SOME ECONOMIC ASPECTS OF FARM OWNERSHIP 19 
To compute a valuation of real estate on the basis of rents from 
which taxes have not been deducted would lead to its overvaulation 
as compared with a mortgage investment yielding interest to the 
same amount. On the other hand, to compute the value of real 
estate on the basis of rents from which all real-estate taxes have 
been deducted might lead to undervaluation of real estate as com- 
pared with mortgage investments. The undervaluation would rest 
upon two facts. One is that some real-estate taxes, such as special 
assessments, may react favorably on the valuation of the property, 
the other that mortgage investments also have some tax burdens to 
bear. By using primary net rent, from which no real-estate taxes 
have been deducted, the most liberal valuation of the real estate 
ean be ascertained. Then, by using secondary net rent, from which 
all real-estate taxes have been deducted, the least liberal valuation 
can be derived. A range is thus established within which account 
can be taken of the tax factor according to conditions. 
It should be pointed out that the owners may have actually antici- 
pated changes in some of these items that were widely different from 
those indicated in Table 7. These are merely the minimum amounts 
of change which, in the light of the rents and interest rates of the 
various periods, would have had to be counted upon in order to put 
the real-estate returns on a bare equality with first farm-mortgage 
loans. Being merely amounts of change that were mathematically 
necessary to fulfil certain minimum requirements, these figures should 
not be taken to represent the full expectation of these owners or 
others whose influence affected the valuation of this real estate. 
A PERIOD IN WHICH COMPUTED VALUATIONS WERE MORE THAN CURRENT 
MARKET VALUATIONS 
Both primary and secondary net rents** were a larger percentage 
of the market valuation of the real estate in the years 1903-1907 than 
was interest earned on first farm-mortgage loans of similar amounts. 
This real estate in those years could be said to have been undervalued 
by from $6.30 to $10.50 an acre, that is, from 17 to 30 per cent, when 
real-estate taxes are not deducted from rents; otherwise from $4.17 
to $7.74, or from 10 to 24 per cent. A decrease of from 2 to 4 cents 
a year in primary-net rent and from 1 to 38 cents in secondary net 
rent could have been counted upon without entirely overcoming this 
undervaluation. 
During this 5-year period, 1903-1907, the market valuation of 
the real estate advanced at an average of $2 an acre a year but failed 
to advance promptly enough to allow for both the declining rates 
of interest and the advancing rents. Why did not the market valu- 
ation run ahead of the movements in these factors as during other 
portions of the quarter century? The explanation les mainly in 
the effects of the rush for wheat land in areas north and west of 
the section in which these farms are located. This rush carried 
well into the prairie Provinces of Canada. Persons coming into 
the spring-wheat belt to buy land to operate were carried in unusual 
proportions beyond this section of North Dakota. The exodus of 
farm tenants experienced in eastern North Dakota conditions was 
also a disturbing factor for persons who might have bought land in 
13 Terms defined on p. 5. 
