With an ever-more volatile stock market where progress graphs look a lot like a sketchy EKG readout, finding dependable places to park money without risking it is getting more and more difficult.
But one strategy remains solid, even if it’s not exactly flashy: land banking.
What is land banking?
Land banking is exactly what it sounds like it is. Investors looking for safe opportunities with dependable returns can do worse than investing cash in ranch real estate. The ranch real estate market–particularly the legacy ranch sector–enjoyed a marked upswing due to the COVID-19 pandemic, with “lifestyle” or legacy properties leading the way.
A lack of ranch real estate inventory is keeping the ranch market hot. This makes land banking in a ranch a wise investment, says Harrigan Land Co.’s Hunter Harrigan.
“Demand for ranches in our price point has not slowed down and prices have not dropped,” he says. “With so little available inventory, I don’t see anything slowing down.”
There is some quality inventory, however. Consider the iconic Haystack River Ranch in southern Wyoming that offers investors both an avenue for investment return and the potential for passive income with 92,000 acres of deeded and leased land for cattle, including several miles of the legendary North Platte River – a destination for anglers.
Also in Wyoming, the Harrower Ranch offers a prime land-banking opportunity that boasts both deeded and leased agricultural land, as well as hunting and fishing opportunities.
Benefits of land banking
Owning ranch property offers investors a number of benefits. First, by tying up liquid assets in real estate, investors can shelter cash from some taxes while, over time, enjoying appreciation.
Of course, there are income opportunities from ranch property. Ranch owners can run livestock or grow marketable agricultural crops (cropland in the U.S. is valued at more than $5,000 an acre by the U.S. Department of Agriculture, up from just $2,760 in 2008). Investors in ranch property with recreational or lifestyle assets – like trout streams or huntable acreage – can also earn income from those activities. And, it’s important to note, those assets add value to the property, particularly for investors who hold onto the land over time.
Even as the U.S. housing market continues to cool as the Federal Reserve continues to try and slow inflation with interest rate hikes, the land market across the country, while not white-hot like it was at the peak of the pandemic, remains strong. Acreage isn’t getting cheaper, even if its price growth has mellowed over the last year or so.
There are other benefits to land banking. Unoccupied ranch land doesn’t require investors to deal with tenants or continually fork over maintenance costs. There are no utility costs and, if investors use the land to bank cash, there are no mortgage payments, either.
Cons of land banking
While land banking is generally considered to be a safe investment that can offer moderate returns over time, most investors don’t have the patience to realize significant income from vacant property. Patience is a must for investors who wish to build significant capital through land banking.
The final word
Investing in vacant land is a great way to “bank” cash in a safe place – rarely will a land investment lose money, especially if investors exercise patience over time.
And, the right investment property can produce immediate returns if the investor is able to use the land for its agricultural or recreational assets. These larger, legacy properties are usually in higher demand and tend to be within reach of resort communities, so the investment threshold is generally higher.
All that said, land banking is one of the safest cash shelters in the country. It’s also a perfectly legal way to park money and build passive income.