Saskatchewan | Freedom 35 Blog

Jaw Dropping Returns – Farmland Prices Jumped 10% in 2015

Apr 142016

To become a successful farmer you have to be outstanding in your field, if you know what I mean. But as most investors know, commodity prices have been in a slump over the past couple of years. This means many grain farmers have to live a very tough life. Perhaps some of them barley survive from wheat to wheat! But things may not be as bad as they seem because crop sales in 2015 were some of the strongest Canadian farmers have ever seen, and was cited as a contributing factor to growing farmland prices.

Canadian Farmland Values Grow 10.1% in 2015

The national agency, Farm Credit Canada, recently released its annual farmland value report about the previous year’s farming landscape. As it turns out in 2015 the average Canadian farmland price increased 10.1%. This is absolutely incredible! 😀

16-04-farmland-value-canada-up-10

Farmland prices are assessed using recent comparable sales. These sales must be arm’s-length transactions. All provinces saw their average farmland values increase and Manitoba experienced the highest increase at 12.4%. The full report is on FCC’s site.

After this year’s adjustment using the 9.4% Saskatchewan increase from the new FCC report my farmland should now be worth $129/acre more than last year. Since I have about 300 acres of Saskatchewan farmland, that’s almost $39,000 of capital appreciation in one year. Whoop Whoop!

16-04-farmland-seal-happy-39k-meme

Farmland Historical Performance

Here’s a look at historical farmland values in Canada from 1985 to 2015 according to FCC.

Canadian Farmland Prices Increased 14% In 2014

Agriculture 19 Responses »

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%. 😀

15-04-farmland-cat-grin-reaction

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

15-04-farmland-price-2014-canada-fcc

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

The Greatest Advantage 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 value of 18.7% last year actually means a redonkulous 150% rate of return on my capital. Not too shabby. 😉

My farmland was worth about $1210/acre last year, so after this year’s adjustment it should be worth $226/acre more now. Awesome sauce! 😉 $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. 🙂

15-04-farmland-satisfied-seal-reaction

Investing in farmland isn’t for everyone but hay, maybe I have it in my jeans. 😀

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. 🙁 Although I realize this must be the ultimate first world problem, lol. 😛

My Second Saskatchewan Farm

Agriculture 23 Responses »

Apr 162014

In 2012 I found a farm I liked on the MLS website, and bought it for $150,000 🙂 I was so happy with my purchase I decided to buy another farm in 2013 for $172,500 at an auction. This one is a 150 acre, class F, grain farm. It’s located adjacent to my first farm, and both properties are rented to the same farmer 🙂

But you know what? My second Saskatchewan farm is even more cash flow negative than my first. I’m currently losing money on both properties. But it’s no big deal. I don’t mind because YOLO 😀

I’ve already broken down the numbers of my first farm in a previous post. So today I will share the financial details of my latest purchase.

Breakdown of purchase price.

$10,000 Personal savings
$10,000 Proceeds from selling stocks
$17,500 TD Line of Credit
$5,000 CIBC Line of Credit
$20,000 HELOC
$5,000 Margin account
$5,000 Credit Card
$100,000 Long term farm loan, amortized over 25 years

Total amount = $172,500

To be honest it was a bit challenging to procure all the financing I needed, but luckily everything worked out. Just like the first farm, I raised $20,000 in cash from savings and selling stocks. The remaining balance of the purchase ($152,500) was all thanks to using other people’s money as listed in detail above 🙂

13-11-farmb second Saskatchewan farm

Fiscal Update – Sept 2013 – Population Milestone

Fiscal Updates 14 Responses »

Oct 032013

Canada’s population is growing. We now have over 35 million people for the first time ever 🙂 But the growth isn’t even all around. Maritime provinces like Nova Scotia and New Brunswick have actually seen a drop in population since last year, meanwhile Alberta and Saskatchewan benefited from growth rates double that of the national average. I have suggested on this blog before to take advantage of the economic prosperity in the western provinces. The property I bought in October 2012 around Regina, SK is worth at least 7% more today according to the latest land reports 😀 I’m glad to see other people are taking my advice and moving to where the jobs are 😎

13-9-canadianstereotypes

But besides low unemployment and competitive wages the west is also a terrific place to invest right now. Oil wells, potash mines, productive land, and farm machinery are all capital intensive and require money from investors. Provincial regulation has changed over the years to make it easier for anyone to invest in western Canada. With the Canadian Wheat Board monopoly gone businesses are now able to sell their goods at a fair market price, which encourages more efficiency, greater investment demand, and more workers. Land title restrictions have also been relaxed. BC residents like myself can now buy large amounts of Saskatchewan farmland which was not always possible in the past. When I visited the prairies last year I knew I had to invest in Western Canada. I anticipated all the new businesses and investments will attract more people to move there, which will only fuel industrial demand and production! And more economic activity means more profit 😀 If I ever decide to invest in a rental property like a condo I’d want to do it either in Edmonton or Calgary since I already have investments in BC and SK, but not yet in Alberta. Lots of opportunities out there, all I need now is the money 😀

*Side Income:

Part-Time Work = $500
Dividends = $400

*Discretionary Spending:

Eating Out = $0
Others = $300 (Bought an 8 inch tablet pc)

*Net Worth: (MoM)

Assets: = $574,800 total (+$2800)
Cash = $5600 (–$1000)
Stocks CDN =$75,100 (+$900)
Stocks US = $40,800 (+$1200)
RRSP = $31,500 (+$1700)
Home = $252,000 (same)
Farm 1 = $152,500 (same)
Farm 2 deposit = $17,300 (same)

Debts: = $383,400 total (-1200)
Mortgage = $201,400 (-$300)
Farm 1 Loan = $109,700 (-$300)
Margin Loan CDN = $26,100 (Same)
Margin Loan US = $23,000 (+700)
TD Line of Credit = $19,000 (-$700)
Credit Card = $4200 (-$600)

*Total Net Worth = $191,400 (+2.13%)
All numbers above are in CAD. Conversion rate used: 1.00 USD = 1.03 CAD

$4000 increase so not a bad month 🙂 It’s mainly thanks to low interest rates and continuing stock market rally which pushed my portfolio to new highs 🙂 The annual interest rate on the credit card balance is only 1.9% until November. Keeping some cash on hand for legal and closing costs. I think $200,000 in net worth is achievable by the end of the year.

We’re Becoming Wealthier

Wealth 19 Responses »

Jul 262013

Recently read in the news that the average Canadian household now has a net worth of $400,151 CAD, a record high. Yay, time to partay＼(~o~)／ This is great news because more money translates into better purchasing power so buying goods and services become more affordable, relatively speaking.

I didn’t know exactly why my net worth has been going up so quickly since the beginning of this year, but it makes more sense now with this new information. I think by being exposed to hot markets my personal finances has somehow benefited 🙂 The study points out that Vancouver still leads the country with the most wealth as the average net worth per household here is a whopping $662,600. Wowzers that’s a lot of money 😀 So far my net worth isn’t even close to that number yet but if I stay in Vancouver and continue to save and invest I’m sure one day I will become average as well haha. money_buy_happiness

At my part time job for example, a lot of students I work with bring capital to the school from foreign countries. The money allows for them to get an education and is a source of income for the local Vancouverites like myself 😀 Win win.

And Saskatchewan is apparently the leader of economic growth. Real estate prices increased 7.7% last year. Good thing I locked in the contract to buy the farm earlier this year for $172,500. I remember blogging about it in the spring and was nervous that I might have overpaid. But now I realize even if I did, the spread is probably gone by now anyway 🙂 I hope my land will continue to grow as other people look for investment opportunities in the prairies. But who will be the greater fool? hehe.

This study is quite telling, but of course average isn’t always a good barometer of relative wealth because the numbers can be heavily skewed by the ultra wealthy. So let’s find out what the median household net worth in Canada is 😀 Last year a study that I blogged about showed the median net worth per adult is $89,014. And from the 2011 Census, we know that there are 13,320,600 private households in Canada. We also know that Canada has approximately 35,000,000 people. This means that there is roughly 2.63 people per household. If the median person is worth $89,014 then the median household would have a net worth of roughly $234,000. Probably not very scientific, but it gives us a ball park figure anyway.
Disclaimer: I’m bad at math 😛

As you might have expected the median household net worth at $234,000 is much lower than the average 🙂 Nevertheless I probably still have a couple years to save before I’m considered median lol. Speaking of wealth, I recently published a new page dedicated to net worth statistics 🙂

—————————————–
Random Useless Fact: How to propose to someone if you’re on a tight budget 😛

burger_engagement_ring_cheap

Older Entries