Despite lack of liquidity, land remains a solid investment

At first glance, buying empty space might sound like the road to ruin. But for many investors, land has become a path to a balanced, and profitable, portfolio. While that doesn't mean it's for everyone, land is certainly worth a closer look from investors weighing their options.

Land as an investment can take many forms: institutional investment by life insurance companies and pension funds, farmers renting out land for revenue, active farmers purchasing land for future investment or expansion, and developers/investors buying for future residential or commercial development.

A novel place to plant your savings

Given the fickle Canadian climate, farming for a living is often viewed as a risky proposition. Buying farmland, however, is attracting some interest from Calgary investors seeking a hedge against inflation that will also produce goods and generate income.

The two most common ways to make money from farmland are capital appreciation – when the land increases in value - and income. That income can be from cash rent, calculated by dollars per cultivated acre, or a crop share, where the investor receives a share of the total crop sales each year, usually about 20-30 per cent.

"Farmland has been a tremendous investment over the last 10 years," said J.P. Gervais, chief agricultural economist for Farm Credit Canada. "Not only have land values been rising, but returns from farming have been very strong, with farm cash receipts increasing on a national level by an average of $2 billion a year for the past decade."