rural residential farm

COVID-19 Impacts on Rural Residential Hobby Farms

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 the rural residential hobby farm market.

With a trend the past decade of urban-dwellers moving further to the outskirts of larger urban areas, the COVID-19 outbreak seems to have pushed the migration to rural residential hobby farms even further. Lisa Johnson, ALC, with Horsepower Real Estate out of Junction City, OR, shared that when it comes to buying a rural residential hobby farm or ranchette, these properties are a great “entry-level for owning land, typically 5-20 acre plots.” She feels that due to the COVID-19 outbreak “People are looking to get back to the basics a bit and out of the suburbs.” She explained these rural residential hobby farms are the perfect alternative because “the price range for these properties is well within reach of someone looking to sell their home in town and roll their equity into a down payment for 5 to 20 acres.”

Rural Residential Hobby Farm

As far as going forward, she says they aren’t seeing a lot of listing coming on but closed sales were still pretty even with where they were this time last year. She did note that since the start of April, many agents are seeing a slight slip in the number of closed sales.  Lisa predicts that there will be a lot of demand and says that right now there isn’t a lot of inventory to meet it. “We’re still seeing a lot of people calling from the larger metro areas… that, whether its 5 acres or 100 acres, they just want somewhere to go.”

She also noted that the shutdown is making it clearer than ever that not everybody needs to go to work in an office. With so many companies getting a taste of working remotely, there will likely be a shift in the future to more remote jobs that will allow people to settle further out from cities on to properties like these. As far as an outlook, she said “I also think the economy is going to come back pretty strong.”

Drew Ary, ALC, with Ary Land Co in Coweta, OK, said he is seeing a similar trend in land sales with “an increase in anything outside of 45 minutes of a major metropolitan area.” He said they’ve “had some seasoned listings that have been on the market a while and many of them have been snatched up lately,” noting them having “a lot of calls on rural residential developments.” Drew mentioned that “these properties on the outskirts of major metropolitan areas really seem to hold their value.” He also noted that the inventory and interest rates are low and thinks “we’ll continue to see an incredible increase in demand for these types of properties.

Panel moderator Eric Zellers, who is also with Ary Land Co., noted that he’s been “getting a lot of calls asking if sellers of larger tracts would consider breaking them down and selling 5 or 10 acres of the property.” It is still early to tell, but this could be a new trend in buyer purchasing as more and more people look to invest in living outside urban areas and instead on a rural residential hobby farm or ranchette.

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.

About: Drew Ary, ALC, is an agent with Keller Williams Advantage. Drew has a vast knowledge of raw land, land with improvements, and farm and ranch properties. Above all, he has a passion for selling land and farm and ranch properties by bringing buyers and sellers together through honesty and integrity. Drew spent 10 years in the real estate auction world with roles as a Closing Coordinator, Project Manager, and a large portion as the Director of Farm & Ranch Sales. Drew moved to traditional real estate with Keller Williams Advantage at the beginning of 2017.

Lisa JohnsonAbout: Lisa Johnson, ALC, is the Owner/Principal Broker at Horsepower Real Estate. Specializing in Farms, Ranches, and Equestrian Properties in Western Oregon, her and her team of land Brokers are among the top rural agents in the area. Lisa is a member of the RLI Pacific Northwest Chapter, and a 2019 Future Leaders Committee member.

recreational land camping

Are Buyers Moving To Recreational Land In The Age Of COVID-19?

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 recreational land real estate.

Justin Osborn, ALC, out of Durango, CO, who is with the Wells Group Durango said he is “definitely seeing an increase in demand for recreational properties.” For example, he “had three properties that had been on the market for over a year and all of them went under contract the first week of March.” He expects there are a lot of buyers out there “just looking to get away with all the sports clubs shutdown, the recreation centers shut down, and people just can’t get out to spend time as a family recreating like they were able to before all this started.” This is already being reflected in the market as “demand for recreational land has actually gone up,” at least so far in the early days after the outbreak and shutdown.

recreational land

While the demand has gone up, the interesting thing that Justin pointed out is that many of the recreational tracts being purchased are on the smaller-side, as opposed to larger more expensive parcels. This means that many buyers in the market right now are turning out to be potentially first-time land buyers or middle class buyers looking for a refuge to camp and “hunt to fill their freezer.” In his opinion, “We’ll probably see a small uptick, less than 5%, in the small parcels.” He said he doesn’t “see those depreciating, at least right now.”

The bigger parcels, especially in the millions of dollars, he noted that “there’s still a lot of inventory of those. I don’t see those larger ranches doing quite as well, especially the ones that are overbuilt… those I’m afraid could get pretty hard [to sell].” He noted, though, that the depreciation of those larger ranches though should be more of a short-term hit that will eventually correct in the longer-term.

Overall, Justin is predicting “a lot of opportunities, even for the average Joe, to get themselves into a recreational property.”

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.

About: Justin Osborn, ALC, is a licensed associate real estate broker with The Wells Group. Justin is a member of the REALTORS® Land Institute and serves as Chair of their 2020 Future Leaders Committee.

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.

timberland

COVID-19 Impacts on Timberland

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 timberland real estate.

“Much of the forest products market is tied to housing, especially softwood markets, and our long awaited housing boom had finally arrived. We were in a period of extreme optimism,” said Chris Miller, ALC, with American Forest Management Inc. in Charlotte, NC, talking about the market before COVID-19. He went on to say that “Since early March, however, we’ve seen some softening in our forest products market… and mills are lowering their inventory in preparation for what they perceive as a slowdown in demand for their products.” He did note, though, that its fairly early to tell, so price reductions have been modest so far. He explained, however, that he does “anticipate an 8% to 12% decrease in unit pricing across forest product markets in 2020.”

As far as demand, he also noted “much of this is tied to housing starts, the numbers for which have now been revised from an anticipated 1.6 million to around 1.2 million for 2020.”

timber

However, he said it is not all bad news, “There is optimism, we anticipate a v-shaped recovery for our business… with some gradual increases [in product prices] starting in the fall of 2020.” Part of the reason, he says, is because the underlying fundamental need for forest product is so strong. We have under-built homes in our country that are going to need replaced or repaired. “One of the main benefits of timber is you can delay a harvest.” He also noted that, as a land agent, incoming “call volume is much higher than it was pre-COVID-19 so the interest in doing business is still there.”

Talking about investing in timberland “The broad consensus is that we expect little impact on [long-term] timberland values. Timberland investors in general have a really long-term view with most of their acquisitions based on ten-year or longer ownership periods.” As far as the outlook, he said “Whenever there is a drop like this in equities I think it reminds folks of the value of timberland [or farmland] and a balanced portfolio.” He also notes that timberland makes a good hedge against potential inflation, which may result from the stimulus package that was approved.

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.

For more insights on the impacts of the outbreak and shutdown on the timberland market from Chris 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:

Chris Miller, ALCAbout: Chris Miller, ALC, is a land broker and consulting forester for American Forest Management, Inc. in Charlotte, North Carolina.

ranch land

What Ranchers Need To Know About COVID-19’s Impacts on The Ranch Land Market

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 ranch land real estate.

Clayton Pilgrim, ALC, with Century 21 Harvey Properties in Paris, TX, shares his insights on the impacts ranchers are seeing from the shutdown caused by the outbreak. You can’t talk about the land values for ranch land though until you talk about the demand, so he started by noting that “The restaurants being shutdown has left us right now about 10% off where we were last year, looking at $100-200 per head loss on cows. We’ve had some price adjustment, so people are pulling cattle back to try and wait until prices go back up. In my opinion, though, that’s going to cause things to go even further down.” Additionally, he noted that the demand for higher quality cuts of meat has gone down due to restaurants being shut down and people looking ahead to potentially another recession with higher levels of unemployment. “If I’m a beef producer today, I would definitely keep things tight,” he suggests to current ranch land owners.

So what does all that mean for land values? Clayton says “In my opinion, I think you’re going to see pretty declining prices in [ranch land] in the next six-months to maybe a year,” just looking at the decreased demand for poultry, beef, dairy, and other ranch land products. “One positive for any potential buyers,” he joked, “is that interest is sure cheap right now!”

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.

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 Texas and 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.

commercial development land

COVID-19 Impacts on Commercial Development Land

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 commercial and development land real estate.

Accredited Land Consultant (ALC) Matt Davis with Cushman & Wakefield in San Diego, CA, says the biggest issue they are running into in the commercial land development market is that “most developers, investors and lenders we’re working with don’t know how to underwrite the risk. They don’t know how much of a discount is reasonable, so, to eliminate the risk, they’ve put their pencils down.” He went on to note that “There are buyers who are still underwriting deals. The ones we’ve talked with have been using more conservative assumptions, some of those assumptions include slower lease absorption for new construction, expecting no rent growth over the next couple years, and increased cap rates at their exit. Again, those are all conservative assumptions that will result in a lower land value than there would’ve been a month ago.” So what does he recommend sellers do now? “It is a great time to put together marketing collateral and be prepared to enter the market.”

He also shared some good news about the development land market. He is seeing “very different impacts on transitional land since these properties are less likely to be impacted in the short term. The biggest disruption for [transitional land] transactions is coordinating site visits and meetings with municipalities, project consultants, and other parties needed to complete the transaction. Overall though, there is good news on the longer-term development front.”

For more insights on the impacts of the outbreak and shutdown on the commercial development land market from Matt 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.

Matt DavisAbout: Matt Davis is a real estate broker with Cushman & Wakefield. He is based in San Diego, CA, and assists clients with the disposition and acquisition of investment grade agricultural and transitional land assets. He is also founding member of the company’s Land Advisory Group and Agribusiness Solutions Team. Matt is a member of RLI, received their 2019 Land Rising Star award, and serves the 2020 Future Leaders Committee.

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.

private ranch property

Landownership Basics: Private Property Rights

“The best investment on earth is earth.” -Louis Glickman

Fee simple landownership comes with some fundamental private property rights no matter what kind of land you own and where you own it. Understanding your private property rights from the start, even before owning a property, will ensure you get the most enjoyment from your property without violating the rights of others.

Fee simple “refers to real estate or land ownership. The owner of the property has full and irrevocable ownership of the land and any buildings on that land. He is free to do whatever he wishes on the land subject to local zoning ordinances. Fee simple and fee simple absolute are the same thing. Fee simple is the highest form of property ownership.”

“Private property rights are one of the pillars of capitalist economies, as well as many legal systems, and moral philosophies,” according to an article defining property rights.

Right to Possession

Once you fully own your own piece of land and hold the title, you retain possession and control its rights. If you have a mortgage, then the lender probably holds your land title until the loan and its interest is paid in full. Until then, you will have limited possession rights and potentially limited private property rights for use. Depending on where you live and the terms of your loan agreement, the lender could take the property quickly once you stop making payments.

land real estate private property

Right to Control

Assuming that you do not live in a neighborhood or city with zoning regulations or other laws that forbid certain activities, you can participate in any legal action on the land you own.

Keep in mind though that neighborhood associations and similar organizations often have covenants that restrict certain activities, so you’ll want to ensure none apply to your property. Covenants may include relatively harmless demands like requiring you to maintain grass that’s visible from the road. Other covenants may restrict activities like raising animals, operating a business, or using chemical fertilizers.

Always read local covenants and laws closely before purchasing land. Using a land expert in your area is the best way to learn about your property rights.

Right to Use and Enjoyment

The right to use and enjoyment means that you can engage in any legal activity on your property. The word “legal” carries a lot of weight in that sentence. For example, owning land does not mean that you can open a casino there without a state license. You must comply with local, state, and federal laws at all times. In fact, the Department of Justice can seize property that they think has been used to commit crime. Federal forfeiture law lets the government take ownership even without proof that it was connected to a crime.

You’ll also need to gather information on any zoning regulations that are tied to your property. According to legal experts, “Zoning regulations and restrictions are used by municipalities to control and direct the development of property within their borders,” and therefore restrict, limit, or otherwise define the uses of a property.

agritourism apple picking

Right to Allow Others a Right to Use

As a landowner, you can give other people access to your property. In fact, it is for many one of the most lucrative aspects of owning land real estate. You can choose to let others access the land for free, or you can charge for access. For example, investors may purchase farmland so they can earn money by leasing it to farmers. Recreational landowners may charge for access to hunt their properties. Agricultural landowners may charge visitors to access for agritourism like fruit picking, pumpkin patches, or corn mazes.

private property signRight to Privacy and to Exclude Others

No one has the right to access your property without permission. You have the right to tell other people that they cannot come onto your private property.

There are only two caveats to the right to privacy and exclusion. Law enforcement can come onto your property while pursuing a suspect. They do not need to stop their pursuit to seek your permission. Law enforcement can also access your property without consent by getting a judge to issue a warrant. If a judge has reason to believe that illegal activities take place on your property, then it only takes one document for officers to investigate.

Additionally, people who have been granted legal rights to use the property for access or another use by previous owners should be considered.

Right to Transfer Ownership

When you own land, you have the right to transfer ownership as you see fit. You could give the property to a relative or friend as a gift. You could include the land in a will or trust. You can also transfer ownership by selling the estate to someone.

Right to Use Property as Collateral

Your land has value that you can use as collateral when using a mortgage to purchase other properties. Collateral may help you qualify for a mortgage or other loan, and you may get a lower interest rate because your land offsets some of the lender’s risk. Keep in mind that failing to repay the mortgage could mean losing rights to your property.

Air Rights

For the most part, you own the right to use the air space that’s above your land. There are limitations to your air rights, though. You could potentially build a skyscraper on your property as long as doing so doesn’t prevent other owners from enjoying their land or violate any zoning laws as mentioned above.

You also don’t have the right to build horizontally across someone’s land. You can only construct vertical buildings that follow your property lines. If the building hangs over the property line, then the neighboring owner could demand that you remove the structure. Air rights especially come into play when it comes to developing on commercial land or residential land in urbanized areas.

What Landownership Rights Do Not Include

Owning land gives you considerable rights over its use, which is one of the biggest draws for land buyers in all markets. Surface rights, however, do not ensure that you control access to the ground below your feet or the air above your head. Before purchasing land, it makes sense to perform an extensive title search or Mineral Rights Search. You may discover that someone else already owns the minerals, oil, and other valuables under the surface of your property.

Understanding Your Private Property Rights

Landownership gives you exceptional rights, but private property rights can have limits. Make sure you understand your private property rights before you purchase a piece of land. Doing so could influence where you choose to buy property and how you use it.

When it comes to learning about your property rights, Accredited Land Consultant Matt Davis with Cushman & Wakefield in San Diego, CA, says “In addition to the personal enjoyment you and your family may receive from spending time on your property, owning land is a tried and true way of preserving and growing wealth. By leveraging the expertise of a land professional early in your property search, you can be confident you know what you are buying, what rights others may have that impact the property, and that you will be able to use the property the way you desire, for generations to come.”

The best way to learn about your property rights or to learn about the property rights of a property you are interested in purchasing is to Find A Land Consultant, like an Accredited Land Consultant, in your area with expertise in the land market.

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.

buying land

5 Mistakes to Avoid When Buying Land

Buying land forces you to make a lot of choices. Unfortunately, people who don’t have much experience buying land rarely know how to avoid common mistakes. And even experienced buyers can make mistakes.

Check out these pitfalls to avoid so you can make informed decisions the next time you are in the market buying land.

1. Choosing the Wrong Type of Funding Source

You have several funding options when buying land. If you have exceptional credit, then you might find that a conventional bank or credit union will lend you money.

Another option is going through the Farm Credit System. “The Farm Credit System (FCS) in the United States is a nationwide network of borrower-owned lending institutions and specialized service organizations. The Farm Credit System provides more than $304 billion in loans, leases, and related services to farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusinesses, and agricultural and rural utility cooperatives.

Congress established the Farm Credit System in 1916 to provide a reliable source of credit for farmers and ranchers. Today, the Farm Credit System provides more than one-third of the credit needed by those who live and work in rural America.”

Don’t assume that you have to rely on a bank and a loan, though. Crowdfunding has become a popular alternative to traditional investing.

Explore as many options as possible to make sure your funding best meets your needs.

buying land

2. Accepting High Interest Rates That Increase the Land’s Price

If you decide to get a loan for buying land, look for a lender that will give you a low interest rate. The more interest you have to pay, the higher the land’s overall price becomes.

Putting in extra effort to find a low-interest loan can help you save a lot of money. Even a couple of percentage points will affect how much you spend.

Land loans usually have short repayment schedules, so you will need to repay the lender within five years. Let’s say you borrow $100,000 at 3% interest. At the end of five years, you will have spent about $7,812 on interest.

At 6%, the total interest comes to nearly $16,000. The extra 3% more than doubles your interest payments.

Fight for a lower interest rate when buying land. Otherwise, you will find it much more difficult to repay the loan or earn a profit from the property.

3. Not Inspecting A Property Before Buying Land

Never purchase land before you have it inspected by a professional. The features that you look for will depend on how you plan to use the land. For example, you need to test the soil before you can turn the property into a farm.

Other essential factors to inspect before buying land include:

  • Access to the property
  • The area’s topography
  • How the neighbors use their land
  • Whether the land is in a flood plain

Additionally, you need to hire a surveyor who can show you the property lines. Don’t rely on an old map that shows where one property ends and a different one begins. An inaccuracy could eventually cost you a lot of money, so don’t take any risks.

4. Failing to Get the Right Insurance Policies

Don’t start buying land without getting insurance policies that will protect your investment. Talk to your land consultant to determine what policies you’ll need. Then, determine whether you need additional policies designed for specific uses of land. Below are a few common types of policies landowners can take out.

Title Insurance

Ideally, your property has an accurate history showing who owns the land. Mistakes happen, though. With title insurance, you get protection from:

  • Delinquent tax bills from former owners
  • Unpaid mortgages from former owners
  • Forged documents
  • Hidden mortgages
  • Clerical errors
  • Easement problems
  • Claims from the children or spouses of previous owners

Buying land without getting title insurance is a big gamble. You could lose ownership without getting anything in return.

General Liability Insurance

Anyone who gets hurt on your property can sue you for damages. It’s a problem that all landowners face. The possibility of injury becomes even more significant when you buy land for hunting or agricultural uses.

General liability will pay for your legal protection. Instead of paying a high-priced lawyer, you give your insurance company a relatively small amount of money to avoid court.

Property Insurance

If you plan to build structures or store equipment on your land, then you should property insurance. Property insurance can help cover structures and equipment like barns, vehicles, and tractors.

Crop Insurance

Investing in agriculture can lead to exceptional long-term profits. Unfortunately, you can’t predict how the weather several years from now will affect your crops. Crop insurance can help protect you from significant financial loss caused by unforeseen conditions.

Talk to crop insurance providers about Revenue Protection and Revenue Protection – Harvest Price Exclusion policies to help you decide which option works best for you.

5. Working With the Wrong Type of Agent When Buying Land

Don’t make the mistake of thinking that all real estate agents have the same level of experience in doing land transactions – in fact, most have never done a land transaction. Land transactions are different from buying a home. When buying land, you need to find a land consultant in your area with experience working in your market doing the type of land transactions that are similar to the type of land you are trying to buy.

You can easily ensure that you get help from a qualified land professional by using an agent with the elite Accredited Land Consultant (ALC) Designation.