Posts

Buying Land For Hobby Farming 101

Whether or not you consider yourself a green thumb, it isn’t too difficult to start your own hobby farm. Technically, all you need is an ample amount of land, a decent amount of farming knowledge – which you can acquire from experienced farmers and the Internet – and plenty of time and patience. However, if you don’t already have the land, you’ll need to find a good property to purchase with soil that is ideal for farming. A qualified land agent can help you with this task.

What is a Hobby Farm?

A hobby farm can be quite large — the USDA considers a small farm anything that is 179 acres or less. Additionally, while you can certainly sell some of the products from your farm, a hobby farm is not meant to provide you your main source of income. Essentially, the farm is run for your own pleasure, and can go a long way towards setting you up for a self-sustaining future.

It is important to note that a hobby farm is much different than a vegetable garden in someone’s yard. You will need to devote time and effort to keeping your farm operating, as well as considerable expense to purchase the land, equipment, and resources you need to get the farm up and running.

hobby farm kid with goat

Benefits of Hobby Farming

Hobby farms are growing in popularity as more and more people realize the benefits and seek to move away from crowded cities after experiencing the challenges of the pandemic. Here are some of the ways you may benefit from having a hobby farm:

Health Benefits

With a steady crop of healthy vegetables and animal products, you and your family will be able to eat healthier throughout the year. You can choose to make your food as healthy as possible by growing only organic crops.

Hobby farming is also hard work at times, and you’ll be sure to get plenty of exercise working on your farm, another health benefit.

Lastly, gardening and farming have always proven to be great activities for stress relief and relaxation, improving mental health as well.

Social Benefits

Aside from gaining a new network of friends who are also involved with hobby farming, you can interact more with the local community by setting up a stand at local farmer’s markets. A local farmer’s market can be a good source of extra income, and you’ll also likely gain a few steady customers that become friends as well. If setting up shop at a farmer’s market isn’t for you, you can also donate extra food to a local food bank.

Self-Sustaining Life and Agriculture

In addition to becoming more self-sufficient and less reliant on purchasing food thanks to a sustainable food supply, hobby farming is also great for the environment. And, it will help you save a significant amount of money as well once you are producing steady crops, as the more food you grow for yourself, the less you need to spend at the grocery store.

hobby farm produce

How Do I Start Hobby Farming?

The first thing you need to decide is what type of livestock you’ll want to have on your farm and/or what crops you’ll want to grow. Will you have chickens, cows, pigs, goats, or honeybees? Fruit trees and bushes? Herbs and vegetables that grow throughout the different seasons? Perhaps a combination of all of the above!

Once you decide what you want, the next step is choosing a parcel of land that is suitable for your needs. Your best source for purchasing viable farmland is to speak with a qualified real estate agent that has sufficient experience in finding and selling land, not just houses or buildings.

A qualified real estate agent with land experience can help you find a parcel of land with good soil health, and will also be able to help you learn about zoning laws, which can regulate what the land can be used for and whether you would be allowed to have livestock on the land.

Depending on what type of farming you plan on doing, you’ll also need to research what tools and equipment you will need, whether you need to design an irrigation system, and where you can acquire food for any animals you might have.

Before you jump into hobby farming, see how all of the above works with your budget. You may find that you will need to scale back your ambition if the cost of what you want exceeds your current available budget.

It is important to note that purchasing land is different than purchasing a house. A land loan often has higher interest rates and down payments, and must be paid back within 3-5 years. Speak to a qualified land agent to learn more about purchasing land to be used for farming purposes so that you can make an informed decision.

Happy hobby farming!

invest in farmland

Why Farmland Is A Good Investment

While many current media stories relate the plight of the American farmer, savvy investors with long-term goals know that investing in farmland can actually be quite a lucrative endeavor. A sizable tract of open farmland can become something very profitable so long as you do your due diligence and enlist the aid of a qualified real estate agent who is experienced in doing farmland transactions.

What to Know Before Investing in Farmland

Purchasing land is not as easy as securing a mortgage for a home. A land loan typically needs to be paid within 3-5 years, and both the down payment and interest rates are higher than that of a mortgage as well. Experts recommend paying cash for a land purchase if you are able.

It’s also important to note that a farmland investment is different than a regular land purchase. You’ve got to have the knowledge and experience to be able to properly maintain the site for maximum profitability (or at least the ability to hire someone who possesses both).

If you plan on living on the land yourself, you’ve also got to be prepared for a significant lifestyle change and any environmental factors that could affect your crops. That being said, if you’ve got the fortitude and resources for farmland investing, there are a number of ways in which you could benefit from this type of real estate purchase.

invest in farmland

Benefits of Investing in Farmland

When you own farmland, you have several options for making a profit. The most common is, of course, growing and selling your own crops. An alternative to this would be leasing the farmland, saving you a lot of the work while still allowing you to reap some of the reward.

You aren’t necessarily limited to keeping the land for strictly farm purposes, either. Assuming zoning laws will allow it, there isn’t much you can’t do with your own private property. Just make sure to work with a qualified land agent so you know the property’s highest and best use so you can make informed decisions about it.

Farmland Is Exempt From Certain Taxes

If the land is utilized as a farm, the income you generate is exempt from the wealth tax. Additionally, mortgage interest on farmland can be deducted from your taxes.

Government Assistance

There may also be government grants available to you for growing crops and purchasing livestock, which could be another source of lucrative income.

money growth time

Why It’s a Good Time to Invest in Farmland

The rising food demand due to a growing global population is proving good for farmers. Subsequently, many nations are seeking to purchase large tracts of farmland to better supply their own countries with food at a reasonable cost.

As a result, farmland is a red-hot investment right now, and, according to Marketwire, has appreciated at a rate 2% higher than inflation since the 1950s.

Historically, farmland also offers higher total returns than many other types of real estate investments, and also exhibits a much lower level of risk. That’s because farmland continues to produce product that are in high demand and likely always will be: meats, grains, fruits, and vegetables. Additionally, even when the market is fluctuating farmland typically escapes such volatility and continues to appreciate.

While there is, of course, no solid guarantee that your farmland investment will yield amazing results through crops or property leasing, you still have the chance to build equity. Over the last decade farmland prices have nearly doubled in most areas of the country, giving you the opportunity to at least make a sizable profit simply by owning the agricultural land and selling it at a later date to another investor.

farmland

In Conclusion

Globally, farmland today is a $9 trillion market. Farmland has remained a solid investment option for over 50 years, with high returns and mitigated little risk. Additionally, because the market is often confusing and at times daunting for those without sufficient knowledge of how to navigate it, there is a lot of untapped potential for investors who take the time to properly research the market and retain the aid of a realtor with experience in farmland purchases.

Farmland also makes a great addition to any investment portfolio, as it has proven resistant to inflation and is a sizable asset that will retain its worth. Farmland investing can be quite costly from the initial outset, but if you aren’t intimidated by the costs or any other potential barriers, it can be truly worthwhile investment.

COVID-19 Impacts on Agricultural Tillable Farmland

A panel of Accredited Land Consultants of the REALTORS® Land Institute (RLI) shed light on the impacts of the Coronavirus (COVID-19) outbreak on land values and land market trends across the country in a recent Virtual Round Table session. The panel, which consisted of expert land agents from across the country, mostly pointed towards a positive outlook for the land market despite volatility in other areas. One key market they covered was farmland real estate.

RLI 2020 National President Kyle Hansen, ALC, with Hertz Real Estate Services in Nevada, IA, shared his expertise on what’s happening for agricultural tillable farmland, especially as for the Midwest. Kyle’s company holds a lot of in-person auctions and due to the stay at home orders and CDC recommendations they’ve been postponing a lot of those. However, he noted some are choosing to move to online auctions. “There’s been a little bit of activity, though some sellers are withdrawing their properties.” He went on to say that “We haven’t seen much of a drop-off in the number of sales that we’ve seen happening. It is still a little too early to tell how much this is going to affect the market, but I can definitely tell you that there’s been a lot of activity; a lot of phone calls asking what’s available on the market.” He told listeners that most are looking for good deals and mixed-use agricultural/recreational properties.

On a positive note, he said “It seems like there’s money to be spent. I’ve even had a few properties that have been on the market for ten months to almost a year that I received three offers on in two-days and that hadn’t had almost any offers on over the past ten months. So there is definitely activity and some increased interest from buyers.” He believes that, especially for high-quality productive agricultural properties, they will continue not to see a drop off in buyers which is good news for sellers and the market as a whole.

agricultural land

The biggest change he’s seen since the shutdown? “We’ve been doing a lot of remote teleconferences… a face-to-face meeting isn’t necessarily warranted.” He went on to touch on other technologies that have enabled transactions to continue taking place remotely, saying “We’ve been using drones and are able to see a lot more with drone footage than ever before in the past… so it’s a tool that’s come out in the past few years that [agents] are really taking advantage of now.”

When asked by sellers if now is the right time to list, Kyle tells them “It’s the right time when you and your family decide to sell a farm.” As he pointed out, “no one can know for sure what is going to happen to the market six months from now,” so he believes “as long as [sellers] are realistic and understand the market conditions right now, I tell them that we’ve got buyers asking.” Predicting some pent-up demand after all this gets figured out and the market goes back up, he says “You have to be positioning now to get your property on the market.”

Kyle also pointed out that for those looking to do a 1031 Exchange or who are getting close to the deadline of finalizing one, they have extended the deadline to July 15. This 1031 deadline extension was fought for by the REALTORS® Land Institute which signed on to a letter from the National Association of REALTORS® petitioning congress for an extension. NAR and RLI have advocated heavily for these extensions since the outbreak of the COVID-19 pandemic.

He said the best things buyers and sellers can do right now is “to try to understand the market and visit with your land professional each and every day.”

For more insights on the impacts of the outbreak and shutdown on the ranch land market for ranchers from Clayton as well as insights on how other land markets are being impacted, make sure to watch the full Impacts of COVID-19 on The Land Market Virtual Round Table presented by the RLI 2020 Future Leaders Committee  or check out the related posts below:

If you are interested in buying, selling or investing in land real estate, make sure to Find A Land Consultant, like an ALC, in your area with the expertise needed to best assist with your transaction.

Kyle Hansen, ALCAbout: Kyle Hansen, ALC, has been a member of RLI since 2008, receiving his ALC Designation in 2011. In 2015 and 2016, he served as Chair of RLI National’s Future Leaders Committee. He is an active member of the RLI Iowa Chapter, serving as their President from 2012-2013. The chapter also awarded him the RLI Iowa Chapter Land Broker of the Year Award in 2013. Then in 2014, he received the RLI National Rising Star Leadership Award which recognizes a member approaching a mid-level in their career who is on their way to making significant contributions to the land profession and to RLI. Kyle later went on to receive a 2017 RLI Top Twenty Producer APEX Award and was among those recognized in the 2017, 2018, and 2019 APEX Producers Club as part of the RLI APEX Awards Program. Kyle received his Broker’s license in 2016 for Iowa and Missouri.

lease farmland

How to Lease Your Farmland

Owning farmland doesn’t mean that you have to grow crops or raise animals to earn money. When you lease farmland, you give someone else the right to use the property while you retain ownership. Before you lease your farmland, though, you should learn about several factors that may affect your agreement.

Do Some Research to Set a Fair Price

You must set a fair price when leasing your farmland because it will attract reliable tenants and help you earn a strong return on your investment. You will need to consider several variables to set a fair price, though.

Learn About Your Farmland

The more you know about your farmland, the better you can market it to interested lessees. For example, you might get a higher price if you have excellent soil that will nourish crop. Then again, you might need to charge less if you discover that an industrial operation used to sit on your property.

You should also walk the land carefully and note existing water features, roads, hills, and buildings. All of these things will matter when you try to lease farmland. Plenty of ponds and access to a barn could drive up the price. Too many hills, though, you could mean that you need to lower the price or focus on lessees who don’t mind hilly land.

Know How Much the Taxes Will Cost

You may have to pay property and income taxes when you lease your farmland. Talk to your county’s tax office or property value assessor to determine your annual taxes. You may also want to talk to a CPA about how the income from leasing your land will affect your federal and state tax burden.

Make sure you consider these amounts when you set a fair price for your farmland lease.

lease farmland

Get Insurance That Protects You

As the owner of farmland, you have more responsibilities than the lessee. Get the right insurance policies that will protect you from liability, property damage, and vandalism. Without insurance, you could get stuck with expensive medical bills after someone gets injured on your land and needs to recover in a hospital. You could also lose money when an irresponsible person lets your infrastructure or buildings degrade. You won’t need crop insurance like the lessee, but you do need other forms of coverage that protect you from liability.

Always Check References

Get at least three references from your applicants. Ideally, the lessee will have farming experience, so you can talk to another landowner or farmer about the person’s reliability.

Meet Applicants in Person

It is always optimal to meet applicants in person so you can get to know them. However, often this can be a difficult one to make happen since many landowners are absentee. If you can arrange to meet them though and something feels off about an applicant, then it’s best to pass on their offer. If meeting in person is not in the cards, you can tell a lot from a phone conversation or video-conferencing call as well to get a better feel for the applicant. You don’t want to lease to someone who will misuse your land or not uphold their side of the agreement.

Talk About the Business of Farming

Finding a long-term tenant will save you the hassle of looking for more lessees in the future. Whether in-person or on the phone, talk to applicants about their business plans. If they understand the business of farming, then they’re more likely to earn a good living from the land. That makes them more likely to keep leasing from you.

cornfield

Use a Land Professionals to Lease Farmland

Don’t rely on handshake deals when you lease farmland. Avoid getting lost in a corn maze, have a lawyer or farm manager write a legal contract that defines every aspect of your agreement. It should include, at a minimum, the following:

  • Beginning and ending dates.
  • Options to renew the farmland lease.
  • Any restrictions on what lessees can do with the land.
  • The monthly price of leasing the land.
  • Any fees that you will charge for late payments, returned checks, and similar situations.

“While you can use an attorney, a farm manager if possible is usually a better fit.  They are likely cheaper and will maintain contact with the tenant and land to ensure things are running smoothly,” says Accredited Land Consultant Luke Worrell, ALC, AFM, with Worrell Land Services, LLC. in Jacksonville, IL. He also suggests landowners seek to work with and ALC that is “a Farm Manager or an Accredited Farm Manager (AFM),” as it “would be extremely valuable and eliminate a lot of the extra work a landowner would need to otherwise take on themselves.”

If you need help evaluating your farmland or finding someone to lease it, Find Land Consultant in your market with specialized expertise, like an Accredited Land Consultant (ALC) for assistance. If possible, find an ALC in your area who is also an AFM to assist with this type of transaction. Accredited Land Consultants have years of experience and continuing education, so they can make the transaction easier for everyone involved.

Farmland

The Basics of Farmland Investing

Despite concerns in other areas of the economy surrounding the COVID-19 outbreak, now is still a good time to invest in farmland because the market is neither too saturated or thin. In fact, many investors are moving to investing in farmland as a safe haven. Plus, farmland has consistently yielded returns greater than 10% over the last five decades – so it is a proven good long-term investment.

If you’re interested in investing in farmland, you will need to learn the basics first though so you can make smart choices.

Top Reasons to Invest in Farmland

Investors point to a lot of different reasons when they explain why they choose to put money in farmland real estate. Some of the most popular reasons include:

  • The option to hold onto land until it becomes profitable to sell.
  • Transitioning the land to suit an emerging, high-profit market like organic produce or hemp.
  • Making money by leasing it to farmers.
  • Adding diversity to investment portfolios.
  • Scarcity. They aren’t making any more of it.

With the right approaches, farmland investing can give you an exceptional, one-time profit or provide a long-term source of income. Either way, it’s a relatively stable option that fits well into most portfolios.

What to Consider Before Investing Farmland Real Estate

Like any investment, buying farmland real estate comes with some risk. That means you should do some research and hire an expert land agent in your area before you invest in farmland. Learn about the following factors to make sure you choose land that’s likely to increase in value.

The Land’s Previous Uses

A piece of land’s previous uses can play a crucial role in your investment. If a former owner used chemical fertilizers, you might find it challenging to qualify for organic farming. If the land has sat unused for a decade, you may need to add a lot of nutrients to the farmland soil before you can grow crops.

The Soil’s Acidity and Nutrients

Crops only thrive when they’re grown in the soil with the right acidity and nutrients. Before you invest in farmland, get a soil test that measures the acidity and amounts of nutrients like:

  • Aluminum
  • Calcium
  • Lead
  • Magnesium
  • Phosphorus
  • Potassium
  • Sulfur

Without the right levels, you will either need to grow different crops or amend the soil before planting.

farmland soil

The Farmland’s Soil Drainage

Most crops grow best in soil that drains quickly. For most plants, you don’t want standing water that contributes to rot, blight, and mold.

You can test soil’s drainage by digging a shallow hole, filling it with water, and returning the next day. If the hole still has water in it, then you probably don’t want to invest in the land.

Surface and Mineral Rights

Buying farmland always gives you rights to the land’s surface. You may not, however, have mineral rights. If a previous owner sold the land’s mineral rights, then the mineral rights are not included in your investment.

Owning mineral rights doesn’t matter for some land. If the company that owns the mineral rights decides to extract oil, natural gas, coal, or other commodities from the property, though, the excavation process will disrupt farming and can even limit the amount of land available to farm.

Determine How Your Investment Will Affect Your Taxes

Investing in farmland could increase your tax burden. In most cases, you will need to pay property taxes. You may also need to pay state and federal taxes on income that you earn from the land.

farmland investing

Ways to Get Started in Farmland Investing

If you have a large amount of money, then you can start investing in farmland almost immediately. You just need a qualified land agent to help you find farmland real estate that will earn money.

Most people, however, don’t have thousands of dollars to buy acres of land. That doesn’t mean you cannot benefit from investing in farmland real estate, but you may need to take some additional steps.

Know How Much You Can Spend

You need to determine how much money you can afford to spend on farmland. Even if you need to borrow money, a sizable down payment should increase your profit potential.

Find a Funding Source

Traditional lenders often charge high interest rates that make it difficult for farmland to earn profits. If you get a low interest rate, then a conventional loan might work well for you. Keep in mind that you have alternatives, though.

Crowdfunding gives you a low-cost way to access the funds you need to purchase farmland real estate.

You could also co-invest in land with friends, family members, or business partners.

Use a Qualified Land Agent Before You Invest in Farmland

Make sure you use a qualified land agent when investing in farmland. Land transactions require specialized expertise. One mistake could make it difficult or impossible for you to get a healthy return on your investment.

Find a land consultant in your area and make sure the agent has experience in farmland transactions. Accredited Land Consultants, agents who have earned the ALC Designation, are know in the industry as the most experienced and educated agent in the industry for assisting with land transactions.

There are plenty of good reasons to invest in farmland, but you may need help from a land agent, lawyer, and CPA to make sure you choose a piece of land that will give you a strong return for your money.

soil

Sifting Through The Science of Farmland Soil Health

“Under All Is The Land” – the motto of the National Association of REALTORS® could not better encompass the enormity of that statement so succinctly. Indeed, the essence of all we do is upon, within, and determined by the land; its location, structure, depth, topography, and a myriad of other land factors that dictate and influence our lives and, certainly, our livelihood. We build our homes, cities, factories, and roads on the land, and put the lines and pipes to serve them under it. We till and farm and irrigate the land to feed ourselves and much of the rest of the world. We draw imaginary lines on the land and fight wars over it. Land is literally and figuratively our foundation. Of particular interest to the land brokers who comprise the REALTORS® Land Institute, is that portion of the land we call soil.

“It’s not dirt, its soil!”

“It’s not dirt, its soil!” is an often used distinction between what you plant your crops in and what you track into the house on your boots. While the words are colloquially used interchangeably, the study of soils is a fascinating exploration into the resource beneath our feet. Land brokers, particularly those involved in farm sales, can benefit from some basic soil knowledge. Many farm brokers were raised on farms and work in the ag communities where an understanding of “good dirt” is common. The underlying reasons, those identified by farmland soil science, are important to the users of the land, particularly farmers, and means that those who broker that land should also have a basic understanding of the elements of soil health.

Topsoil is the uppermost layer of soil and comprises the elements that make crop production possible. Topsoil is a very valuable and precious resource – it takes 500 to 1,000 years to create a single inch of topsoil that can be lost in minutes to erosion or improper management. Soil is developed from parent material (rock) over the span of millennia by the ongoing natural actions of weathering: wind, water, heat, cold, freezing, thawing, chemical and biological action, topography, and time. Constant, careful, and deliberate management measures must be applied to property manage our topsoil resource, keep it healthy and productive, and prevent unnecessary loss due to erosion.

The largest man-made environmental disaster in the U.S. was the great Dust Bowl of the 1920s and ‘30s. Because of mismanagement, and a lack of foresight and understanding, a vast area of the central U.S. was devastated by loss of topsoil due to improper farming practices and sustained wind which resulted in economic collapse and the largest relocation of our population in U.S history, as farms went broke and people left the land. This is not just past history that can be acknowledged and forgotten, because without vigilance, it could happen again. In just the last 5 years, virgin grasslands in sensitive, arid areas have been plowed and planted with the expectations of profits from high commodity prices. When those prices inevitably adjust downward, those fragile soils may be subject to excess erosion.

dust bowl dirt

In the wake of the Dust Bowl, the Soil Conservation Service was formed by the Federal Government to research the causes and prevention of massive soil erosion and take steps to train landowners, make relevant law and policy, and buy back and set aside formerly privately owned land for restoration. The establishment of our system of National Grasslands came about by these efforts. Other government efforts that offered landowner incentives to take highly erodible lands out of production produced programs such as the original Land Banking program and the decades-old Conservation Reserve Program, still in use.

The efforts of decades of the soil conservation movement are evident throughout U.S. farmland with the use of terracing, tiling, contour farming, grass waterways, strip farming, retention of crop residues, irrigation management, and numerous other practices that are a part of modern American agriculture.

Soil is very much alive. The makeup of topsoil includes the geosphere (rock and parent material), the biosphere (millions of bacteria, fungi, worms and other life), and the atmosphere (air and pore spaces for water movement, and oxygen for chemical and biological action). A healthy soil is teeming with life. Preserving and enhancing a soil environment that can host and encourage biological action is a goal of proper soil management.

Management and the health of topsoil are critical and include proper tillage methods, prevention of soil erosion, and retention of crop residue to enhance organic matter content. The Natural Resources Conservation Service (NRCS), formerly the Soil Conservation Service, is an agency of the United States Department of Agriculture (USDA) that provides information, education, services, and assistance to landowners to develop and maintain conservation plans. Most crop price support, crop insurance, and cooperative assistance programs offered by the Farm Service Agency (FSA) require that a landowner must have an NRCS approved conservation plan as a condition of participation in the program. NRCS is also responsible for creating and updating the Soil Survey, a valuable source of information in both printed and on-line digital form (more on that later).

nrcs soil texture

It is common for a farmer or landowner to discuss soil types in terms of the soil’s texture, such as a “loamy” soil or a “clay” soil. Soil is comprised of three soil texture types, all based on the size of the soil particles. The three basic soil textures, in order of size from largest to smallest, are: sand, silt, and clay. A loam is a mixture of varying amounts of sand, silt, and clay. Specific soil textures are determined by using a soil textural triangle based upon the percentage of sand, silt, and clay in a particular soil sample (see illustration). NRCS provides an online calculator that is a great resource for calculating soil texture.

Soil health and fertility status is best determined by an on-site sampling of soils, usually in a grid pattern, submitted for laboratory analysis.

The soil test lab report provides valuable information on the makeup of the soil, its pH (acidity or alkalinity), and cation exchange capacity (CEC). CEC is a determination of the ability of the soil components (primarily clay and humus) to allow for the absorption and transport of soil nutrients from the soil to the plant roots. It is essentially a measure of the soil’s ability to hold nutrients and feed the plants. Fertilizer recommendations are based on the results of a proper soil test. Variations of soil types on a farm, and even in a particular field, can be identified and accounted for. When the information is translated to geo-spatial formats, current precision agriculture technology using GPS location equipment has the ability to make on-the-go adjustments for varying soil types and fertilizer needs.

A farm broker often needs to provide soil information on a property to prospective buyers. As always, the landowner, manager, or operator is a good first source, particularly if they utilize the services of a crop production adviser who analyzes the soil conditions periodically. A very good general source of soil information is the USDA/NRCS Web Soil Survey, an online resource that provides information on most U.S. soils. A broker can readily create a soils map, from the Web Soil Survey, and accompanying summary of soil capability, average expected crop yields, and more.

The Web Soil Survey has links to a vast amount of soil information, education, and a tutorial on using the survey. A handy green “start” button opens the survey itself. The process is started on the Area of Interest (AOI) tab by defining the subject parcel as a specific area which narrows the parcel search to the level of section, township, and range. Other methods to find and define the AOI are street address, GPS coordinates, and other reference maps, in addition to the Public Lands Survey System legal description. Once the map is zoomed to the general selected area, a specific location is automatically plotted on an aerial map utilizing the AOI tool to define rectangular or trapezoidal parcel boundaries. Once the Area of Interest is defined, a click on the Soil Map tab creates a map of soil types shown on the subject parcel. Once presented with the soil map, a click on the Soil Data Explorer tab provides an extensive selection of soil attributes, analyses, and limitations on use for the area defined. Ag lands would utilize info such as crop production capability classes, expected yields, and erosion susceptibility. One can also find info and potential limitations in regard to septic system leaching fields, road construction, and other engineering and construction topics. Once the map and information is selected, the user clicks on the Shopping Cart tab to obtain the map and report in digital form for download, or in printable form. The information is free, despite use of the term “shopping cart.”

For the brokers who wish to provide basic soils information for a particular parcel, the Web Soil Survey is a quick, easy to use tool that provides the ability to create a comprehensive soil map and report for any listing. This is a good way to work with your clients to provide valuable information on a sale property and impressive data to prospective buyers. More specific information and education can be obtained locally at the nearest USDA Farm Service Agency. Most counties in the U.S. have an office and can direct you to the best sources of information, including a locally or regionally available soil scientist.

A comprehensive understanding of all things soil related would require much study and education, but a great deal of this valuable information can be obtained, analyzed, and presented for free through the programs explained here. Hopefully, you will have gained a bit of historical perspective and direction. If you are a landowner trying to sift through soil science, it is important to Find A Land Consultant with expertise on the subject, like an Accredited Land Consultant (ALC). If you are a land agent and interested in learning more on this topic, make sure to take RLI’s Agricultural Land Brokerage and Marketing and Land 101: Fundamentals of Land Bokerage LANDU courses.

This article was originally published in the Fall 2015 edition of the Terra Firma land real estate magazine published by RLI.

Kirk Goble, ALCAbout the author: Kirk Goble, ALC, has been a Colorado licensed real estate broker since 1988 and founded The Bell 5 Land Company in 2000. He specializes in farm, ranch, land, and water brokerage. He is a member of the National Association of REALTORS®, The Greeley Area REALTOR® Association, and the REALTORS® Land Institute. Goble was awarded the Land REALTOR® of America by the REALTORS® Land Institute in 2013 and is a LANDU instructor for RLI.

flooded field

Thoughts on Flood Recovery for Farmers

With record floods receding all along the Missouri river valley, producers are facing a daunting clean up. With sand up to five feet deep deposited over thousands of acres of land, when it comes to flood recovery, how do you clean it all up?

Before we discuss how to clean it up, you may be asking “Why do I need to worry?” After the 1993 floods, many producers attempted to just plant in their field as they always had. Some areas didn’t produce, and most that did dropped from 75 bushels per acre to about 15 bushels. No one was happy about that and we started looking for ways to get our fertility back.

Federal disaster grants are available to help with cost, but they are capped at 75% of the fair market value of the land before the flood.

flood recover farmland

First, you must remember that the U.S. Army Corps of Engineers prohibits dumping it back into the river channel. They consider it contaminated, preventing its introduction back into the river. For areas with less than a foot of sand deposits, deep disking is usually the most cost-effective way of dealing with it. This will turn up some organic material for our soil.

Now. to address areas with sand from one to ten feet we turn to a track hoe. With a 180-degree swing, and bucket widths up to 5 feet wide, you can reach down and get the good black dirt. Once you start, a large machine can turn over nearly an acre per day.

This works out to about $2,500 per acre for the rehab cost but, at 70 bushel beans vs 15 bushels per acre, it seems like the only approach that works. If the land is now only worth $2,000 per acre, but you bought it for $5,000 per acre years back, it must be productive enough to cover the loan. So, we continue to rehab section by section to restore the value to this once fertile delta.

About the Author: Tim Hadley, ALC, is an agent with Keller Williams Realty in Gladstone, MO. He joined the REALTORS® Land Institute in 2017, serving on the 2019 Future Leaders Committee.

Benefits and Drawbacks Of Different Types Of Land Investing

In articles about investing, “land investments” are often all lumped together, as if investing in a commercial property is the exact same as investing in a vineyard. There are many different types of land, and not every land type is right for every investor. Let’s take a look at the benefits and drawbacks of investing in some of the different types of land.

Disclaimer: There are more benefits and drawbacks to investing in a single land type than we could ever fit in a single article, so we are going to focus on some of the most important pros and cons of each land type.

Timberland

Pro: Less Risky Than Stocks

Historically, timberland has had much less risk and volatility than stocks, but timberland returns were similar to those of stocks.

“Over the last twenty years, according to the National Council of Real Estate Investment Fiduciaries, returns from timberland have been almost equal to returns from equity investments as measured by the S&P 500.” Said Bob King, ALC in his article The Basics of Timberland Investing.

Pro: Moves Against the Stock Market

Not only does timber have less volatility than stocks, timber historically moves countercyclical to other asset classes. That means even during bad markets where many other investments types take a dip, your portfolio will have a safety net.

Con: Timber Is Delicate

The elements can impact all types of land, but timber is especially susceptible to the elements. Pests, natural disasters, wildfires, and other forces of nature can have long-lasting impacts on the value of your land.

Con: A Pricy Down Payment

When timberland is priced as the “highest and best use”, often by sellers marketing their land towards people looking to build their second home, the price can skyrocket. The exact same property can double or triple if it is reclassified. The best thing you can do, is work with a land expert in your area to make sure you are paying the right price for your investment.

Vineyard

Pro: Quick Returns

If you invest in a vineyard that is already producing grapes, you will likely see a return on your investment quickly. In fact, vineyards are one of the land investment types to see the fastest return on investment (ROI).

Pro: Tax Advantages

From the immediate expensing of replacing diseased vines to tax breaks based off the depreciation of a trellis to cash-only accounting, vineyards are ripe with tax advantages.

Con: The Down Payment Might Be More Than You Think

Depending on where you buy, investing in vineyards might cost a pretty penny. In the past decade, wealthy buyers have started investing in vineyards, so the prices have skyrocketed up to over $400,000 an acre in some high demand areas.

Con: High Operating Costs

Vineyards can be very expensive to run, making it harder to turn a profit on smaller vineyards. If you are buying a vineyard that hasn’t started producing yet, it won’t produce a profit for at least the first two years, so that can add extra financial burden to an investor.

Farmland

Pro: Tax Breaks Based Off Of Depreciation

Similar to vineyards, farmland can also offer tax advantages to investors, as pointed out in the article How And Why To Invest In Farmland by Clayton Pilgrim, ALC.

“Many farms contain improvements that depreciate such as grain storage, irrigation pivots, shops, barns, etc.,” says Pilgrim. “An owner can depreciate some of these assets each year to offset yearly taxes.”

Pro: The Ability to Lease Out Farmland

Sharecropping or leasing your land can help bring in some extra income. It’s minimal effort on your end, and it brings in some extra cash.

Con: High Risk

There are many risk factors to take into consideration with farmland. The market is unpredictable and can change on a dime. And it’s not just the market – the weather, natural disasters, pests, and dozens of other factors out of your control can take a serious toll on your investment.

Vacant Land

Pro: The Freedom

The possibilities of what to do with vacant land are endless. You can transition the property to its highest and best use, hold the property until the value goes up, add solar panels or wind turbines, and more. The choice is yours!

Pro: More Affordable Than Developed Land

Since it often doesn’t come with structures, vacant land often has a lower price tag than other land types meaning the financial barrier to entry is usually a lot lower than other land types.

Con: Less Tax Advantages

Unlike some of the other land types on this list, vacant land doesn’t have much to offer when it comes to tax advantages.

Orchards

Pro: More Money Per Acre

Trees don’t need much space, so you can squeeze lots of trees onto your property to maxamize your returns.

Con: Time To Grow

There’s an old Chinese proverb that says “The best time to plant an orchard was twenty years ago. The second-best time is now”. The meaning behind it is if you want a successful future, but in the hard work now, but it can be taken literally. Trees are a slow grower, and can take three-to-six years to start producing money. If you are looking for quicker returns, consider investing in an orchard that is already producing.

Con: Fruit Rot

Fruit that falls from the trees needs to be picked up quickly or else you run the risk of fruit rot. Rotting fruit can impact the health of your trees and the land.

Recreational Land

Pro: Sentimental Value

It’s not as easy to have fun on timberland! Recreational land is an investment that you can enjoy with your family and friends.

Pro: Can Handle More Wear And Tear

Unlike other land types (we’re looking at you, orchards!), recreational land is hearty. It’s meant to handle foot traffic. If you don’t want to spend time fretting over the impact of people or weather, this might be the right investment for you.

Con: Animals (And People) Can Be Tricky

If your recreational land is used primarily for hunting, you’ll need to keep a close eye on the habits and health of the animals on your property. Attracting and keeping game on your property can take a lot of time and money.

It’s not just animals you need to worry about – poachers and trespassers can steal animals, destroy the animals’ habitats, and scare animals off your land. Be sure to have clearly marked signs and limit access points to reduce the risk of trespassers.

There are lots of benefits to land investing, regardless of land type. Tax advantages, diversifying your portfolio, and saving for retirement are all great reasons. No matter what land type you invest in, investing for your future is always a good idea.

About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.

How and Why To Invest in Farmland

OVERVIEW: INVEST IN FARMLAND

From the beginning of time, farmers have been an integral part of feeding the public. Many technological changes have impacted the farming industry, from the invention of the plow to more modern advances, such as GPS technology, irrigation, and drought-tolerant seed varieties. Many facets have changed but one has not, the dirt. Investing in land is a “simple” process of purchasing property and creating value through: revenue, appreciation, or tax benefits. Although it sounds that many “simple” investors don’t understand the difficulty in selecting properties that make sense for their investment goals when they invest in farmland, for example investing in farmland for retirement.  Listed below are a few short items to look at before investing in farmland.

FIND A PROFESSIONAL

 

Many investors both large and small make the mistake of not employing a professional that has the knowledge of the industry/market and can care for their money. Many times, throughout my real estate career, investment experience and as a farmer myself, I have seen investors not use the correct professional with knowledge of the land. When looking to diversify with farmland, seek a real estate professional with historical and proven confidence in the area.

Accredited Land Consultant land transaction expert farmland

Typically, land professionals are part of organizations like The Realtors® Land Institute where land is the single most asset class, they deal in. To go further, Accredited Land Consultants are trained and accomplished in the industry, of which only a few hundred agents have acquired the designation worldwide.  I use the quote, “I will not go to a heart doctor to get my hip replaced.” A Realtor® who sells homes in an urban area would not have the specific expertise to know the farm and ranch industry and understand the investment quality of a property. A farm and ranch real estate agent would not know about condominium prices in downtown. Use the Find A Land Consultant tool and look for an ALC Designated agent (see why) to make sure you are using a qualified land professional.

BENEFITS

One of the best benefits known to investors is the ability to have land as a tangible asset when you invest in farmland. This is especially important when a portfolio is heavily invested in the stock market.  Another benefit we see in farmland is the tax deduction in relation to depreciation.  Many farms contain improvements that depreciate such as grain storage, irrigation pivots, shops, barns and etc.  An owner can depreciate some of these assets each year to offset yearly taxes.  Always ask your favorite CPA for more information.

invest in farmland

“The United States has some of the best potential farmland for investment…”

Another great benefit to owning farmland is the ability to lease, farm, or share crop your property, to make money.  The value of farmland has increased over the last several years due to an increase in demand for food and fiber globally.  The United States has some of the best potential farmland for investment because of our democratic government and the infrastructure it possesses; ie, railroads, rivers and highways. Other countries have very fertile soil but have no roads to deliver products to a port, and it makes for a hard harvest.  Also, some foreign countries have great land to grow crops but have a corrupt government and/or the state owns all the ports of exchange.  Not all international investments are bad, they just can be more volatile than the U.S.

SELECTION

When selecting a farm to purchase an investor needs to keep three simple points in their process.  Do I have the capital to make the investment? Do I feel comfortable in a long-term project? Can I leave emotions aside when purchasing/selling?

  1. Knowing your buying potential, aka how much can you spend, is key when purchasing farmland. Some investors move capital into property with no debt and many move some capital and acquire debt through lenders.  Lenders are everywhere and, in my opinion, choose a lender that understands farmland and its characteristics.  There are options for government loans through the USDA and other government entities as well.  Consult your land professional to direct you to lenders that can help.
  2. Farmland investing for the most part is a long-term project. Many investors buy land and hold it for extended periods of time to get the most return.  Many large investors may hold land for as long as 10+ years to see the returns.  The farm economy goes in cycles much like the economy, which as a whole goes up and down.  To see real potential in farmland, one must be ready to hold on through at least 5+ years.
  3. Emotion is always on the table when it comes to tracts of land. Throughout my career I have fallen victim to getting emotional towards a piece of property.  This is a definite thing to remember when it comes to you and your family’s financial future.  Leave emotions at the door.  The phrase, “time is money”, can go both ways. Waiting two years to purchase because it makes more sense financially or selling now because you have a willing buyer, may factor into your decision. Remember, “A Bird in the Hand is Worth Two in the Bush”.

“To see real potential in farmland, one must be ready to hold on through at least 5+ years.”

DIVESTING

After the asset has reached potential or maybe you are ready to buy a new investment, it is time to liquidate. When you invest in farmland, selling the property is as important as the day you purchase. I cannot express the importance using a qualified professional. Visit the Realtors® Land Institute to find a qualified agent when it comes time to sell your investment. The right professional can elevate your sales price, alleviate hassle, and supply you with confidence to the day of closing. When selling farmland, a land professional must qualify buyers and must advertise to the masses. This requires a tailored marketing program and someone with whom has the skill set to vet buyers and make sure qualified candidates can meet or exceed the requirements to get to the closing table.

CONCLUSION

Investing in farmland is very rewarding, if done correctly. The key to remember is to surround yourself with qualified people to help you make decisions. This is your money and your future, happy hunting!

About The Author: Clayton Pilgrim, ALC, is a licensed real estate agent with Century 21 Harvey Properties in Paris, Texas.  Throughout his career he has been in production agriculture from on the ground operations to large scale management.  Pilgrim is involved in private investing in farms, ranches, and recreational tracts throughout East Texas and Southern Oklahoma.  He is a member of the Realtors® Land Institute, an Accredited Land Consultant and on the board of the Future Leaders Committee.  He resides in Paris, Texas, with his wife, Kristy, and daughter, Caroline.