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Tony Soprano rarely offers his children lessons in ethics. However, in Season 4 of The Sopranos, Tony gives his son a piece of advice to remember.
“Buy land, A.J., ’cause God ain’t making any more of it,” Tony says.
Essentially, Tony tells his teenage son that land will always be worth the investment because no matter the state of the economy, land is, by definition, limited and irreplaceable.
At a time of rampant inflation — the tendency of money to lose its purchasing power over time — the value of land increases. Historically, real estate has risen in value faster than inflation, and farmland in particular tends to appreciate in value significantly, even as the general economy suffers.
Between 1971 and 2008, the value of farmland consistently outpaced inflation. Here are some data points, according to NCREIF, that other news outlets won’t tell you:
- During periods of 3 percent inflation, farmland prices rose by 8.3%
- When inflation rose to 4 percent, farmland prices rose by 12%
- When inflation reached 6 percent, farmland prices rose by 15.7%
I would take those odds and then brag about them to the loons on social media who despise farmers, the very backbone of this country.
Every year since the end of WWII, save for 1983,’ 85-’87, farmland in the United States has experienced a steady rise in value. So why does farmland offset inflation so well?
Well, the answer is that farmland is in the unique position of not caring about position — or, in this case, location — at all.
Non-farmland real estate investments depend almost entirely on location, which changes, inviting unpredictable ebbs and flows. However, farmland does not depend on fluctuating forces like tourism, development, and economic growth. In other words, farmland is the Teflon Don of real estate.
That’s not all. While farmland retains a level of value other assets do not, it also generates income through the sale of crops. Row crop farmland has produced cash income consistently between 4% and 8%. So farmers can earn now and cash out later.
And while crops like citrus and nuts take several years to begin production, they offer high yields and land appreciation opportunities when they do become productive, making them solid financial investments as well.
Finally, farmers enjoy the benefit of wearing denim overalls, hanging out with fellow farmers, avoiding early-morning highway traffic, and other unquantifiable perks. Those who load up on cryptocurrency, gold, or monthly streaming services usually can’t do that.
It’s rare I suggest taking advice from a vicious and clinically depressed mobster, but in this case, I think Tony is right. God isn’t making any more land, and farmland in particular offers a hedge against inflation, fluctuations in income, and capital appreciation.
Name another competing asset that can promise that.
Visit Farmfolio’s opportunities page to see what farms are currently available and how they can help you generate inflation-beating returns.