recommend buyer representation to protect your needs.
If you want further in depth on this subject you should read Things to Consider when Buying a Montana Ranch for Sale or Montana Hunting Ranches for Sale-The Dream.
Buzz Tatom is a Partner at Venture West Ranches. He moved to Montana 6 years ago and still owns the 5T ranch in Texas. He has a BBA from Texas Tech and an MBA from SMU. He and his wife are involved in a number of business ventures. He also enjoys being a part time professor at MSU in the business school and mentoring students.