USA | jdironman - 11/17/2023 18:23
A lot depends upon income tax rate. 40% rate on 5.5 interest leaves you 3.3 return. So the 6000 is at 196$. 4000 is at 7.5 so is 300 cost. If you have a 1000 a acre depreciation on a 40 % tax rate that saves 400 a acre up front so writes down interest for 3 years which a lot think interest will soften. Than if you have too much equipment already, ( most do) your cost actually drops slightly as you are spreading it over more acres. If it is a farm that adjoins you than you can farm the 1/4 section with very little more time than the 80. I am not going to get in a pissing contest as it is not the same deal it was when interest was under 4, in some cases under 3 and there is no argument about that. My point is that some people think interest will come down considerably ( don’t know if I agree with that) and other school of thought is that inflation will continue to run. Here not much land comes up for sale so not like the stock market where you can get in and get out and also a lot depends upon individuals situation. There have been very few times in my life when I thought land was really a deal. I definitely am not out looking for land to buy, but if right farm comes up especially if it adjoins me, I will still try to get something done. Now example is on 10000 land and I realize that is not in the cards in a lot of places and would be below market for good land here. I am conservative so not disagreeing with you coup, just trying to keep a open mind. I am also more concerned that we might be seeing a downturn in our commodities for awhile so than interest and commodity prices could make things really interesting.
https://www.calculator.net/loan-calculator.html?cloanamount=4%2C000&...
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No pissing match but your numbers don't make sense as to what reality is. $400 income tax savings is for year one , still have $3000 principal to pay in after Tax $ .To pay the $3000 @ 40% income tax bracket would require $5000 acre in pretax $ So if it was a 20 year loan would have 19 years of $105 acre tax liability.
Year one numbers would look like this. with 7.5% int
$400 rent - $300 int- $35 Re tax = - $65 acre + $400 income tax savings = $335 acre.
$6000 cash x 5% = $300 acre.
If the $335 tax savings was used to prepay principal
Year 2 would look like this.
$3572 principal x 7.5%= $268 int
$400 rent - - $268 int - $35 Re tax- $105 income tax = -$8 acre loss.
$6000 cash invested @ 5% = $300 acre x 40% income tax = $180 after tax income .
Edited by coup 11/17/2023 21:17
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Kubs Den “ INSANITY OF PAYING 7% ON AN ASSET (FARMLAND) THAT ONLY EARNS 2%”
