The rent-equivalent values in the table show that when land values are increasing at an annual rate of 2 percent or more, it is less costly to purchase the land for $6,000 rather than pay a rent of $360 per acre.
Know your cost
Admittedly, purchasing land is a lot riskier and complicated than paying cash rent for a year’s use of land. But don’t blindly pay higher cash rents without considering the option of purchasing land. You should be aware of what it would cost you — net of real estate appreciation — to own land versus meet the demands of a landlord.
More importantly, you should be knowledgeable of ownership cost so you can determine whether landlords are indeed pushing rents up to levels where it now pays to buy the land versus renting it.
Bruce Jones is a professor of farm management at the University of Wisconsin-Madison.