Pick a CAGR That Makes Sense Locally
A land value appreciation projection is only as honest as the growth rate you feed it. Plug in 8 % because a neighbor sold well last spring and the calculator spits out a fantasy. Use the 20-year county average—often closer to 3–5 % for rural parcels, per the USDA Economic Research Service farmland-value series—and the output becomes something you can actually plan around.
The most common mistake is treating a single boom year as the new normal. Midwest cropland jumped nearly 30 % between 2020 and 2022. Buyers who assumed that pace would hold built financing around numbers the market could not sustain. A defensible CAGR drawn from at least a decade of local data keeps your equity math grounded. This calculator lets you stress that rate higher and lower, and see how many years of compounding it takes before the gap between a 3 % path and a 6 % path becomes uncomfortably wide.
Nominal vs Real Value (Inflation Drag)
A parcel that doubles in nominal dollars over 20 years sounds impressive until you check what a dollar bought two decades ago. The Bureau of Labor Statistics CPI data shows cumulative inflation of 55–65 % across many recent 20-year windows—meaning your “doubled” land grew only 25–30 % in purchasing power.
Real CAGR ≈ ((1 + Nominal CAGR) ÷ (1 + Inflation)) − 1
5 % nominal with 3 % inflation → real CAGR ≈ 1.94 %. Over 20 years that is the difference between a 165 % nominal gain and a 47 % gain in today’s dollars.
For generational holdings or retirement reserves, the real number is the one that matters. Nominal gains look good on paper; real gains determine what you can actually afford when you sell.
Base, Optimistic, Pessimistic Paths
Nobody knows the right rate, so test three. A single projection creates false confidence. Three paths turn the calculator into a decision bracket: “Even pessimistic, I break even after costs by year 12—I can live with that.”
| Scenario | CAGR | $120k After 15 yr | Total Gain |
|---|---|---|---|
| Pessimistic | 2 % | $161,200 | 34 % |
| Base | 4 % | $216,100 | 80 % |
| Optimistic | 6 % | $287,600 | 140 % |
A two-percentage-point spread between pessimistic and base creates a $55,000 gap at year 15. Between base and optimistic the gap is $71,500. Small rate differences compound into large dollar differences, which is exactly why you want the bracket instead of a single guess.
Costs That Quietly Reduce Your Net Gain
The projection shows gross appreciation. What you pocket is that number minus every dollar spent holding and transacting the land:
- Property taxes. At 1.2 % of assessed value annually, a $120k parcel costs roughly $1,440/yr—over $21,600 across a 15-year hold before any reassessment bumps.
- Insurance and maintenance. Liability coverage, mowing, fence repair, and access road grading add $500–$2,000/yr depending on acreage and county expectations.
- Opportunity cost. The down payment and carrying cash could earn a return elsewhere. If you tie up $30k in equity that could compound at 5 % in an index fund, that forgone growth is a real cost even though no invoice arrives. The Holding Cost Estimator quantifies this drag year by year.
Stack these against projected appreciation and the net CAGR drops by 1–2 full points. A 4 % gross path easily becomes a 2.5 % net path—still positive, but a very different planning number.
Exit Proceeds After Taxes and Sale Fees
Appreciation is a paper number until you sell. At closing you receive the gross price minus:
- Broker commission. Typically 5–6 % for improved lots, sometimes 8–10 % for raw acreage. On a $216k sale that is $10,800–$21,600 gone before anything else.
- Transfer tax and recording fees. Rates vary by state; many charge $1–$5 per $1,000 of sale price. The Land Purchase Cost Estimator breaks these out line by line.
- Capital gains tax. Federal long-term capital gains rates range from 0 % to 20 % depending on taxable income, plus a potential 3.8 % net investment income surtax. State taxes add 0–13 % more. On a $96k gain the tax bite can range from nothing to over $20,000.
If the 15-year base-case gain is $96k and exit costs eat $30k, your take-home gain is $66k on a $120k investment—still healthy, but 31 % less than the headline projection implies.
Sensitivity: Rate vs Hold Period
Two levers dominate: the CAGR you assume and how long you hold. A one-point change in rate matters far more at year 20 than at year 5 because compounding is exponential, not linear.
At 4 % for 10 years, $120k becomes $177,600. Push to 5 % and the same decade yields $195,500—$17,900 extra from one percentage point. Extend to 20 years and that gap widens to $57,700. Over short holds, rate precision matters less; over long holds, small errors create five-figure dollar gaps.
Watch for the rezoning “jump” too. A parcel reclassified from agricultural to residential can gain 50–200 % in a single year—a step-change no steady CAGR captures. If rezoning is plausible, model it as a separate lump-sum gain on top of the base CAGR path, not as a higher annual rate applied uniformly.
Mistakes That Make Projections Useless
- Using a boom-year rate as the long-run assumption. A county that jumped 12 % in one year rarely sustains that pace. Anchor to 15–20-year averages from your assessor’s records or the USDA ERS data, not the best year in the last cycle.
- Projecting nominal value and comparing it to today’s purchasing power. Saying “my land will be worth $300k in 20 years” without noting that $300k will buy what $180k buys today (at 2.5 % inflation) misleads the whole planning exercise.
- Ignoring negative CAGR years entirely. Land values can and do decline—rural Midwest values dropped 10–15 % between 2014 and 2017 in several counties. A projection that only considers positive outcomes is not a plan; it is a wish.
The projection is one piece of a wider analysis. Pair it with the Lease & Rent Return Calculator if the parcel generates income while you hold, the Holding Cost Estimator to see the carrying drag, and the Land Purchase Cost Estimator to capture the true acquisition basis before appreciation math even starts.
Projections here are mathematical what-if scenarios, not appraisals or investment advice. Real land values depend on local conditions, zoning, infrastructure, and economic cycles that no fixed-rate model can predict. Consult a licensed appraiser or financial advisor before making decisions based on appreciation assumptions.