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Buying Land During High Inflation

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  • Buying Land During High Inflation

    While I understand land will hold its value better during a time of high inflation, will there not also be downward pressure on it from people trying to sell it to realize its value because they lack alternatives like gold and silver? I would like to buy a small plot (not even an acre) of semi-rural or rural land and build a small 100 or 200 sq-ft cottage on it. I am curious as to what my course of action should be.

  • #2
    Re: Buying Land During High Inflation

    Originally posted by BadJuju View Post
    While I understand land will hold its value better during a time of high inflation, will there not also be downward pressure on it from people trying to sell it to realize its value because they lack alternatives like gold and silver? I would like to buy a small plot (not even an acre) of semi-rural or rural land and build a small 100 or 200 sq-ft cottage on it. I am curious as to what my course of action should be.
    Land is illiquid, and as such prices tend to be set by the last price sold. When there is 'blood in the streets' and land needs to be rapidly liquidated, prices can drop quite a bit as sellers who are forced to get out, get out. That said, with our last unwind, I think most of the speculation is gone (a few areas excepted) and some sense of normalcy has returned to the land an property markets.

    Buying less than an acre in some areas is a large lot, in others quite small. Much depends upon what you want out of your land and how long you wish to live there, coupled with location location location, quality and then price. I am sure there are plenty of places in the US you could get one acre of land quite cheaply. Heck you could buy some of the finest farmland in the midwest at 1 acre from some farmer (with much cajoling) for under $12k. So now what? Do you want to live in the middle of Nebraska?

    Perhaps you are thiking of this more from a 'strategic location' viewpoint to have a nice garden and take advantage of it during PCO. In that case you should also be considering weather, proximity to a city that has strong rail or port(water) access, as well as your ability to get there. It does you no good to own a cheap acre of land to grow stuff but be priced out of transportation one day, now does it?

    What kind of weather do you want? Warm Florida, 4-season New York, wet Western Washington? Will you definitely be a transit commuter? If so places like Portland, OR would be good for you or the Bay Area somewhere near the BART system. Chicago along the L-line, or the Metra, or maybe NY State along one of their rail lines.

    I would be least concerned about the eventual value of the land than the quality and location location location of it. Think water, transportation, growing seasons, degree days, your choice of climate, your job skills, etc first.

    Also, can you build on it? What quality must you build? In FL there are plenty of places that can be had for $100k or less with a house on a large lot, but you won't get that in the Bay Area of SF. I can sell you 9 acres of prime NW farmland just outside of Tacoma WA for $8k/ac that will grow almost anything during the summer months, but no house allowed there. Living in the Hudson Valley of NY would give you waterway transit, and there is good farmland ther, but he winters are cold.

    Make a list of you prioritiies and necessities, and maybe we can help you more. Worry least about resale unless you are trying to be a 'flipper'.
    Last edited by doom&gloom; 12-29-12, 04:36 PM.

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    • #3
      Re: Buying Land During High Inflation

      Hey, doom! Thank you for the reply. I did not notice it until just now!

      Here is what I would like:

      I want for it to be near mountains and forests.
      Liberal area
      Weather isn't really much of a concern.
      The ability to grow food isn't a concern either.
      In town or out of it, but still relatively close (within 10 miles of a town)
      I would prefer somewhere in the northeast or northwest.

      I have to have the ability to build a 100 to 300 sq-ft home on it.

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      • #4
        Re: Buying Land During High Inflation

        build a small 100 or 200 sq-ft cottage
        You may want to try out a cargo container to see how it fits your needs. They can be rented in many locales and run in size from 20 to 40 feet and up in length. A 10 X 10 may be available as well, if you think a 100 sq footer will work.

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        • #5
          Re: Buying Land During High Inflation

          Originally posted by don View Post
          You may want to try out a cargo container to see how it fits your needs. They can be rented in many locales and run in size from 20 to 40 feet and up in length. A 10 X 10 may be available as well, if you think a 100 sq footer will work.
          I've read about those, but I've also heard that all of the retrofitting needed to make them suitable for a home adds up pretty quickly. Thanks, though.

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          • #6
            Re: Buying Land During High Inflation

            Originally posted by BadJuju View Post
            Hey, doom! Thank you for the reply. I did not notice it until just now!

            Here is what I would like:

            I want for it to be near mountains and forests.
            Liberal area
            Weather isn't really much of a concern.
            The ability to grow food isn't a concern either.
            In town or out of it, but still relatively close (within 10 miles of a town)
            I would prefer somewhere in the northeast or northwest.

            I have to have the ability to build a 100 to 300 sq-ft home on it.
            Well sound like your wants tend towards OR, WA on the west coast (ID may be too 'conservative' for you but is a damn nice place), and then much of the northeast area of the country. Given PCO I would stay near the Hudson River or similar. For warmer weather think NC. CO may also fit your bill and still be 'liberal' enough. Also OH.

            For fun you can roam www.landandfarm.com and see what you find. There are a few other sites like that as well.

            Personally I would say start your search in the Hudson Valley. There are a lot of small towns that were severely impacted by the de-industrialization of th US so you cheaper pickings for a older or abandoned home with some land may be best there.

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            • #7
              Re: Buying Land During High Inflation

              Originally posted by BadJuju View Post
              I have to have the ability to build a 100 to 300 sq-ft home on it.
              Instead of building a cabin or retrofitting a cargo container, why not get a Park Model mobile home? They're basically small, 1-bedroom manufactured homes with very clever storage and efficient use of space. You can pick up decent used ones for around $10,000. New ones start around $20,000. Schult is a quality brand. I'd stay away from Champion.

              You can get an idea of what they're like here.

              Alternatively, you could buy a 5th-wheel, drive it to where you want to live and set it up there. Instant home.

              Wherever you buy land, make sure it has utility hookups for electric and water at a minimum, or a well.

              Be kinder than necessary because everyone you meet is fighting some kind of battle.

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              • #8
                Re: Buying Land During High Inflation

                Originally posted by BadJuju View Post
                While I understand land will hold its value better during a time of high inflation, will there not also be downward pressure on it from people trying to sell it to realize its value because they lack alternatives like gold and silver? I would like to buy a small plot (not even an acre) of semi-rural or rural land and build a small 100 or 200 sq-ft cottage on it. I am curious as to what my course of action should be.
                I'm not sure what you're asking.
                Is your goal to buy at the cheapest price, and are trying to discover when that will occur?
                raja
                Boycott Big Banks Vote Out Incumbents

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                • #9
                  Re: Buying Land During High Inflation

                  Originally posted by raja View Post
                  I'm not sure what you're asking.
                  Is your goal to buy at the cheapest price, and are trying to discover when that will occur?
                  I think he wants to see this:
                  http://gonzalolira.blogspot.fr/2011/...art-hedge.html
                  Last edited by globaleconomicollaps; 01-01-13, 12:09 PM.

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                  • #10
                    Re: Buying Land During High Inflation

                    Yes, gec has the right of it!

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                    • #11
                      Re: Buying Land During High Inflation

                      Originally posted by BadJuju View Post
                      Yes, gec has the right of it!
                      OK, so you're interested in buying at a low price . . . .

                      Unfortunately, there are so many factors involved it may be impossible to find the "truth".

                      Why farmland might go up in price:
                      1) There are no good places to invest now, so lots of money might go toward land.
                      2) Land will not degrade in value like dollars will.
                      3) People must have food -- it's not a discretionary expenditure like tanning salons.
                      4) Lots of dollars in Asia might end up being spent in the US on farmland.
                      5) If there is an economic crash, only investments in "real" things will survive.
                      6) Climatic change will ruin farmland in some areas, making other farmland more expensive.
                      7) As dollars decline in value due to inflation, it will take more dollars to buy the same amount of land.




                      Why farmland might go down:
                      1) Farmers will face economic difficulties, and will need to sell their lands.
                      2) As the world economy slows down, people will shift to cheaper vegetarian proteins (soybeans), and livestock grazing lands will be converted to farmland. More available land, lower price.
                      3) When the economy slows, people will cut back by eating less (starvation being the extreme case).
                      4) The government might nationalize food and energy, thus all large farms will be confiscated for "national security".
                      5) A pandemic or war reduces the population, reducing the need for farmland.


                      All these factors have different weights and likelihoods, so you'd really need one of those super-computers like the weather people have . . . and even they get it wrong . . . .

                      (FRED: The indenting function of posts does not maintain the line spacing that is displayed while composing or editing. It has never worked properly. It's probably a bug in the software you are using. If so, can you change to software that operates correctly? If not, can you find a fix?)
                      raja
                      Boycott Big Banks Vote Out Incumbents

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                      • #12
                        Re: Buying Land During High Inflation

                        duplicate post
                        raja
                        Boycott Big Banks Vote Out Incumbents

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                        • #13
                          Re: Buying Land During High Inflation

                          On your why it may go down side:

                          1) in the US at least most farmers are no longer leveraged like they were during the last farming bust. they learned. i dunno about the rest of the world
                          2) lots of land is planted in soy, that is what i grow as well
                          3) people cut back on discretionary products before they stop eating. they will buy less ipods and eat out less, but they will not stop eating.
                          4) this is always a risk, but nationalizing land invariably leads to less production. better to control the markets with taxes afterwards like they now do in Argentina.
                          5) probably the greatest threat to investing in farmland is a drop in world population due to pandemic.

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                          • #14
                            Re: Buying Land During High Inflation

                            doom&gloom wrote; my comments in italics:

                            On your why it may go down side:

                            1) in the US at least most farmers are no longer leveraged like they were during the last farming bust. they learned. i dunno about the rest of the world.
                            Isn't everybody leveraged?
                            And those that aren't will be hurt by those that are when the crash comes. For a taste, look what happened to the farmers with MF Global.

                            2) lots of land is planted in soy, that is what i grow as well.
                            It's a good crop to be in, until the People find out the dangers of soy (http://www.westonaprice.org/soy-alert). Still, that doesn't negate my point that land prices will drop as grazing lands open up to crop-growing when the slowing economy forces people to vegetarianize.

                            3) people cut back on discretionary products before they stop eating. they will buy less ipods and eat out less, but they will not stop eating.
                            They won't stop eating, but they may stop eating like pigs. Hence the phrase "belt-tightening" to describe money-saving actions taken in response to reduced income.

                            4) this is always a risk, but nationalizing land invariably leads to less production. better to control the markets with taxes afterwards like they now do in Argentina.
                            More taxes on farming -- just like a windfall profit tax on gold -- will make farming a less desirable business . . . which will lower the value of farmland.

                            5) probably the greatest threat to investing in farmland is a drop in world population due to pandemic.
                            Yes, food is a necessity, but people are not . . . at least from Mother Nature's perspective.

                            Don't get me wrong.
                            Investing in something that is going down is not necessarily bad, if other investment choices are equally bad or worse. I do not see any sure-thing investments at this time, and having farmland is far better than Treasuries or cash if Big Inflation strikes . . . .
                            raja
                            Boycott Big Banks Vote Out Incumbents

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                            • #15
                              Re: Buying Land During High Inflation

                              I feel as if you are taking a rather simplistic view of farming and land in general.

                              Lets go back to the 5 points:

                              1) on leverage: first one has to believe that everyone operates as MF Glow-ball did, nd they will all burn up. I believe as we saw the Fed backstop pretty much everyone and anyone of even minor significance, such a belief is not well founded. In addition, the loss of competition means that the 'survivors' have even MORE pricing power, not less.

                              2) I grow soy because that is what the world demands now. I grow wheat because that is also what the world demands now. My soy goes to China, my wheat to Brasil. My soy is eaten by pigs, my wheat by people though it can also be consumed by animals. The Chinese will no sooner give up the pork staple of their diet than Americans will give up burgers. The Brasilians will no sooner give up bread than Americans will. I agree with Price, and I do not eat soy and rarely eat wheat, but not everyone agrees, knows or cares. As to grazing land, there is a reason grazing land is not farmland -- it does not (usually) support intensive agriculture. Either the topsoil is not there, or the nutrients, or the water, or the organic matter or... There is still land in the world that can be converted from grazing land to cropland that is sufficient for industrial ag, but nowhere near as much as people believe. Furthermore, while you can use grazing land for cropland in some instances, you will also experience much higher input costs to do so. For example, land in the Brasilian cerrado is quite cheap, and will grow soy or cotton quite well, but only with a lot of inputs. Without those nothing grows. In a PCO world, where oil touches everything, you want land that is NOT heavily dependent on inputs and has enough quality to keep input use down. Or, you just become non-competitive.

                              3) on eating: i'm a 'fat guy' but i guarantee i eat less than you. maybe not necessarily as healthily, but less. I seem to be the way I am. I have gone on all protein diets, restricted calorie diets, etc. Weight hangs onto my like white on rice. Perhaps with enough effort I might actually slim down, but I am by no means eating like a pig. Those people do exist, and the western diet is clearly not healthy, but there are other issues at play in weight gain and retention that are not necessarily food input related. plus people who are used to eating will give up much much more before they give up food. they may change the quality and price point of what they eat, like steak to burgers, or fresh veggies out of season to frozen in cream sauce etc, but i guarantee ipads go before food does.

                              4) on nationalization and taxation: whatever hits farmers will hit other aspects of an economy as well. if taxes go up on farmers, trust me they are going up on everyone as that cost just gets passed thru the food chain. No farmer can operate at a loss on a regular basis. Then we get back to marginal land farmers whose output is less per input costs. If taxed too high they drop out (like any industry with non-competitive players) and the remainder continues on. If the drop outs result in less output, prices rise for the remainder. I only buy good lands so I am in the remainder. as to confiscation, I believe the experiences of the USSR tell governments if they want to see food output fall, just take away lands from farmers. POOF, you will see output fall like a stone in water. In my particular case, I am in Uruguay, a country highly dependent on ag revenue. I would be quite surprised to see such a small country screw around with their golden goose like that.

                              5) here we are in agreement.

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