Ready to sell farmland? Here's how to make it happen
Whether you need to get in a better place financially or are ready to capitalize on a long-term investment, selling farmland can be a great way to generate a substantial cash influx.
And when we say substantial, that’s potentially exactly what we mean, especially here in Northwest Iowa. For example, some recent farm land sales have surpassed $25,000 per acre and one 75-acre tract of land in Sioux County late last year went for $30,000 per acre.
That sounds substantial, right?
Now, while not all land is going to sell for that rate, it should be known that, if you are ready to sell farmland – for whatever reason – you could be in for an excellent payoff. You just have to recognize the position you are in and play your cards right.
Iowa land prices rose again last year
Here in Iowa, land prices once again rose compared to the previous year. According to the Iowa State University Land Value Survey, the average value of an acre of Iowa farmland still managed to increase in price, on average, by 17 percent to $11,411 per acre.
Even after a year in which the average value of an acre rose 29 percent, that’s still a 17 percent increase, of $1,660. In fact, Iowa farmland values have only risen more than 15% in a handful of years, according to the survey.
So, with that said, sellers are in a very strong position to reap the benefits of a market that’s still very hot and leaning in their favor.
However, there are still ways to make sure you capitalize on your position to sell and see the most return on investment possible.
Know the buyers’ perspective
First, anyone who is looking to sell farmland needs to know the perspectives potential buyers are going to bring to the table.
In many cases, there are two distinct analytical approaches to the buying decision, an economic analysis and a financial analysis.
The first of these approaches is an economical analysis, which involves a buyer who is going to look into how much the land under question is worth based on its net income earning potential. This is quite the in-depth analysis, which is detailed more in this online report.
The other approach is a financial analysis. With a financial analysis, the buyer will want to know whether the land will generate a positive cash flow after they have paid all of the costs of ownerships, operations costs and any debt payments associated with the land. A deeper look at how this analysis works is also available in an online report.
What to know about the farmland market
But sellers also need to know where they stand in the farmland market.
For one, they should know that the farmland market is tight, which in part explains the price increases that have occurred over the past couple of years. There just simply is not a whole lot of land available in comparison to the amount of demand that exists.
That’s great news for sellers.
In addition, crop yields have remained strong, which means the income-generating potential of land is keeping prices up.
That’s another feather in the sellers’ cap, assuming that the land they are looking to sell has also performed well in recent years.
Know who also is selling farmland
Another factor that sellers need to keep in mind is who else is also selling farmland currently.
For the most part, that list includes:
- Active farmers
- Retired farmers
- Estate sales
- Miscellaneous others
Knowing who else is selling farmland will give those looking to also sell their land an idea of where they might stand in terms of competitiveness.
Start with the local experts
One of the next steps any potential seller needs to take is to get in touch with their local farm real estate experts to check in on the local farmland market and prices.
While the overall farmland market is strong and in a good position for sellers to capitalize on their land, there could be regional factors that affect how much return they can expect in one way or another.
It’s just a fact that not all regions are faring in the same way. It’s always best to work with an expert.
What’s your land valuation?
Sellers also need to know how much their land is worth before they go to market. Not only will this help them set a good asking price, but it also will give them clues into how they might be able to make improvements that could increase the value of the land.
When you are having an appraisal done, you will need to consider several factors that may influence the end result. This could include anything from how easily the property is accessed, the topography of the land, its amenities, how the land is configured and how large it is.
On top of that, any assessment will take into consideration how the land has produced in recent years. This will be a major factor from the buyers’ perspective.
Be prepared to provide information
Buyers are going to come into the process wanting to know all this information and much more. So, it’s in the sellers’ best interest to be prepared to provide what they believe any potential buyer may be interested in knowing about the land.
Take a moment to think to yourself what you would want to know about any land that you are buying. We’ve discussed a few factors already, but what are others? This could include easements, zoning, access to utilities and a wide range of other factors.
Time to make improvements?
Last but not least, are there improvements or projects that you have been putting off that you could get finished by the time the land sells that could increase the value of the land?
Not only could certain improvements increase the final selling price, they could also draw more interested buyers in the first place.
Work with Midwest Land Management
Want to sell your land and reap the most return possible? Your best bet is with the pros at Midwest Land Management.
Contact us today to discuss your options and strategy.