It May Be More Important To Not Overpay for Land Than Have Too Much Leverage

Two speakers from Kansas State Univeristy indicated that overpaying for land in their analysis was more likely to be more harmful to a farm operation than having too much leverage.

Their bottom line objectives for their land buying decisions in 2011 is that the perceived land rent value should be at least 4.50% of the amount paid. If it ends up being lower than 3.50%, then the farmer most likely pass on the purchase.

If 2011 is like 1981 in values and returns, under all their scenarios, all farmers would have a negative return over 20 years, however, it is very unlikely it is like 1981, but it might be.

Just make sure you use consistent decision making in your land purchase decisions.