One of the oldest and most respected investment strategies in America is land speculation and subdivision. Remember both George Washington and Davy Crockett we both land men. President Washington was a surveyor and Davy Crockett sold homesteads to folks immigrating from the east coast.
In our modern time there is no frontier to homestead but there is still huge opportunity.
Why do you care if you’re a rancher? Consider that 30-40 years from now you will stop operations the only real difference is what is the legacy you are leaving behind. I see land today that was not in the path of growth that sells for $5,000 per acre but land that is now in the hottest development area sells for over $2per square foot or $87,160 per acre. Both sold for $600 per acre on the 1960s.
This means that with a 80 acre example the out of the way parcel will be worth $400,000 but the development land will be worth $6,969,600 and both were worth $36,000 in 1965. I foe one would rather leave a legacy of nearly 7 million to my family.
If you plan to have a farm operation within 150 miles of a major metro area the future path of development should be part of your consideration before you purchase land. In every area of the country there are multiyear development plans that show the projected path of development. It takes years to build the necessary infrastructure to turn farmland into the suburbs.
Now that we are looking at this as a asset that will appreciate over the years it must be factored into our max potential purchase price. If there is a opportunity to buy near a new off ramp where has not been one prior there may be opportunity. Next we look at roadway improvements projects that the dept of transportation is proposing. It often takes years to get funding to create a loop bypass a small town or build a new bridge widen a road to multi lane etc.
This illustration shows why we may pay a premium for land today that will be held for decades. Imaging if you passed up site #2 in 1965 because it was 5% higher list price than site #1 the sale price would have been $2,400 less at purchase but when it was sold in 2018 the sale price was $6,569,600 lower. This shows the power of strategic planning in farm and ranch operations.