1) You won 2 million dollars in a lottery. But, there is a catch. Inflation has hit 10 per cent per year and is rising rapidly. It appears as if the Fed has made a mistake printing so much money to bail us out of the financial crisis of 2008. On top of that, in 2020, oil prices are hitting $170 per barrel, and the government is subsidizing everyone’s fuel bills by printing more money. You conclude the best place to invest the lottery winnings is productive farmland or timberland. This project challenges you to buy a piece of land currently on the market that will generate at least $40,000 in net income in today’s dollars, ensuring the financial security of your family.
2) Locate a land broker or realtorin a place where you would like to purchase the property. The website of the land broker should provide information about the size of the land, current crop production in bushels per acre, whether the land is designated highly erodible or is wetland, and a soil survey. The tax information should also be posted on the realtor’s website. In general taxes are about $10 per acre per year, and chemicals cost about the same.
3) Keep in mind you will need at least 300 acres in a state like Illinois, about 500 acres in the eastem plains states, or greater acreages if you choose to buy timberland.
4) You will need a detailed soil survey, go to web soil survey (USDA), or to a private site called acrevalue.com (by granular). Evaluate the soil. The tillable portion of the total acreage should be at lease 70 per cent of the total, and the soils must be class 1, class2, or class 3 soils. The NCCPI rating should be higher than 50. NCCPI stands for. National Commodity Crop Productivity Index. No erosion should be seen in the aerial photo.
5) Calculate the gross proceeds based on crops planted: (Total planted acres) X (average bushels per acre) X (current price per bushel).
6) Your net proceeds are the gross proceeds divided by 3. This one third factor accounts for the fact that you are allocating 113 of the gross proceeds to the tenant farmer and 1.3 for the cost of the equipment. Net income is the net proceeds minus the sort of fertilizer, pest control and weed control, and yearly taxes on the land. This final figure should be about $40,000.
Sample Solution
