Your income-producing land as an investment strategy—farms, ranches, resorts
Income is important, but investment returns are a critical component of land ownership
Almost 20 years ago, I was a new landowner. At the time, I was a busy wilderness outfitter running a herd of 45 horses. We had been leasing winter horse pasture and it was getting expensive to board our horses over the winter. It was time to buy some land. Once the purchase was made—118 acres of irrigated ranch land—the old rancher who sold us the land took me aside. “You may think you’re buying land to raise cattle or board your horses,” he said, “but in truth you have now become a land investor. After it’s all said and done, this will be one of the biggest investments you’ll ever make. The day you sell your land is when you will realize the value of this investment.”
Land appreciates in value over the years—a solid investment strategy
Recently I spoke with a very savvy investor and asked him about his successful strategies over time. He had built commercial properties and subdivisions and done very well. However, he said, “Over time, the farmland that we bought has been one of my best investments. In the 20 years since we bought land, it has tripled in value.” My experience mirrors his. If someone asks me what I paid for my land, I’ll tell them, and usually their jaw drops. “You stole it!” they’ll say. “I wish I could have bought land at that price!” Well, today is a new day, and 20 years from now, someone else will be saying the same thing.
Income returns in addition to investment returns = solid investment performance
If you just bought a piece of land and walked away from it for 20 years, paying the taxes and keeping it maintained, you would still probably make money on it. However, income-producing land is highly sought after and can produce rental returns. In farm states, it is very common for tenant farmers to rent land from absentee landowners and pay a decent cash rent. In some areas, it’s enough to pay the taxes and maintenance, where in other areas it can produce a return of 5% or more. However, when you combine rental income or passive income with annual appreciation, land investment can be a whopping return. AcreValue calculates an average annual return of 11.5% over the past 30 years. That beats the heck out of the stock market.
Land can be bought in a self-directed IRA using financing to leverage your purchase
It’s possible to enjoy the tax benefits of an Individual Retirement Account—which most people relate to investing in the stock market—with land investment. Ask your tax professional about how to set up a self-directed IRA and add land to your portfolio. Most investment advisors hate this idea because you’re thinking for yourself and they don’t make a commission if it’s not a stock investment. In truth, it can be a great strategy to increase your net worth and long-term portfolio. You can also use financing to buy land. Let’s say you put $200,000 down on a million-dollar farm and it appreciates 5% a year in value while the cash rents make the payments for you. That’s a $50,000-a-year appreciation when you only put down $200,000, or 25% a year on your real investment.
Creativity can create income—hunting leases, “glamping” sites, AirBnB rentals, horse boarding
There are many ways to optimize your earnings on a tract of land, whether you farm it yourself, lease it to a farmer, harvest the timber, or lease it for hunting. Many landowners are now exploring the idea of allowing guests to enjoy their property, using it as a private campground, AirBnB rental, or wedding venue. Have you heard of “glamping” sites? That’s the concept of a luxury or “glamorous” campsite for city dwellers to come to the farm and have a tricked-out camp already set up for them. A friend of mine has set up several glamping sites on his property, and he’s raking in $750 a NIGHT from his campers! Personally, while my wife and I raise hay on our property and do make some money from hay sales, our biggest money-maker is Labrador retrievers. 
We sell our puppies for $1,500 each, and our “started dogs”, which are young adult dogs with a basic set of retriever training, sell for up to $5,000 each. For me, I go out to irrigate every morning anyway, so why not bring another couple of pups along with the pack while I’m out there? It’s pretty easy to spend a few minutes teaching obedience and retrieving, and our dog buyers love the fact that their pup came from a real working ranch where they got to run free every day.
Land ownership has its challenges—it requires maintenance and attention
If you think you can buy land and walk away from it without any consequences, you’re wrong, of course. It requires maintenance and attention. Nature likes chaos, and your land can become devalued if the brush is too thick, the fences have fallen down, prairie dogs are taking over your fields, or the ditches are not maintained. Basic upkeep has to be performed. Part of land ownership is land stewardship, and you need to budget for the inevitable expenses that you will incur. A cow breaks off your irrigation riser; a ditch washes out; somebody pulled in too tight with a trailer and broke off the gate post. Of course, many people see this as an opportunity to buy cool toys such as side-by-side ATV’s, tractors, skid steers, mini excavators, horses, and big pickups. All good, but remember the idea is to stay as close to profitable as possible!
Land ownership is a rewarding investment—lifestyle trumps high returns
At the end of the day, you might make higher returns investing in the stock market than in land. But it’s hard to go fishing on your market account; it’s never going to take you hunting; you’ll never enjoy fresh produce grown on your IRA. Land ownership provides great joy that you will not find with any other investment. There are so many enjoyable moments that I’ve experienced on my little ranch that I can’t even tell you. In the morning, I get up and pick up my binoculars to see what’s going on. There might be a mule deer doe with a couple of fawns grazing in the pasture; a fox trying to catch a pheasant hiding in the willows; a sudden rainstorm that brings a rainbow arching across the horizon. Land ownership literally keeps me grounded—tied to the rural lifestyle that I love and cherish. Yes, I could probably have made more money with another investment, but that mountain view is ours, those cottonwood trees belong to us, we grew the hay in the barn that feeds our horses, and we know every fence post and strand of barbed wire on the property. It’s our land, and yes, we may ultimately sell it when we are old and grey and need the money for retirement. In the meanwhile, however, we’re enjoying the heck out of land ownership and I’m here to help you find the same enjoyment and investment. Call me, Gary Hubbell, for a consultation on land ownership. 970-872-3322.
Gary Hubbell, ALC, is an Accredited Land Consultant and Broker/Auctioneer with United Country Colorado Brokers & Auctioneers. Gary and his wife, Doris, run a small hay farm and ranch on 118 acres near Crawford, Colorado. As a ranch real estate broker, Gary specializes in farms, ranches, orchards & vineyards, resorts, luxury homes, mountain land, and hunting properties. He has sold properties all over Colorado and Utah.