Farewell to my 310 acres of Saskatchewan farmland
Farmers and Wall St. bankers don’t have much in common. But something they both seem to enjoy is getting down and dirty with their hoes. 😉 Farming can be difficult. Some grain farmers barley scrape by. Luckily for me it’s a lot easier investing in farms than working on them. 🙂
Thank you so much everyone for following me on my 7 year farmland journey. I have received a lot of comments and support regarding this major investment. But all things must come to an end. As you may be aware, last year I put my farmland up for sale with a real estate agent. Well as of last week I have successfully sold my farmland. 🙂
I received my first offer after a few months of listing my land. The buyer and I negotiated and we ultimately settled on a price of $445,000. This is 5% below my initial asking price.
The advantage of getting out of an investment is being able to reflect on my decisions, and consider where I could have done better. In today’s post I’ll review my experiences of buying, managing, and selling the farmland.
Breaking down the numbers
I invested $40,000 of my personal savings, and leveraged up to buy $322,000 worth of farmland. It was basically a 12% downpayment that allowed me to greatly improve my returns by 8-fold. 😀
Farmland profitability 2013 to 2019: Let’s start by looking at the farm’s income statement over the years. In 2013 my operating costs were low because I only had a mortgage on one farm for most of the year. It wasn’t until the end of 2013 that I had closed on the second farm. I operated at a small loss in 2014 before turning a profit again in 2015.
Net operating profit: $10,000
Let’s look at my capital gains next.
Capital gain = sold price – purchase price – transaction costs
Sold price: $445,000
Purchase price: $322,000
Total commissions and other transaction fees: $26,000
Capital gain = $97,000
Cheese-n-rice! That’s the most money I’ve ever made buying and selling a single investment! This must be what affluent people feel like all the time. 😀
Finally the return on investment can be determined using the following formula:
ROI = (Net gain from investment / Cost of investment ) x 100%
Net gain = $97,000 capital gain + $10,000 net operating profit
Cost of investment = $40,000
Return on Investment = 268%
Wow. 268% ROI over 7 years works out to a 20% annualized return. 😀 Sweet sassy molassy! I feel simply elated! By comparison the TSX stock market index returned about 60% over the last 7 years, including reinvested dividends.
Here is a look at my farmland balance sheet over the holding period. $40,000 of cash savings was turned into $260,000 due to price appreciation and gradually paying down the farm loan.