Buying a farm

[Lauxa]

So, my dad called me and out of the blue said he's been thinking about buying a farm, lets go Saturday (today) and check out some properties.

His motivation is primarily that he's convinced the dollar will fail and he "wants to have something more valuable than just ink on paper." "Like a deed?" I asked.

Anyways, he knows nothing about buying this asset class (nor do I) and I am worried that he will make an impulsive decision. But at the same time I'm psyched, it sounds really neat to me. It doesn't sound like he's going for revenue generation here, just a "safe" investment to sink some $$$. To me, hoarding doesn't sound safe, you are either expanding your assets or they are slowly draining away.

So, are there any farm-owners here that would like to give some advice on the wisdom of this plan and what to look for when buying? He's looking in the Fayetteville Texas area.

Another issue is that dad needs to be thinking about end-of-life planning and how to shelter his assets from future medical problems and death. I have been advised that perhaps a trust should "own" the property instead of dad. Anyone had any experience in this area?

[Andrew Gubb]

if he wants something that will last when dollars fail, he should buy gold. it's currently going up at the moment, too (probably because everyone else is buying gold).

it's also more "real" than a deed, which could be a good thing.

i think i might keep some of my assets in gold to keep 'em diversified at some point.

[Andrew Gubb]

Also I don't know much, but i think my mother "owned" one of my grandfather's properties for a while before he died. That way she didn't pay tax. But i bet you have to be smart about it.

[Lakshyayidhi Lakshmihi]

Originally Posted by Lauxa

Another issue is that dad needs to be thinking about end-of-life planning and how to shelter his assets from future medical problems and death. I have been advised that perhaps a trust should "own" the property instead of dad. Anyone had any experience in this area?

I can't comment on buying property in TX, I have no clue. I am not comfortably investing in gold, because the metal has no intrinsic value and unless there's a governing body willing to purchase said gold.

I will say that in my experience in accounting, trusts were the go-to tactic for the well to do, less so for those who aren't wealthy (but Trusts are NOT just for the wealthy!!!!!). You eliminate the concept of death tax - which is absurdly high and ridiculous - and gift taxes are greatly reduced. The trust itself pays the taxes on properties owned, and would have its own tax return. Trusts also eliminates the lengthy and costly process of probate that happens in the court system after the death of a property owner.

There are also other documents to consider besides just a will - living will/healthcare proxy, power of attorney - those things need to be in place BEFORE he suffers a debilitating illness. I've seen too many families bicker over this while the person in question is kept on life support and it's horrible.

I advise you to discuss estate planning with a CPA and a tax attorney; there are a lot of things to consider when you are trying to protect your assets, and there's a lot of delicate and sensitive information necessary to have a complete picture so you can develop the appropriate strategy. Also the estate tax exemption changes all the time (estate tax was phased out for 2010 but it will be back unless legislation prevents it, and this is not a fashionable bit of legislation right now).

[SatvikBeri]

Originally Posted by Andrew Gubb

if he wants something that will last when dollars fail, he should buy gold. it's currently going up at the moment, too (probably because everyone else is buying gold).

it's also more "real" than a deed, which could be a good thing.

i think i might keep some of my assets in gold to keep 'em diversified at some point.

This is exactly the kind of thinking that led to the credit crisis. When an asset bubbles in the short term (5 or 10 years) that usually means it will crash within the next 10 years, though exactly when is hard to say. But people tend to look at very short term data and pile on whenever something is going up-this is what caused the tulip bubble in Holland, the housing bubble and crash over the last 10 years, and pretty much every stock market bubble and crash ever.

You noted that everyone else is buying gold-that is EXACTLY the sign of a bubble and crash coming.

Over the long term gold does no better than inflation (Historical Gold Charts and Data - London Fix, Inflation Calculator- from InflationData.com). Since gold has done extremely well in the last few years, that means its due for a crash soon.

If you want to avoid the effects of inflation, the easiest way is to go with TIPs, invest in a diverse selection of commodities (such as food, oil, AND metals), or invest in foreign countries currencies.

[Andrew Gubb]

This is exactly the kind of thinking that led to the credit crisis. When an asset bubbles in the short term (5 or 10 years) that usually means it will crash within the next 10 years, though exactly when is hard to say. But people tend to look at very short term data and pile on whenever something is going up-this is what caused the tulip bubble in Holland, the housing bubble and crash over the last 10 years, and pretty much every stock market bubble and crash ever.

Good points, obviously getting on something just cause it's going up isn't sustainable. never the less, i think gold is a fairly reliable thing cause people will never cease to value it, and if the dollar might be lost at some point it could be useful. also some people predict situations in which not even real estate property would have any meaning; they seem rather crazy to me, but if this sort of situation DID happen gold would probably be one of the few things that would keep its value, because it's an asset you can hold in your hand and reliably stake your claim on.

if you want something that has the same value-staying properties as gold but isn't in danger of a bubble and crash, i guess diamonds?

[Andrew Gubb]

I'm sorry, i am a bit of a noob in this. perhaps i shouldn't be writing.

your points are interesting satvik. what's TIP by the way?

[SatvikBeri]

Originally Posted by Andrew Gubb

I'm sorry, i am a bit of a noob in this. perhaps i shouldn't be writing.

your points are interesting satvik. what's TIP by the way?

Don't worry about it-sharing your thoughts and being corrected when you're wrong is a great way to learn.

A TIP is an inflation adjusted bond backed by the US government. It pays some interest rate + the inflation rate.

[Andrew Gubb]

Originally Posted by SatvikBeri

Don't worry about it-sharing your thoughts and being corrected when you're wrong is a great way to learn.

A TIP is an inflation adjusted bond backed by the US government. It pays some interest rate + the inflation rate.

I see, cool. so much to learn.

[Mounds]

I think farm land can be a great investment. I wouldn't buy a farm - lock, stock and barrel - unless I was planning on doing it for a career though. Buildings have overhead expenses and equipment likes to depreciate.
When it comes to the buying process, here's what I would do:

1. Get in touch with local farmers. These guys love to chat. Shouldn't be difficult to find a local farmer hangout (they tend to congregate in certain restaurants or bars).

2. Drive around and see what people are growing. I have no clue what they grow in Texas (although I know someone who grows watermelons!). Around here, there's LOTS of grains and cattle. There are select spots, mostly close to the river, that horticultural crops are grown (onions, carrots, broccoli, cabbages, potatoes). IMO, that's the type of land you want (horticulture).

3. Learn your soil types or bring an experienced farmer along when you're looking at buying. You don't want to buy soil that doesn't grow anything. Find out about what crops have been grown in the past. One trick I got from my dad is to look at the size and variety of trees in the area. If the trees are enormous and not all of one species, that's a good sign. There's vast areas south of my home where there's only two types of trees growing: burr oak and quaking aspen. Good for nothing but cattle.

4. Think about organics. If you take a piece of land out of production for three years, it can be certified organic. Around here, the land rent on organic is close to double. Not too shabby!

Hope that helps

[secrets0stolen]

Originally Posted by Mounds

4. Think about organics. If you take a piece of land out of production for three years, it can be certified organic. Around here, the land rent on organic is close to double. Not too shabby!

IF you do decide to do something with the land, then I'd even think about going a step beyond organic to biodynamic. The yields are higher, and the work is essentially one setup and then harvest as many times a year as it is designed for. There's no tilling, potentially no fossil fuel, and many other environmental and economic benefits.

[Lakshyayidhi Lakshmihi]

Originally Posted by secrets0stolen

IF you do decide to do something with the land, then I'd even think about going a step beyond organic to biodynamic. The yields are higher, and the work is essentially one setup and then harvest as many times a year as it is designed for. There's no tilling, potentially no fossil fuel, and many other environmental and economic benefits.

I don't think the US government differentiates between biodynamic and organic at this time, this is a good practice to consider in terms of environmental concerns but financially, it may be important to achieve the certified organic status for the financial benefit prior to making the transition to full biodynamic. It's a bit expensive, initially. Lots of front end cost.

[Mounds]

Hadn't heard of biodynamics up until this point but I do have thoughts on it.
I looked into it and I can't see it being less work than conventional farming. Growing an organic crop is a massive undertaking in itself and biodynamic sounds like even more work. It's something to keep an eye on though.
Here's one thing I've learned... it can be the best idea in the world but if people aren't ready for it, it's not gonna fly. If you're going to rent out land, stick to what people know.

[Lauxa]

Originally Posted by Lakshyayidhi Lakshmihi

I advise you to discuss estate planning with a CPA and a tax attorney; there are a lot of things to consider when you are trying to protect your assets, and there's a lot of delicate and sensitive information necessary to have a complete picture so you can develop the appropriate strategy. Also the estate tax exemption changes all the time (estate tax was phased out for 2010 but it will be back unless legislation prevents it, and this is not a fashionable bit of legislation right now).

That's what I told him, too, to consult his end-of-life planner attorney person about how he should set it up before he buys the property. He agreed to do that.

Mounds, he's not planning to rent it out. Maybe fix it up and use it as a weekend getaway for the family. Or we may all move down there and finally have our little family commune.

The property was really neat, 9 acres in a kind of long and skinny parcel with a pair of almost finished houses at one end and a pond at the other 15 feet deep and stocked with bass. One huge oak tree, and other than that just grass land. They've been growing hay on it. Hay didn't make any money this year apparently due to too much hay and not enough cows. Being a farmer is a bit like being a gambler.

I know peaches and pecans grow in that area, and can maybe grow figs, blackberries, pears, and pomegranates. I'd probably do raised bed gardens and bring in the kind of soil I wanted for vegetable gardening. Lots of possibilities.

[NDN Scholar]

Originally Posted by Lauxa

That's what I told him, too, to consult his end-of-life planner attorney person about how he should set it up before he buys the property. He agreed to do that.

Mounds, he's not planning to rent it out. Maybe fix it up and use it as a weekend getaway for the family. Or we may all move down there and finally have our little family commune.

The property was really neat, 9 acres in a kind of long and skinny parcel with a pair of almost finished houses at one end and a pond at the other 15 feet deep and stocked with bass. One huge oak tree, and other than that just grass land. They've been growing hay on it. Hay didn't make any money this year apparently due to too much hay and not enough cows. Being a farmer is a bit like being a gambler.

I know peaches and pecans grow in that area, and can maybe grow figs, blackberries, pears, and pomegranates. I'd probably do raised bed gardens and bring in the kind of soil I wanted for vegetable gardening. Lots of possibilities.

That's awesome. Some day, I want to be able to do that for my family; you have a great dad!

[ginkgo]

It sounds like Andrew Gubb is right but precious metals include gold and silver. China is telling its citizens to buy gold and silver. At one time all paper money in the U.S. was backed by gold and silver and people would talk about robbing Fort Knox. Fort Knox contained all that gold and silver.

Many experts say that silver is undervalued and some day when it gets to what it is really worth it will be soar through the roof. To make it more fun, you can even get gold and silver coins like the U.S. makes 99% silver eagles and China makes 99% silver pandas.

Here is where I get my gold and silver coins from. In fact they have it where there is no extra shipping to send coins to friends. So on one order, I ordered some coins for myself and ordered a coin (silver panda) to be sent to many friends. I thought that sending real money was a nice gift. Some guy on TV showed that Iceland had their currency become worthless and said that he thinks it may happned in the U.S. He showed people rioting in Iceland.

The 2008–2010 Icelandic financial crisis is a major ongoing economic crisis in Iceland that involves the collapse of all three of the country's major commercial banks following their difficulties in refinancing their short-term debt and a run on deposits in the United Kingdom. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.[1]

Each country has its own artificial currency but gold and silver are world currency.

[Lauxa]

Don't worry guys, Dad's got gold, too. He's been holding it for 20+ years and buying more since the 90's. If you want to have a discussion on the merits of hoarding precious metals, could you start a new thread? Thanks.

[rawxstasy]

I think that's great he wants to buy a farm. I want to get myself a hobby farm when I can afford it. It looks like he just wants to be more self reliant, which I can totally agree with. At least when the dollar crashes and everything goes to hell in a handhandbasket, you'll all have a safe place to be .. until the roaming hoards of hungry people come and take what you have Just joking.. kind of.

[Lauxa]

Originally Posted by rawxstasy

I think that's great he wants to buy a farm. I want to get myself a hobby farm when I can afford it. It looks like he just wants to be more self reliant, which I can totally agree with. At least when the dollar crashes and everything goes to hell in a handhandbasket, you'll all have a safe place to be .. until the roaming hoards of hungry people come and take what you have Just joking.. kind of.

Well, country folk stick together. That area of Texas is crawling with my relatives. And DH has a safe full of AK's. We'll be all right.