Farmland can be a good investment to keep, but the answer depends on the individual property, its income, expenses, location, land quality, and your financial goals. Iowa farmland can provide rental income while giving the owner a tangible long-term asset. However, farmland also has risks, expenses, management responsibilities, and capital tied up in the property.
If you already own or inherited farmland in Iowa, the question is often different from asking whether you should buy farmland.
You already own the asset.
The question becomes: Does continuing to own this farm make sense compared with selling it and using the money elsewhere?
Here are the factors to consider.
Why Do People Keep Iowa Farmland?
People keep farmland for many different reasons.
For some owners, it is an investment that generates annual rental income. For others, the farm has been in the family for generations and carries significant personal value.
Common reasons for keeping Iowa farmland include:
- Annual rental income
- Long-term ownership
- Potential appreciation
- Agricultural use
- Family legacy
- Diversification
- Future development potential
- Recreational use
- The possibility of farming it in the future
There is no single reason that applies to every landowner.
The important question is whether those benefits fit your goals.
How Does Farmland Generate Income?
For a landowner who does not personally farm the property, rental income is often the primary source of annual cash flow.
A farm may be rented through a cash-rent agreement, crop-share arrangement, or another lease structure.
With cash rent, the tenant generally pays the landowner an agreed amount for the use of the farmland.
To evaluate the investment, look beyond the rent check.
Start with the farm’s gross rental income. Then subtract expenses such as property taxes, insurance, management, repairs, drainage work, and other ownership costs.
The amount remaining gives you a better picture of what the farm is actually producing for you.
How Do I Calculate the Return on My Farmland?
A simple starting point is to compare the farm’s annual net income with its current market value.
For example, suppose a farm is worth $1,500,000 and produces $45,000 in annual net income after normal ownership expenses.
The calculation would be:
$45,000 ÷ $1,500,000 = 3%
In this simplified example, the farm is producing a 3% annual cash return based on its current value.
This calculation does not include future appreciation or depreciation, taxes associated with a sale, financing, or other factors. However, it gives the owner a useful starting point.
The important number is not necessarily what your family originally paid for the farm.
If you are deciding whether to keep it today, consider what the asset is worth today and what it is producing relative to that value.
Does Farmland Appreciate in Value?
Farmland values can rise over long periods, but appreciation is not guaranteed every year.
Land markets move.
Farmland values can be influenced by:
- Commodity prices
- Farm income
- Interest rates
- Agricultural profitability
- Investor demand
- Local buyer competition
- Land availability
- Inflation
- Development pressure
- Broader economic conditions
A strong historical period does not guarantee the same rate of appreciation in the future.
That is why a decision to keep farmland should not rely solely on the assumption that land prices will always increase.
Does the Quality of My Farm Matter?
Absolutely.
Not all farmland is the same investment.
For Iowa row-crop farmland, buyers and owners may consider:
- CSR2
- Soil types
- Tillable acres
- Drainage
- Tile
- Field configuration
- Access
- Location
- Farm size
- Conservation practices
- Improvements
A highly tillable farm with productive soils and good drainage may have different income and market characteristics than a farm with significant non-tillable acreage.
Location matters too.
Two farms with similar soils can perform differently in the market because of local buyer demand, rental demand, and neighboring farm operations.
Does Cash Rent Make Farmland a Good Investment?
Cash rent is an important part of the equation, but it should not be considered by itself.
Suppose one farm generates $400 per acre in rent while another generates $300 per acre.
The first farm does not automatically provide the better investment return.
You also need to know what each property is worth.
A farm producing higher rent may have a much higher market value, which can result in a similar—or even lower—cash return as a percentage of value.
Evaluate income relative to the value of the asset.
What Expenses Come With Owning Iowa Farmland?
Farmland is often viewed as a relatively straightforward asset, but ownership still involves expenses.
Depending on the property, those may include:
- Property taxes
- Insurance
- Farm management
- Legal and accounting expenses
- Drainage repairs
- Tile improvements
- Fence repairs
- Building maintenance
- Conservation work
- Weed or brush control
- Assessments
A farm with buildings, grain storage, livestock facilities, or extensive drainage infrastructure may require more management than a simple row-crop property.
Calculate your return after these costs rather than looking only at gross rent.
Is Farmland a Passive Investment?
It can be relatively passive, but it is not completely hands-off.
Someone still needs to manage the lease, communicate with the tenant, collect rent, pay taxes, monitor the property, maintain records, and address problems.
For an Iowa landowner living hundreds or thousands of miles away, these responsibilities may require professional farm management or help from someone locally.
If you inherited farmland but know very little about agriculture, you do not necessarily need to sell it.
You do, however, need to understand how it is being managed.
What Are the Risks of Keeping Farmland?
Like any investment, farmland has risks.
Potential risks include:
- Declining land values
- Lower rental income
- Rising property taxes
- Higher interest rates
- Agricultural downturns
- Tenant problems
- Drainage expenses
- Environmental or conservation issues
- Concentration of wealth in one asset
- Limited liquidity
Liquidity deserves special attention.
You cannot sell 10% of an 80-acre farm as easily as you can sell a portion of some financial investments.
Selling farmland usually involves selling the entire property or creating a legally and practically workable division.
What Does Investment Concentration Mean?
Imagine you inherit a $2 million Iowa farm and have $300,000 in other investments.
Most of your wealth is now tied to one property, in one location, and in one asset class.
You may be comfortable with that.
Another owner may prefer greater diversification.
Neither decision can be made simply by looking at farmland’s historical performance. You need to consider the rest of your financial situation.
A financial advisor or tax professional can help you evaluate how farmland fits into your broader financial plan.
Should I Keep Farmland That Has Been in My Family for Generations?
This decision is not purely financial.
A family farm may have emotional and historical value that cannot be measured through cash rent or investment returns.
You may want your children or grandchildren to have the opportunity to own it.
If family legacy matters, include that in the decision.
At the same time, keeping a family farm without a clear ownership or management plan can create challenges for future generations.
If several family members will eventually own the property, discuss how decisions, expenses, income, and future transfers will be handled.
Should I Keep Farmland I Inherited?
If you inherited Iowa farmland, avoid making an immediate decision based only on emotion or an unsolicited purchase offer.
First, understand what you inherited.
Determine:
- Current market value
- Annual rental income
- Annual expenses
- Existing lease terms
- Tillable acres
- CSR2 and soils
- Drainage and tile
- Property condition
- Ownership structure
- Tax basis
- Potential tax consequences of selling
Once you understand those factors, you can better compare keeping the property with selling it.
When Might Keeping Farmland Make Sense?
Keeping farmland may fit your goals when the property generates acceptable income, you are comfortable with the risks and management responsibilities, and you want continued exposure to farmland ownership.
It may also make sense when family ownership itself is important to you.
But “Grandpa never sold land” is not an investment analysis.
Neither is “farmland always goes up.”
Look at the numbers and your goals.
When Should I Consider Selling Farmland?
Selling may be worth evaluating when your goals have changed or when the capital could serve you better elsewhere.
For example, an owner may consider selling when:
- They no longer want to manage the property.
- Several heirs want different things.
- The farm represents too much of their total wealth.
- Significant capital is needed elsewhere.
- The property no longer fits their investment strategy.
- The owner lives far away and does not want management responsibilities.
- The market value is high relative to the income being generated.
- Estate or family circumstances have changed.
Considering a sale does not mean you must sell.
It simply means comparing the alternatives.
Should I Sell Farmland Just Because Prices Are High?
Not necessarily.
A high farmland value may make selling more attractive, but price alone should not determine the decision.
Ask what you would do with the proceeds.
If you sell a farm worth $1.5 million, what happens to the $1.5 million?
Would you pay debt? Buy another investment? Purchase different farmland? Complete a 1031 exchange where appropriate? Fund retirement? Divide an estate?
Comparing keep versus sell requires evaluating both sides.
Do not evaluate selling without considering what comes next.
Should I Know What My Farmland Is Worth Even If I Am Not Selling?
Yes. Knowing the current value of your Iowa farmland is useful even if you plan to keep it.
You need the current value to evaluate the property’s return.
It can also help with:
- Estate planning
- Financial planning
- Insurance
- Family discussions
- Investment analysis
- Future sale decisions
Do not assume you know the farm’s value because you remember what a neighboring property sold for several years ago.
Look at current, relevant market information.
How Do I Decide Whether to Keep or Sell My Iowa Farmland?
Start with four questions.
1. What is my farm worth today?
Estimate its current market value using property-specific information and relevant comparable sales.
2. What does the farm earn?
Calculate gross income and subtract ownership expenses.
3. What are my goals?
Consider income, appreciation, family legacy, diversification, retirement, estate planning, and liquidity.
4. What would I do with the money if I sold?
Compare keeping the farm with the realistic alternative—not simply with cash sitting in a bank account.
Those answers give you a much stronger basis for making the decision.
Is Farmland a Good Investment to Keep?
Farmland can be a good investment to keep when its income, long-term potential, risks, and ownership benefits align with your financial and family goals. However, farmland is not automatically the right investment for every owner.
Evaluate the property based on what it is worth today, what it earns, what it costs to own, and what alternatives you have.
For some Iowa landowners, keeping the farm may make sense.
For others, selling and reallocating the capital may better fit their goals.
And for families who inherited farmland, the right answer may involve both financial considerations and the desire to continue owning a piece of the family legacy.
The important thing is to make the decision with good information.
Trying to Decide Whether to Keep or Sell Iowa Farmland?
At Whitaker Marketing Group, we work with Iowa landowners who want to better understand their farmland and the current market.
Even if you are not ready to sell, understanding the property’s acreage, soils, CSR2, tillable acres, income potential, recent comparable sales, and current market value can help you make a more informed decision.
If selling becomes the right choice, the next step is determining how the property should be brought to market.
Before deciding whether to keep or sell farmland, understand what you own, what it is worth, and what it is doing for you.
Land is our Brand.
