The answer to whether to buy land, especially farmland, was “yes,” with virtually all speakers declaring it a good investment.
Paul Genho, former president of giant landowner Farmland Reserve Inc., noted that agricultural land historically beats the investment return of the Standard and Poor’s 500 stock index. “Ag investments have been both reasonably profitable and safe,” he said. His advice on buying farmland included the gem, “Don’t fall in love with a potential acquisition … But don’t let opportunities pass you up.”
Genho said 65-75 percent of the value gain in an agricultural investment comes from land appreciation, while 25-35 percent of profit is from the agricultural operation. Land appreciation can be managed, he added. “Managing appreciation means dealing with planners” – specifically governmental land use and transportation planners, Genho said. “Transportation drives population growth and projected growth drives values,” Genho said. He suggested that landowners be involved with Metropolitan Planning Organizations (MPOs) to help ensure transportation projects bring more population near their land. MPOs devise long-range planning operations for urban areas.
Economists Sean Snaith and Mark Dotzour touched on the ‘when’ of land buying by noting the current economic expansion is nearing 7 years. That’s two years longer than the average expansion in the United States.
“I think probably it is time to start thinking about the next recession,” said Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. He said there will be a recession, but no one knows when. Dotzour, former chief economist at the Texas A&M University Real Estate Center, offered another view: “We’re in the seventh or eighth inning (of economic expansion); we still have room to run before we have a recession.”
Dotzour said Florida was second behind only Texas in job growth from 2000 to 2014, adding that places with top job growth are good places to invest. He added that he is “super bullish on transitional land in states that have good job growth.” Transitional land is former agricultural land likely to be developed.
Dotzour gave a strong plug for commercial real estate, saying a large majority of his retirement account is invested in it and will stay there until he sees a better opportunity elsewhere. He likes the ability of commercial real estate property owners to raise rent in case of inflation. Coldwell Banker Commercial Affiliates President Fred Schmidt also offered a positive outlook for commercial real estate in part because of ‘tailwinds’ including low interest rates. Schmidt added that ‘headwinds’ for commercial real estate include unemployment and political uncertainty in the United States.
South Americans investing in Florida land and the potential for Florida investors to invest in South
American land were discussed at the conference. CBCSRE owner Dean Saunders said he made several sizeable Florida land sales in 2015 to South Americans looking for a safe haven for their money. CBCSRE associate broker Patrick Archer reported South Americans accounted for 56 percent of non-U.S. citizens buying Florida land in 2015.
On the other hand, Eduardo Blasina of Uruguay suggested reasons why Floridians might consider buying land in South America, and where. The agronomist engineer and director of agribusiness consulting firm Blasina & Associates said Uruguay and Chile rank high in some key indicators important to investors. Both countries are perceived to have transparency in their economies and adherence to the rule of law, he said. Other South American nations are perceived to have much less economic transparency, he said. When Blasina concluded his presentation, Saunders pointed out that CBCSRE lists several properties for sale in Uruguay.
Saunders returned the focus to Florida land by saying sunshine, water, a great climate and no state income tax combine to bring people to Florida. He said the Sunshine State in 2015 had 10 million individual parcels of land valued at $2 trillion – a 10 percent value rise in a year. With low interest rates and limited returns elsewhere, many investors want to place their capital in land, he said. “Land is considered safe, a tangible asset.”