10 Reasons for Investing in Florida Agricultural Properties
By Martin R. Beck
1. Self Supporting Property
If you purchase property with an existing grove or farm the property may even generate a positive income which can offset mortgage and other holding costs. If you choose not to live on the property you can make arrangements for an agricultural management firm to care for it. Many agricultural property owners profitably lease their land out to growers or ranchers. At the very least this will allow the owner to qualify for an agricultural exemption under Florida law.
2. Pay Almost No Property Taxes
Agricultural property, if properly managed, will qualify for an agricultural exemption. This will reduce the annual real estate taxes to a fraction of what they would otherwise be. This can be a huge advantage to an investor, because it allows you to hold the property without significant carrying costs. These costs will eat away at your initial investment and diminish any gains you might realize through appreciation. For example, real estate taxes for undeveloped property in Broward can be as high as $2000 /acre per year. With an agricultural exemption the taxes will be less than $100. Imagine owning a five acre farm without an exemption!
3. Minimum Risk Investment
The bottom line is that agricultural land can be a good long term and in some cases, short term investment. Unlike stock prices, the price of land rarely ever drops in value, which makes it an important component to any well rounded portfolio. Almost everyone who has purchased farm land, at farm land prices, and held the land until the transition to urban development has enjoyed very handsome appreciations.
4. Buy Land in the Path of Progress
In southern Miami Dade County, the gateway to the Florida Keys and agricultural breadbasket is undergoing a dramatic transition away from agriculture .
Agricultural and unzoned properties "in the path of progress" are showing significant gains. After Hurricane Andrew in 1992 land prices remained flat. However, since 1999 acreage has shown an increase of 260%. Projections indicate a continued robust demand for these properties.
Businesses and families have begun to invade this area and the population is doubling every 3 years. In Metropolitan Miami over 30,000 new home permits were issued in 2003. The first new hospital in 20 years is being constructed in Homestead as well as a large new Walmart.
5. Large 5+ Acre Tracts Available
Just about every sub division and shopping center is built upon what was once farmland and developers need large tracts for development. As cities expand into rural areas agriculturally zoned property is re-zoned to higher densities and for commercial or residential use.
We see this situation happening everywhere. In Broward county it is economically unfeasible to purchase land for farming because it is far too expensive. The same situation is happening in Palm Beach County. Formerly agricultural properties are being developed at a prodigious pace.
6. Usually Owner Financed
You do not have to go to a bank to get financing for purchasing raw agricultural property. In most cases you can obtain financing from the owners and negotiate a down payment that is acceptable and affordable. Generally speaking what you are looking for are reasonable terms in return for agreeing to the sellers price. Credit worthiness is rarely an issue because the land can be foreclosed on and recovered relatively inexpensively if a buyer fails to meet the mortgage obligations.
7. Farming Benefits from State and Federal Agencies
The USDA and the State of Florida Department of Agricultural provide all kinds of support for farmers. Every sort of program imaginable is available to you through the Department of Agricultural. These include financial assistance like low cost insurance, government guaranteed loans and grants for farming, advice and support in growing your fruit or vegetable crop all the way through marketing your product. The Institute for Food and Agricultural Sciences (IFAS) associated with the University of Florida is actively involved in researching new food and vegetable crops, new methods of pest control and crop diseases and offers all forms of training and support for farmers.
8. It Can Be a Lot of Fun
Imagine purchasing a small tropical fruit grove in South Florida where you can enjoy the economic advantages of the land appreciating and experience growing exotic fruits and vegetables from all over the world. Lychees, longans, mangoes, guavas, papaya, avocadoes, passion fruit, star fruit, dragon fruit, macadamia nuts, bananas, mamey sapote to name but a few are all grown commercially in Southern Florida. You too can enjoy the taste of the tropics if you own a small farm of even a few acres.
9. Help Preserve Homeland Farming
NAFTA, while a good thing for Mexico and South America, has placed many of the traditional farming operations at a competitive disadvantage, forcing farmers to sell off large tracts of properties that were used for fruit and vegetable farming. Florida, which used to be a huge supplier of winter tomatoes to northeastern cities is being eclipsed by Mexican production and the Florida citrus concentrate industry is under tremendous price pressure from Brazil.
10. Diversify Your Retirement Portfolio
Under the laws governing IRAs (Individual Retirement Accounts) it is perfectly legal to contribute properties to your IRA and defer taxes on the appreciation. The requirement is that the property must be managed by a fiduciary custodian. Ask your accountant or tax professional about this little known opportunity.
Martin Beck is a real estate professional with Century 21 in Homestead, and a veteran lychee and longan farmer. He has been growing, harvesting and selling tropical fruit for nearly 15 years. He can be reached at (305) 219-4425 . Email: firstname.lastname@example.org
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