Apr 162015

Canadian Farmland Values Up Again

Okay, it’s that time of year again when the national agency, Farm Credit Canada, release its farmland value report about the previous year’s farming landscape. As it turns out in 2014 the average Canadian farmland price increased 14.3%. šŸ˜€


MeanwhileĀ residential real estate prices increased only 5.2%, according to the Canadian Real Estate Association. Of course the most strategic way to invest in aĀ portfolio of properties is to be exposed to both residential, and agricultural real estate. Farmland pricesĀ are assessedĀ using recent comparable sales. These sales must be armā€™s-length transactions.Ā The highest price increase was an incredible 18.7% in Saskatchewan, the land of living skies.Ā The full report is on FCC’sĀ site.


As luck would have it I decided to buy some Sask farmland a few years ago. šŸ˜‰ Back thenĀ I had blogged about why land in Saskatchewan was the bee’s kneesĀ because of how undervalued it was compared to other provinces and neighboring States.


The Greatest AdvantageĀ of Real Estate Over Stocks: LEVERAGE

I leveraged 8:1 to secure my position as a farm owner. This meant I borrowed $7 of the bank’s money for every $1 of my own money to invest. So an increase in Saskatchewan’s farmland valueĀ ofĀ 18.7% last year actually meansĀ a redonkulous 150% rate of return on my capital. Not too shabby. šŸ˜‰

My farmland was worth about $1210/acre last year, so after this year’s adjustment itĀ should be worth $226/acre moreĀ now. Awesome sauce! šŸ˜‰ $226 doesn’t sound like a lot of money to get excited about, but since I own 310 acres it all adds up pretty quick. šŸ™‚


Investing in farmland isn’t for everyone but hay, maybe I have it in myĀ jeans. šŸ˜€

As much as I like to feel wealthy on paper, when one particular asset class consistently outperforms all the other ones I’m faced with an asset allocation problem. Farmland now represents about two-thirds of my financial investments (all assets except primary residence.) This means I am not very diversified anymore. šŸ™ Although I realize this must be theĀ ultimate first world problem, lol. šŸ˜›

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