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How Much is That Farm Really Worth – A Comparison of Three Land Purchase Decision Tools

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  • Edwards, William M.

Abstract

Volatile markets for farmland have created interest in tools that can help analyze land investments (Zimmermann, 2014). Extension specialists in several states have created some valuable decision aids that have been utilized by prospective investors, rural appraisers and real estate brokers. Agricultural educators can also use them for teaching the principles of real estate valuation.Among the land purchase decision aids that are currently available are KSU- Landbuy from the AgManager .info website at Kansas State University (Dhuyvetter & Kastens, 2013), Farmland Purchase Analysis from the Ag Decision Maker website at Iowa State University (Edwards, 2015), and Land Purchase Analysis from the Farmdoc FAST tools website (University of Illinois, 2009). For convenience, they will be referred to as the AMI, ADM, and FAST models, respectively. All of these tools are Excel spreadsheets and rely on traditional capital budgeting techniques to analyze a farmland purchase decision, but they differ in some important methodological aspects.The purpose of this article is to compare and contrast the three decision aids and dis-cuss the implications of the different capital budgeting approaches employed in each one. Additional features contained in one or more of the three tools will be summarized as well. A case example representing a typical midwestern farmland purchase opportunity will be analyzed using each decision aid, and the results will be compared.

Suggested Citation

  • Edwards, William M., 2017. "How Much is That Farm Really Worth – A Comparison of Three Land Purchase Decision Tools," Journal of Applied Farm Economics, Purdue University, vol. 1(01).
    • Handle: RePEc:ags:pujafe:302989
    DOI: 10.22004/ag.econ.302989
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