East Central South Dakota | It is all about the balance sheet at these land prices. If a young guy buys today that land purchase will be a big part of his balance sheet. If land goes down 30-50 percent what is the bank going to use as security for an operating loan for raising a crop that barely or doesn't cover COP ? ? ? No cash to service long term debt and now no equity to bleed because you lost it to a devaluing market----------that producer is DONE. As capital intensive as agricultural has become you cannot farm without an operation line of credit (young guy starting out)-----old rich guys different story.
Speaking of old rich guys, if they buy today and land gets devalued 30-50 percent---so what. If you have 4-5 million in net worth, if you loose $300,000 in equity on a purchase at the high, the loss doesn't kick you out of the game. For old rich guys it will be a matter of how much of that 4-5 million in net worth you want to burn in a devaluing market and how long do you continue to work with a P&L statement bleeding a little (working for nothing/little) ? ? Whether you have a child coming back will be part of that discovery process. In my area watch for the sale bills in the famous Green Sheet---all ready seeing some retirement sales---and a lot of land sales advertised from heirs that don't want to leave the party to late. LOL |
Buying land?
