Monetize Farmland in gilroy California

[Rakan Khalid]

I have a 5 acre residential / agriculture zoned land south of san Jose in Gilroy, California.

What are the best ways to monetize it? My land is close to where Amazon recently acquired 66 acres of land. I am paying taxes and losing money. My understanding is farmland prices don’t increase much and I should look at ways to monetize it. Renting to farmer is an option but my research indicates rents are like $1500-$2000 per year for a 5 acre land.

[Brent Grizzle]

@Rakan Khalid I am a farmer and developer here in So Cal.  Farmland is a very specialized asset, so I recommend that you identify a few brokers/agents who specialize in local farmland and make sure they are giving you similar information. There is a lot of farmland in Gilroy, so the expertise is available.  Look for signs on farmland or call your local Farm Bureau and ask if they can refer you to realtor members.

You need to be careful because there are a lot of sophisticated investors who will try to buy your land by the acre while citing agricultural comparable sales.  These buyers will be fully aware of infrastructure projects planned for the area, as well as large development projects coming your way.  You need this information too for your sell vs. hold decision. You want to sell retail and not wholesale, so expect the development price to be per square foot, while the agricultural price will be per acre.

Regarding monetizing your investment through annual rent, the typical cap rate on farmland is 2-4%. Land investing is more about capital appreciation than cash flow. Subdividing and storage are fine ideas if you can pull it off, but you are in an area that is tough with environmental and regulatory burdens.  

Best of luck. Brent