Posted 11/27/2015 16:25 (#4922607 - in reply to #4922339) Subject: RE: Return on equity as a farming operation matures
SE Manitoba
ricefarmer14 - 11/27/2015 13:58
Tiler....agreed...at what point does it make sense to not farm the property in a traditional sense? Maybe it always makes sense to farm your own land but when running numbers I was amazed at how much LESS profitable a mature 80-100% equity business is versus a leveraged business.
Not saying we need to be leveraged just that growth slows down tremendously when you quit expanding and quit borrowing money.
Now you are only looking at one side of the picture.
If you only look at ROI you would want as little investment as possible into your long term assets (chiefly land IMO) but your risk factor IS higher.
So you trade a lower ROI for much lower risk - - - I think that's a good trade. If you can get to a higher ROI on lower risk - - - jump on it - - - if you are facing a lower ROI on higher risk - - - well I'd suggest you back out of there carefully (the last scenario is where I think we are generally in the world today!!).