dynamic duo

Dynamic Duos: Cost Segregation and Section 453

The old west is known for its dynamic duos. Buffalo Bill and Anne Oakley. Frank and Jesse James. Earp and Holliday. John Wayne and Anyone. And of course, the most famous dynamic duo… cattle drives and beans. But there is one Dynamic Duo that is here today and can help ranchers and farmers in an amazing way.

The latest Dynamic Duo is cost segregation (CS) and Section 453, and it provides farmers and ranchers with an amazing opportunity to accumulate more wealth. Here is how the Dynamic Duo works.

Cost Segregation and Land Real Estate

Depreciation is a huge opportunity when owning income producing real estate. Depreciation can be used to shelter income from cattle or farming operations. What if there was a way to increase depreciation and shelter more income. That’s a good thing, right? Absolutely and that’s exactly what CS does.

So what is the first half of the Dynamic Duo, cost segregation? A cost segregation study (CS case study on Vermont family farm) is an engineered based study approved by Congress on each of the assets in a real estate transaction. This could be an irrigation system in a farm or a structure in a cattle operation to wiring in a building.  The purpose of CS is to bring more accelerated depreciation to the property which will result in higher deductions in the early years of the business, keeping more money in the business owner’s pocket because of reduced taxes.

A cost segregation study can increase the rate of return which could help a farmer or rancher sell a property or make the property more attractive to buyers.  At the same time, a CS study can help a seller because the study may be able to shelter more income which would increase the rate of return when that’s a main concern to a buyer. A good CS program can also lessen taxes because more depreciation shelters more income so there is less income to pay taxes on.

That’s the good news but now there is also some not so good news. When using cost segregation to accelerate depreciation, that depreciation must be brought back in for tax purposes when selling. Having said that, you can transact a 1031 exchange and defer the accelerated depreciation, but the accelerated depreciation will count against the replacement property that you buy so there will be less available depreciation. But don’t worry – there is still good news. If there wasn’t, there wouldn’t be a good reason to write this article.

cowboys sunset

Section 453 and Land Real Estate

The seller still has opportunities to defer the accelerated depreciation and that’s why Section 453 is the second half of the Dynamic Duo. Just call me Buffalo Bill…or John Wayne. Either works. What if you could use cost segregation to shelter income and reduce taxes and then defer the accelerated depreciation recapture tax for as long as the property owner would like.

Section 453 can be a great opportunity when the farmer or rancher wants to sell and retire or wants more real estate. If he wants to retire, our Section 453 tax deferral strategies can defer the capital gains tax, state tax, depreciation and accelerated depreciation recapture and the Obamacare tax on the gains on his sales proceeds for as long as he would like and the tax deferrals and the income generated from the deferred taxes can be passed on to his heirs. Also, by deferring taxes, the seller can generate a much larger lifetime retirement income than if he paid taxes first. Seller wins.

Let’s change gears and now the property owner wants to sell and buy another property. Our Section 453 tax deferral strategies can often work better than a 1031 exchange. Here’s why. When selling and using a 1031 exchange, you do not get a new depreciation schedule but rather, the non-depreciated portion of the original property plus the increase in the new property. For example, say the original property that is bought for $1 million is depreciated at 80% and sells for $4 million and using a 1031, a $5 million property is bought. The depreciation on the new property will be the 20% of the original property and $1 million on the new property. You can use a Cost Segregation Study, but the benefits will be limited because of the limited depreciation of the new property.

However, using our Section 453 proprietary trust, you can sell your property and then at any time in the future, buy another property of any kind for any price. Whether the new property is more than $4 million or less doesn’t matter. The property owner can defer the accelerated depreciation in addition to the capital gains tax, state tax, and the Obamacare tax on the sale of the old property and complete a new cost segregation study to shelter more income from the new property. Sheltering more income also reduces taxes and accumulates wealth. Another win for the seller, Buffalo Bill and John Wayne.

The bottom line is that the Dynamic Duo can be a great opportunity for brokers to help their clients keep more of their hard-earned money in their pockets and provides opportunities to reduce taxes and make properties more attractive when buying or selling. So, get to know the Dynamic Duo. Let’s call Groot to make us some beans but preferably without all the cattle. Best wishes and Happy Selling!

About the Author: David Fisher is the managing partner for Creative Real Estate Strategies, a national firm that can defer taxes on highly appreciated real estate when a 1031 isn’t appropriate or can’t be completed. He has been an RLI sponsor since 2006 and has sponsored over various RLI events nationwide. He can be reached at 713-702-6401 or david@cresknowsrealestate.com.

sunset oil land

Getting It Right: Mineral, Oil, and Property Rights

When you buy land, you might assume that your property rights give you ownership of everything below your feet. That’s not always the case, though. While you have surface rights, someone else may have mineral rights to its metals, oil, natural gas, and other commodities.

If you currently own land, then you may need to have someone research its previous ownership rights to determine whether you own the mineral rights or not. Ideally, though, you will know your surface rights and mineral rights before you buy land.

Owning Land Doesn’t Always Mean You Own What is in the Land

When surface and mineral rights get separated, you need to know it affects your property and ownership.

Surface Property Rights

Surface rights only apply to the surface of the land. When you purchase a piece of property, you always get surface rights for the plot of land. Surface rights do not apply to anything below the surface of the property.

Mineral and Oil Rights

Mineral rights apply to ownership of anything below a property’s surface. It often refers to more materials than minerals like copper, gold, and silver. It can also refer to oil and gas rights.

When someone owns mineral rights, they get to access and harvest commodities below the land’s surface. Drilling, mining, and other harvesting options often disrupt the surface. That may not seem fair to the person who buys property. Still, the owner of mineral rights can, within reason, make changes to the surface while accessing sub-surface minerals.

In some cases, companies can access commodities without disturbing the surface. For example, a company may use horizontal drilling to extract oil and gas from the land.

property rights

Leasing and Selling Mineral Rights on Your Land

It’s possible to earn money by leasing or selling your land’s mineral rights. In 2013, landowners made about $22 billion from their mineral rights.

When selling mineral rights, you give someone or a company absolute ownership of the commodities in your land. Unless you have the opportunity to repurchase the rights, your property rights will never include ownership of oil, coal, and natural gas. Depending on the terms of your sale, you may get a lump sum from the buyer or receive a percentage of the money earned when the owner sells the oil, natural gas, or other commodity.

Some people assume that leasing their mineral rights gives them more advantages than selling the rights. The benefits and disadvantages depend on the terms that you and the other party reach.

After you lease mineral rights, the new owner may extract everything of value. If that happens, then you may lose future opportunities to make money from the mineral rights. Leasing can also mean that you don’t get any money unless the new owner finds and makes money from commodities in your land.

By leasing, you get your mineral rights back after a determined amount of time. You also run the risk of making less money and losing the opportunity to earn money from the land in the future.

Things to consider before selling or leasing mineral rights include:

  • How it will affect your taxes.
  • How accessing the minerals, oil, or natural gas will affect your land.
  • Whether removing the commodities will make your land’s surface sink.
  • Whether drilling or digging will affect wildlife or water near your property.
  • Clauses that define things like where drilling can occur and who will pay to repair any damage caused to the land’s surface.

Before you agree to lease or sell rights, make sure to work with a qualified land consultant in your market who can refer you to a lawyer with plenty of experience in these areas. You will need an expert to explain the details and help guide your decision.

Ideally, You Should Know Your Property Rights Before You Buy Land

When you buy land, earlier property rights agreements still apply. If a previous owner sold the mineral rights, you are stuck with the conditions of that deal.

You can learn more about your rights before buying property by performing a title search or Mineral Rights Search. Plenty of title companies offer services that will help you understand your property rights.

It’s important to remember that title searches don’t always find all of the information relevant to your land. Some experts recommend assuming that you don’t own mineral rights when you buy property. If anyone has sold the rights in the past, then you will not own the mineral, oil, gas, and other commodities beneath your feet. When land gets sold to dozens or even hundreds of different people, it’s easy to miss an instance when one of those owners sold the rights.

If you want to buy a piece of land, start by finding a land consultant in your area who can give you accurate information about surface and mineral rights in your state. The rules in one area aren’t always the same as those in other places.

industrial hemp land

What You Need to Know Before You Buy Land for Industrial Hemp

The industrial hemp industry is booming, especially as cannabis legalization continues to add new vistas of opportunity in a growing number of U.S. states. The share of agricultural land devoted to hemp quadrupled from 2018 to 2019, growing from 27,424 acres to whopping 128,320 acres according to a recent LandHub article titled Hemp: The Benefits Of The New Mega CropFinding just the right land on which to grow these crops, however, can prove challenging for farmers, real estate professionals, and investors. Let’s examine some of the most important points you must consider if you’re thinking about taking this potentially rewarding (but also potentially risky) step.

Deciding Which Industrial Hemp Products to Produce

One of the first considerations you’ll have to make when working out your long-term strategy is deciding what varieties of the crop you need to plant and raise to meet your goals and demand. Hemp and marijuana are derived from the same plant family, Cannabis Sativa, and are bred and used for different purposes. The primary difference between the two is the content of THC, the psychoactive cannabinoid produced by the plant, with hemp being defined as cannabis with 0.3% THC content or less. Your options may include:

  • Industrial hemp – A straightforward hemp crop can provide the raw materials for use in paper, plastic substitutes, fiberboard, rope, fabrics, and even protein substitutes for vegan and vegetarian foods.
  • CBD oil – Oils containing CBD (cannabidiol) are derived from marijuana plants; they may also include hemp-derived carrier oils. CBD oil has become increasingly popular for treating issues ranging from depression and chronic musculoskeletal pain to neurological disorders, cancer symptoms, and even acne.
  • Medical marijuana – Medical marijuana has been prescribed for the treatment of conditions such as glaucoma, nausea, epilepsy, Crohn’s disease, and PTSD.
  • Recreational cannabis – States that have legalized recreational cannabis may see substantial profits from taxing this cash crop, just as growers can make considerable money from providing it.

dog cbd oil

Obviously, you must understand your state’s laws on the growth and sale of cannabis before you can make any informed plans about what and how much of it you can and can’t grow. Passage of the 2018 Farm Bill defined hemp as separate from marijuana and allows production in all states. However, states may opt out of allowing hemp production and several still prohibit growing, so it is critical to be aware of your state’s status. In all instances, this is a highly regulated plant requiring careful attention to permitting, testing, transportation, and processing. The compliance requirements are paramount and can be challenging and expensive. In states that don’t permit the use or sale of recreational or medical marijuana, for instance, your options are limited to hemp. If you intend to buy land in a state like Colorado (which spearheaded the trend toward statewide legalization beginning in 2012), you may face no such limits, though local county and municipal laws do pose restrictions, so it’s still always important to check.

Who Is The Target Market For Your Industrial Hemp?

In any business, you must know your target market before you can stand any chance of success. Before you buy land for your future “hempire,” do your research to ascertain which consumer or industrial segments might have a genuine need for your crop. Once you’ve located your prospective buyers, you can market to them directly and effectively.

Another important aspect of pre-planning is estimating the size of your target market and the volume of its demand for your crop. Many hemp producers find themselves stuck with a massive overproduction problem because they misunderstood how much hemp their buyers actually wanted or needed. Market research is a must if you want to avoid this disastrous scenario.

industrial hemp land

Soil, Environment And Other Potential Problems When Buying Land For Growing Industrial Hemp

Hemp may be a remarkably versatile crop, but it isn’t the easiest plant in the world to grow. For one thing, it’s highly susceptible to mold, which can been known to infiltrate and destroy nearly half of many hemp crops. Even trickier is the issue of making sure that the hemp your land supports has a THC content of less than 0.3 percent. Any deviation above this level makes the plant illegal to sell in states that haven’t legalized psychoactive marijuana products for medical or recreational use, and usually results in having to destroy the crop.

Make sure that your land offers a prime environment for hemp growing. Seek out land that offers good drainage, a non-acidic pH level, and mild temperatures. and a generally humid climate. Arid regions reduce the potential for mold issues compared to humid climates, but will be more likely to require irrigation of the crop. In general, hemp will use approximately 1/3 less input of water, nutrients, and pesticides than a typical corn crop. 15 inches of annual rainfall or supplemented irrigation is a minimum requirement for full production potential.

Even the most welcoming soil and climate can lead to nothing if your land is spoiled by environmental toxins. The cannabis plant is a bio-accumulator that draws elements from the soil, so much that is has uses in phytoremediation, the cleanup of toxic elements by plants. Many hemp products, particularly oils, are processed as concentrates of the plant’s compounds, thus any contaminant or unwanted element is concentrated also, and could rise above allowable limits. That’s why, in addition to checking the nutrient levels in the soil, you’ll also want to have the soil and groundwater tested for lead and other dangerous contaminants before you commit to a purchase.

industrial hemp cbd

The Bottom Line: You Need a Land Expert

As you can see, selecting and buying land for hemp farming forces you to think about a number of factors, any of which could make all the difference between boom and bust. Make the process easier for yourself by both doing your own research to learn about hemp as well as consulting the proper experts, including an experienced land expert, ideally an Accredited Land consultant (ALC) who knows how to advise you every step of the way. Fortunately, RLI makes this step the easiest one of all — just head over to our Find a Land Consultant page!

Happy Hemping!

Kirk Goble, ALCContributing 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.

purchasing hunting land

Buyer Beware: Five Myths About Purchasing Hunting Land

When it comes to recreational land, one hunt precedes the other. When it comes to having your own hunting land, you’ll first want to seek out the best land for sale. Before you know it, you’ll hunt with the freedom that purchasing and owning your own hunting land affords.

Identify What’s Most Important

Rarely is there a single goal when you decide to buy land. What exactly do you hope to do with your recreational land? Is it for hunting, fishing, camping, ATV-ing or all the above? Is the land an investment? Do you hope to lease the land for farming? Are mineral rights a consideration? If so, who owns them? The highest and best use of the land for sale impacts price, often dramatically.

There are many ways to evaluate hunting land, beginning with road appeal. Homes have curb appeal, while land has road appeal. For example, is the land well maintained? How easy is it to get to? There’s always a balance to strike between travel time and hunting time.

When considering purchasing a hunting land parcel, inquire about trail camera footage, if available. The current owner may have years of footage revealing important information about the quantity and quality of the wildlife on the property. Once you make your purchase, install your own trail cameras without delay.

Attracting Game

You also want to ask yourself, “What is the realistic potential for attracting game to the land?” Check out water sources. If they are inadequate, consider what it will take to excavate a pond or add water troughs along deer trails. Are current or potential food sources available to attract the prey you seek? For example, deer love everything from clover to wheat, and from chestnuts to apples. Like wild boar, they love acorns too.

Finally, if you plan to add crops, trees or other food sources, make sure the soil type is appropriate. For example, heavy clay soils and chestnut trees do not mix.

Return on Investment

Getting revenue from hunting fees is great when it’s workable. However, there are other sources of revenue like harvesting timber and leasing for agriculture. Of course, there are intangible benefits as well. you may want to use your recreational land to entertain guests. Or, perhaps you’ll make it a place where you teach your children about hunting. Certainly, your return on investment may be about far more than money.

Building Generational Wealth

Over the generations, remote parcels may become land that’s ripe for development. Additionally, land has a tendency to increase in value over the long-term, even sometimes better than the stock market. It an be a comfort knowing that, one day, your grandchildren and great-grandchildren will enjoy the benefits of your foresight.

purchasing hunting land

Five Myths to Dispel About Hunting Land

Prospective land buyers purchasing hunting land will want to see through common myths that many first-time buyers fall prey to during the process. A diligent, fact-based approach with the assistance of a qualified land expert is always best.

Myth #1 – It’s just about buying an attractive piece of land

This is a little like shopping for cars based on color alone. It’s limiting. Okay, so the land is attractive to you. But is it attractive to the animals you hope to hunt and the food sources those animals need to thrive? Sources of food and water are key. So is the sense of security animals get from having adequate cover. Location is another key factor so make sure to consider who your neighbors are and seek information regarding any pending or potential future development projects nearby that may affect your property.

Myth #2 – Disregard open land for hunting

How committed are you to making the land more amenable to hunting in the long term? If you are willing to add features to attract wildlife, you might get more value by purchasing less desirable (and lower cost) land upfront. Then, you can improve the property to give deer cover from predators where none exists by planting low-growing shrubs and tall grasses and doing things like adding water, food plots, and licks where appropriate.

Myth #3 – Land values only go up

If you want to see your hunting land as an asset, check the potential for appreciation. Over time, demand may increase or decrease. Understand that while usually the value of the land will increase over the long-term, there is always the possibility that the land’s value does not increase. Fortunately, there are ways you can tilt things in your favor like making improvements to the property and investing in land that already has known potential for appreciation.

The most important thing you can do to ensure the property your are purchasing is a good investment is to Find A Land Consultant who is a qualified expert in your market. Owning, using, and building the value of your land can bring more pleasure than monitoring an increase in the value of stocks or a 401k.

Myth #4 – It’s simple to buy the right land

Buying a hunting property requires due diligence. For example, an awareness of possible zoning restrictions is critical. You also need a thorough knowledge of the prey you seek. Look for land with the features needed for successful hunting. Chat with nearby landowners about wildlife management. Are they fellow hunters concerned about how the harvest proceeds, or not?

Myth #5 – It’s tedious buying land

You don’t need to be an expert right out of the gate. A land real estate specialist can help fill in any knowledge gaps as your hunt for the perfect property when purchasing hunting land. It is crucial to find a trustworthy land specialist with a thorough understanding of the land market in your area. If you are purchasing hunting land, be sure to seek the advice and guidance of a land expert. Qualified land professionals in your area can be found using the REALTORS Land Institute’s Find A Land Consultant search tool.

With the right attitude and approach, the search for land can be downright fun. Appreciate the quest for finding the right piece of land for what it is – a journey to be enjoyed. During your search, stay focused on the pleasures that owning the right land will ultimately deliver. Envision the camaraderie and the invigorating days to come. Happy hunting!

ranch cow

Seeking The Balanced Ranch

While Colorado is known for its world-class ski areas, fly-fishing, elk hunting, mountain biking, and music festivals, it’s also home to hundreds of producing cattle ranches that contribute mightily to the state’s economy.

While states at lower elevations may have self-contained cattle operations, where all ranching operations occur on the same property, Colorado is a different story, with multiple properties necessary to form a “balanced” ranch. The ideal combination is a productive home ranch at a lower elevation that has ample sunshine, excellent water rights, a good set of working corrals, adequate housing and shop buildings, and, most of all, productive hayfields that are capable of producing high-quality mountain hay. Secondly, the ranch needs transitional grazing lands for spring and fall pasture, as summer pastures are often not ready for grazing until mid- to late-June. Finally, as spring pastures are grazed off, a balanced ranch needs high-country grazing land. This can be in one of several forms—either in the form of a grazing permit on either Bureau of Land Management (BLM) or U.S. Forest Service (USFS) lands or on deeded private ground.

Let’s start the cycle of a Colorado ranch on January 1, for lack of a better date. It is cold and wintry. Cows are heavy with calves and struggle to find good feed and water. The ranchers are feeding hay and breaking ice. Only a month later, in mid-February, many ranchers start calving. Truly, it seems brutal to drop a wet newborn calf in a frozen snowbank, and losses sometimes occur if a ranch hand doesn’t detect a birthing cow in the middle of the night. But there’s a reason for this. The calves need to be strong enough to go up on the mountain.

The mountain? Oh, yes. The mountain. Colorado ranches have a seasonal cycle. Beginning in the spring, when snows melt and shoots of grass start to poke through the ground, the goal is to keep mother cows and their newborn calves off of producing hayfields so that the rancher can grow hay during the summer. The best solution is to bring the cows up to highcountry pastures with lush grass.

A bred cow can require up to three tons of hay to feed her through the winter. A few Colorado ranches produce up to five tons of hay per acre, but most ranches are lucky to get two to three tons. Consequently, it can require up to two acres of irrigated hay ground to feed one bred cow through the winter. Beginning in early to mid-April, ranchers start to move their herds away from their producing hayfields and onto transitional mountain pastures.

Keep in mind that the lowest elevations in Colorado are above 4,000 feet, and few year-round cattle ranches are located above 7,800 feet. While there are 53 peaks above 14,000 feet in Colorado, most ranches are located in that sweet spot between 4,800 and 7,500 feet in elevation. As the snowpack slowly recedes up the mountain valleys, ranchers get ready to move their herds off the home place to spring pasture on deeded mountain land or grazing leases. They brand their calves and castrate the bull calves before the herd goes onto the mountain. Most often, these pastures are in zones of shrub oak, sage, and open meadows at elevations between 6,000 and 8,000 feet. Sometimes the ground is deeded land owned or leased by the rancher, and other times it is BLM grazing leases.

ranchland cow

Of all the lands in Colorado, grazing leases and USFS or BLM permits are often the hardest to find. Many private properties at these elevations have been subdivided into 35-acre ranchettes, and competition is fierce for public land grazing permits. The goal is to find emerging green pastures for hungry cows, keeping them off the hayfields at home while waiting for higher mountain pastures to emerge from snowfields and grow lush mountain grasses. While lush, well-irrigated lowland hayfields can sometimes bring $7,000 to even $10,000 an acre, these middle pastures can command between $1,500 and $3,000 an acre in today’s market. Grazing permits themselves can command a hefty price tag as well. The government says that the permit cannot technically be bought and sold; the value, they say, is in the herd of cows that go with the permit. They can say that all they want, but nobody in their right mind would pay $3,500 for a broke-down old cow unless it came as part of a grazing permit, and many permits trade at high prices.

While many ranchers commence their calving seasons in February, others wait until March or even April. However, the majority of ranchers know that their calves need to be big and strong enough to make an arduous trip upcountry to their summer grazing pastures. It’s one thing to ease the cows and their new calves off the back side of the ranch for a month or two, onto private or BLM spring grazing leases. It’s quite another to push a bunch of cows and baby calves high up onto National Forest grazing permits at elevations of 10,000 feet or higher. Those cattle might be struggling through half-melted snowbanks in mid-June. They will encounter bears, mountain lions, and coyotes; bogs and poisonous larkspur; downed timber and deadfalls. While there are certainly losses, it’s surprising how many make it home.

Some ranchers are fortunate enough to literally open the back gate and turn their cows onto transitional BLM lands and then up to summer National Forest grazing leases. Others are not so fortunate and have to either truck the cows to the mountain or herd them on long, exhausting cattle drives. For this venture, calves born in February or March, having recovered from castration and branding, often weigh 400 pounds or more and are robust and strong enough for an arduous transition. A two-week-old calf weighing less than 100 pounds, however, will have a tough time of it.

ranch cow

Over the summer, the feed at high elevations can be fantastic. It’s common for calves to gain two or even three pounds a day as cattle graze on grasses and forbs that are often up to their bellies—while the rancher is busy growing hay on the home place.

Who watches over the cows on those summer grazing leases? Often, it’s the job of the “pool rider”. Often grazing permit holders are “pooled” with several other outfits, who together hire one or two cowboys (and sometimes cowgirls) to watch over the herds. The pool riders are equipped with a remuda of surefooted strong cow horses, and their job may be to mend range fence, doctor calves, chop down poisonous larkspur, pack salt, and move cows and calves to new pastures. They get a lot of saddle time, and horses that have spent a summer on the mountain are prized among savvy horse buyers.

Back at the ranch, the rancher and his haying crew are busy irrigating and haying, irrigating and haying, and stacking the hay in the barn in preparation for the coming winter. From time to time, ranchers might jump their horses in the stock trailer and pull them up to the mountain to check on their herds, but often the riding is done by the pool riders and sometimes “day riders” who are for hire on a daily basis—have horse, have saddle, can ride, want to work.

Of course, every ranch has to have a balanced herd as well. Cows need bulls, at a ratio of approximately 20:1. Older cows must be replaced with new heifers. Bulls go to the mountain with the cows and calves, but often bulls older than five years are not welcome in the herd, because they tend to sull up, become loners, and refuse to come down from the mountain, even as snow piles up chest deep. Many is the time that a stubborn old bull has died in a deep snowdrift.

As the days grow shorter, the mountain grasses dry up, and the aspens begin to turn yellow, the older, experienced lead cows know that it’s time to come home. Of course, every day on the mountain is a savings of pasture and hay on the home place, so sometimes the cows are left standing at the gate for a while. Usually, sometime between early October and November, the ranchers bring the herds down from the mountain and back to the home-place for the winter. Calves are sorted off, sold, and shipped to feedlots, usually weighing between 550 and 850 pounds. As the snows begin to accumulate, the rancher starts feeding hay, and the cycle begins again.

This cow-calf cycle of Colorado ranching has been going on well over 100 years. It’s commonly known that in order to run a profitable cattle ranch, a rancher can’t afford to pay much more than $8,000 per animal unit that the ranch is capable of running. Many productive cattle ranches were more treasured as “cocktail ranches” and subdivision developments because of their proximity to ski areas and beautiful mountain vistas. Other ranches still survive as working ranches, but owners have paid unsustainable prices per animal unit— sometimes $20,000 per Animal Unit Month (AUM) or more—simply because the owner is wealthy and wants to own a Colorado cattle ranch. Other operations are subsidized by private land elk and mule deer hunts, tourism, guided flyfishing, and growing other crops like hemp. On occasion, some ranchers prefer to run yearlings on those rich mountain grasses, backgrounding those beef cattle and putting on weight before they’re sent to the feedlot for fattening.

As you can see, a balanced equation is very important for the success of a Colorado cattle ranch. If one of the ingredients is missing—adequate hay ground, irrigation water, spring and fall pasture, and summer pasture—it can make ranching operations far more difficult and costly. Ranches that have all the key pieces in place can rest assured that their operations will run much more efficiently.

This article was originally published in the Winter 2020 Edition of RLI’s Terra Firma magazine.

Gary Hubbell, ALCAbout the author:  Gary Hubbell, ALC, is a Western States land broker, auctioneer, and personal property appraiser. Based in Western Colorado, Gary is a licensed broker in Colorado and Utah. He has sold farms, ranches, orchards, vineyards, mountain land, hunting properties, luxury homes, resorts, outfitting businesses, and commercial property in a wide geographical area, including Aspen, Steamboat Springs, Telluride, Durango, and many other hard-to-find locations. Gary is very familiar with conservation easement properties, having sold seven large easement properties. As an auctioneer, Gary has sold heavy equipment, livestock, classic cars, antiques, motels, development land, ranchland, guns, farm equipment, and even the World Record Elk antlers in Crested Butte, CO.

farmland for sale

10 Tips for Finding the Perfect Agricultural Farmland for Sale

Finding the perfect agricultural farmland for sale can seem like a difficult process. In truth, you probably will have to spend some time looking at and researching several properties before you find one that you love and is the right fit to meet your goals.

Use these 10 tips to make sure that the farmland you choose is right for your plans.

land environmental contamination

1. Learn About the Land’s Previous Use

You probably plan to use agricultural land as a farm, ranch, vineyard, orchard, or possibly even a timber forest.

The land’s previous use could influence whether you want to buy the property. Land that has sat unused for decades may not have many nutrients left for your crops. An area that was used for industrial purposes, however, could have toxic chemicals hiding in the dirt and water.

Research the land’s previous use so you can avoid threats and focus on finding a farm with healthy soil.

soil

2. Test the Soil’s Acidity and Nutrients

Before you buy farmland for sale, you should make sure that the soil has the right nutrients and acidity to grow your preferred crops.

Nutrients that you should learn about include:

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

Too much or too little of these nutrients could determine whether your crops thrive or fail.

The soil’s pH range also plays an important role in how well your plants grow. Neutral soil with a 6.5 to 7 pH works well for crops like:

  • Beets
  • Alfalfa
  • Clover

Slightly acidic soil with a 5.5 to 6.5 pH makes a great place to grow:

  • Corn
  • Barley
  • Wheat
  • Peanuts
  • Cotton

Real estate land with a 5 to 5.5 pH should support:

  • Potatoes
  • Sweet potatoes
  • Blueberries

You can purchase a soil test to measure nutrient levels, or you can reach out to your county’s Extension Office. Many County Extension Offices offer free or discounted soil testing services.

If you discover that the farmland for sale doesn’t have the nutrients and acidity needed for your crops, then you will spend time and money amending the soil before you plant.

flooded field

3. Observe the Farmland’s Soil Drainage

Most crops prefer soil that drains quickly after a rain shower. Well-drained soil helps protect plants from diseases like stalk rot, root rot, blight, and molds. Standing water also creates breeding grounds from troublesome insects, including mosquitoes, aphids, and beetles that eat leaves.

You can improve a farm’s drainage by adding perlite, sand, compost, mulch, or vermiculite into the soil. Again, amending the soil will require time and money. If you want to start farming immediately, buy farmland for sale that already drains quickly.

farmland topology

4. Analyze the Agricultural Land’s Topology

Topology plays a crucial role in a farm’s success. Most farmers avoid land with steep hills because water can wash away necessary nutrients down the incline. If you want to buy land for sale in an arid region, then topology probably doesn’t matter as much. For example, plenty of people raise grapes successfully on hillsides in Arizona.

Just make sure that the agricultural farmland’s topography matches the needs of your crops.

5. Research Access to Resources

electrical power lines rural landSome agricultural land sits in the middle or outskirts of densely populated cities. Most farmland, however, is in rural areas. Depending on the agricultural land’s location, you may not have access to resources like water, electricity, and natural gas.

Some properties can give you a leg-up when it comes to resources needed. For example, a farm with a large pond, might give you access to all of the water you need for your crops.

If you cannot connect to the electrical grid or natural gas, though, you will face challenges using some machinery, controlling airflow through tunnels, and growing crops in hothouses during the winter.

In some cases, you can extend water and natural gas lines from municipal sources to your farm. The project could cost quite a bit of money, though.

6. Know Whether the Existing Infrastructure Meets Your Needs

Agricultural land involves much more than healthy soil. You need a farm infrastructure that helps you grow and sell crops. You can break the most important types of infrastructure into four categories:

  • Roads
  • Buildings
  • Irrigation
  • Electricity

Farmland roads need to accommodate large machinery like tractors, rollers, and cultivators as well as trucks.

Buildings should give you a safe place to store your equipment and crops. Think beyond having a good barn that protects hay from the rain. You may need to even look for buildings like grain silos, packing facilities, and refrigerated sheds that keep produce fresh.

Irrigation infrastructure could include anything from drip irrigation systems that run along rows of crops to overhead systems that sprinkle crops automatically. Before you buy farmland, make sure it has an efficient irrigation system that will give your crops the right amounts of water.

Also, keep in mind that electricity becomes scarce when you travel deeper into a farm’s acreage. Ideally, you have an electrical infrastructure that lets you turn on lights at night to operate equipment in the fields. Don’t expect access on every acre, though – That’s rare.

rural road

7. Determine How Easily You Can Reach The Farmland That’s for Sale

When you look at a map, the farmland for sale may seem to have a location right off a major highway or interstate. In reality, you may have to drive across miles of country road to get from the interstate’s exit to property.

You may not mind driving an hour from your farmland to the nearest major road. Consider, though, that you will need to haul heavy equipment and crops several times a year. The time and expense of driving your car 50 miles are considerably lower than the time and cost of hauling a 6,000-pound tractor along the same route.

8. Estimate The Distance To Distributors, Retailers, And Markets

You will also likely need to consider how easily you can reach the distributors, retailers, and markets that buy your crops. Every hour that you spend on the road is time away from your fields.

Since you want to build an efficient supply chain, look for agricultural land that puts you within reasonable distance of distributors and retailers. A centralized location that gives you easy access to several of the region’s cities and towns could help turn your farm into a successful business.

cell tower

9. Check The Area’s Cell Phone Reception

Today’s farmers need smartphones so they can stay connected to their employees, clients, and distributors. An area without good cell phone reception will make it difficult for you to contact the people who make your business successful.

You can use online tools to see whether an area gets good reception. The best test, though, is to visit the location and see how well your mobile device performs there. If you get poor reception, talk to your carrier about adding nearby cell towers, or if there is no other option you may want to choose a different property that already gets good reception.

oil pump field

10. Research Whether Someone Owns Mineral Or Gas Rights

Buying farmland for sale doesn’t mean that you own everything below the surface. Someone else could own mineral and gas rights. If they discover coal, natural gas, or other materials on your property, then they could have the right to enter your land and start mining.

As recently as 2019, the West Virginia Supreme Court upheld the right of mineral owners to use surface land to access minerals, even if doing so disrupts the surface owner’s business.

Conclusion

land agent

A lot of research goes into finding farmland that matches your unique needs. Before you invest in farm real estatefind a qualified land real estate agent to assist with your purchase who can help you pinpoint the best opportunities. Land real estate transactions require specialized expertise and experience, especially when it comes to finding the right farmland for sale. One discussion could save you from a disastrous decision that costs you time and 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.

land market outlook

Seeing 2020: Land Market Current Conditions & Outlook

The longest economic expansion in U.S. history continues to churn out more output and job additions with each passing month. November 2019 marks 125 consecutive months of growth and the momentum factors hint at the trend continuing into at least spring of 2020. Then what? A recession? Not likely, except for one policy error.

Though the populace is intensely polarized politically, as related to the economy, U.S. consumers are indicating high confidence. The consumer confidence index was 125 in September, well above the 100 neutral mark seen throughout 2019. For reference, the index has been under 100 for nearly a decade starting from 2007. The solid expression of confidence about the economy is without a doubt due to the very low unemployment rate of 2.7%, an all-time high in total household wealth in the country as the stock market boomed, and record high real estate values. The prior peak in the net worth of all households was $70 trillion in 2007 right before the last recession, sunk to $60 trillion at the depths of the foreclosure crisis, and then rose to $113 trillion as of mid-2019. Quite an incredible feat, though we should be reminded that wealth holdings have become much more concentrated at the top. All this could mean good things for the land market outlook in 2020.

Consumers consequently are opening up their wallets. Consumer spending rose 2.6% in the second quarter of 2019, after adjusting for inflation, and has been the prime engine for GDP growth over the past few years. Spending on consumer durable goods – with a long product life span – has been even stronger at 4.4%, attesting to the longer- term positive assessment of the direction of the economy. There is no over-borrowing to fuel personal consumption. Finances are coming from an employment growth of 2.15 million net new jobs, rising wages from $27.30 per hour to $28.09 over one year, and higher wealth by a few trillion dollars. Miraculously, there are more job openings today (7 million in August 2019) than the number of unemployed (5.7 million workers).

However, there is not as happy a story for businesses. Corporate profits are indeed very high, especially after cuts to the corporate tax rates a few years ago, rising from $1 trillion in 2008 to nearly $2 trillion now.

This partly justifies why the stock market is near record highs. But even with healthy financial conditions, companies have been less aggressive in spending the cash for machinery, factory expansion, and other investments.

Business investment spending contracted in the second quarter of 2019. Spending on equipment barely changed, but spending on commercial building fell by 4.7% from a year ago. Though assuring no oversupply of commercial real estate construction, the fact that businesses are pulling back is concerning and raising the question as to why.

gdp growth land market outlook

The timing of businesses getting cautious is directly related to the raising of tariffs and hostile rhetoric towards international trade. In fact, many companies in their public statements during quarterly earnings calls say they are cautious because of uncertainty related to trade prospects. REALTORS® specializing in commercial real estate have witnessed that trend as leasing activity markedly slowed in the second quarter to only 3.1% growth compared to better than 10% gains in 2016 and 2017, and 5% gains in 2018. Moreover, even business travel has weakened, as evidenced by falling occupancy rates at hotels, which is now at 72.4%, a full 100 basis points lower than from a year earlier.

The most troubling aspect is the actual slowdown in global trade. U.S. exports fell 1.7% recently while U.S. imports grew by only 2.6%. When both exports and imports decline for a few straight quarters, then a recession is near certain with job cuts. In a growing economy, both exports and imports should be rising by at least 5% per year. This slowdown in trade has had repercussions elsewhere. Just about every notable economy is experiencing slower economic activity in 2019 compared to recent prior years. The International Monetary Fund (IMF) cut its global growth estimate to 3.2% for 2019 after having forecasted 3.6% earlier in the year. The economies of the world appear to move in sync, like a rising tide lifting most boats — and the movement reverses when trade restrictions are put in place. The stock market has nearly always cheered at the promise of a trade agreement and sunk following the rhetoric of a trade war and retaliations of more tariffs. More positively, it is becoming clear that both the U.S. and China are looking for a deal. In such a case, business spending could boom.

One promising sector that could help with future economic growth is real estate construction. America is facing an acute housing shortage – for both single- family owner occupancy and for multifamily apartments. Home prices and rents have been rising far in excess of wage growth for five straight years.

Vacancy rates are at historic lows. The underproduction of new homes over the past decade has cumulatively resulted in around five to six million housing units that are needed today. Even in a normal year, only around 1.5 million new homes can be constructed. Therefore, increased construction needs to occur for multiple years. In 2020, specifically, housing supply is expected to improve, with housing starts expected to hit 1.4 to 1.5 million, up from 1.275 million in 2019.

With home builders still likely to be constrained by what they call the 5Ls — labor, land (lots), lending (financing), lumber (raw materials), and restrictive laws (regulation) — housing starts will still not match the demand from household formation (1.2 million), or the replacements for demolished or obsolete housing (about 450,000). All that means more demand for land and lots.

“…more demand for land and lots.”

In the commercial market space, industrial properties have outperformed retail spaces, arising from the stronger growth in online shopping and quick distribution warehouse needs. Investors are paying much more for industrial flex/warehouse properties on account of low rental vacancy rates and the sustained demand for e-commerce sales. Given that warehouses can be built in off- center sites far away from downtowns and population centers, the demand for land will grow in outlying regions.

In the meantime, the interest rates will be at near historically favorable conditions. The Federal Reserve will more likely cut its fed funds rate a notch in 2020 rather than increasing. It just means that 10- year Treasury yields will remain low at around 1.6% and the longer term borrowing rate at under 4%. In future years, watch what happens to the federal deficit, which is expected to be near $1 trillion in 2019 and projected to surpass $1 trillion in 2020. The total federal debt level, adding of all past deficits, will reach 100% of GDP in a few years, well above the 60% that many economists consider as manageable.

The bottom line summary is that while the economy is experiencing the longest running growth period in U.S. history, there is no reason why it has to falter. The economy is expected to finish 2019 with only moderate growth of 2% due to soft business spending activity, after having notched up a solid 2.9% in 2018. For 2020, a recession is not in the cards, but this assumes some type of truce in the trade war. A trade agreement will be better still and will lift business spending.

“…expect continued job creation, income growth, and rising demand for land.”

Construction spending has to rise to relieve housing shortages and low vacancy rates in commercial real estate. Therefore, expect continued job creation, income growth, and rising demand for land.

Lawrence Yun NARAbout the author: Dr. Lawrence Yun is chief economist and senior vice president of Research at the National Association of REALTORS®. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1.4 million REALTOR® members.

land evaluation checklist

A Checklist For Evaluating Land To Purchase

I was recently reading an article about tasks to perform after buying a tract of land. I decided to develop a list of topics to consider for those evaluating land to purchase before buying any land to help when comparing properties to ensure you buy the best property. We have all heard about buyer’s remorse, so it is important to consider the following before you make that important purchase.

1. Access – How is the property accessed? You may have road frontage or an easement. Is the easement prescriptive or deeded? I would not be comfortable buying a tract with a prescriptive easement and long term verbal agreements are often forgotten about by inheriting heirs.  These prescriptive easements can be converted to a legal or deeded easement, but be prepared for a court battle and legal fees.

I work in a county where there are a lot of transitional properties, so access is key. The county requires that each parcel of land have at least 50 feet of road frontage on a county road or state highway. If you are buying for investment purposes and are planning to subdivide the property, lots of road frontage is important. Check with the local county planning and zoning folks beforehand.

flood plain

2. Flood Plain – These are soils that typically flood after a huge rain event and it affects the utility of the property. I used to manage 85,000 acres of land for a timber company. We categorized property by inoperable and operable acres. The inoperable property was generally Streamside Management Zones and Flood Plains. The utility of the property affects the value. This information is readily available and your real estate agent should provide this information.

Also these areas will not support a conventional septic system. If you are buying land to build a house or cabin, know where these flood prone areas are prior to your purchase.

3. Topography – I have written a blog post about Topographic Maps. Like flood plains, topography can affect the utility of the property. Very steep property is not conducive to farming and logging. Be sure to look at topo maps of the property and nothing can substitute walking the property. Take a close look before you make that important purchase.

4.  Neighbors – With all the technology out there, it is pretty easy to determine who your neighbors are. I can access this information from the tax assessor website. You might be interested to know if they live on the property or if they are absentee landowners. Could you imagine buying a tract of land to learn later that a waste management company owns the property next door? A little work up front can save you lots of heart ache later on.

5. Property lines – I have written a blog post about maintaining your property lines. All landowners should mark and walk your property lines on a regular basis. It is a good idea to know where they are, especially before you buy. If a neighbor is encroaching on the property you need to alleviate the problem. Property lines that are maintained and painted provide a visual aid to your neighbors so everyone is on the same page and knows where the property lines are!

soil type

6.  Soils – In certain areas of the country, soils and soil productivity drive price. Farming (tillable acres) land is evaluated on the productivity of the soils. Most of the property in West Central Georgia is timberland and this can be evaluated based on Site Index. When buying timberland, operable acres and site index should be considered.

7.  Survey – This is huge! I will tell you about two tracts of land I have been involved with recently. These are real life stories. I was contacted by a landowner who had property in Harris County, GA. They solicited my help on a timber sale and later contacted me to sell the property. The tax assessor showed 170 acres and I told them they had more and suggested having the property surveyed before selling. The survey yielded 213 acres…advantage Seller!

In another situation, I was contacted by a Family Limited Partnership. The property had been in the family for 3 generations. The property was beautiful and the timber was over 60 years old. The family had an old plat from the 1920s from Columbus Power and Electric who built Lake Harding. The lake is now owned by Georgia Power and they own up to the 525 foot elevation. They were paying taxes on 236 acres. I estimated about 185 acres and arranged to have the property surveyed. The survey yielded 176.6 acres.

If you buy or inherit property, have a survey, you need to know what you own. These are both also a great examples of why it is important to work with a real estate agent that specializes in land transactions in your area.

8.  Timber Cruise – Timber cruises are important when buying timberland. First of all the amount and type of timber helps when valuing the property. Secondly, the timber cruise will help when conducting cost allocation on the property. This is the process where you assign value to the timber and the dirt. Cost allocation will save you lots of money when the time comes to thin or harvest your trees. You will pay taxes on the capital gain (revenue less depletion).

Interested in purchasing a land property? Land transactions require specialized expertise from an agent, like an Accredited Land Consultant (ALC), with experience and education in the industry! Find A Land Consultant near you for expert advice.

This post was originally published on The Dirt Blog.

Kent Morris, ALC, is a Registered Forester and Associate Broker who has experience in fields such as timber appraisals, harvesting, thinnings, and timber sales.

new mexico land

Why You Need a Qualified Land Agent For Your Transaction

Buying or selling land can be a complicated business, and prospective buyers and sellers must be sure they have a qualified land agent who not only has their best interests in mind but also the knowledge and experience to make it happen.  In Southeast New Mexico, where I am located, we often jokingly say we have more cows than people.  Some of the more recent statistics suggest this may no longer be as true as it used to be, at least when judging the entire state as a whole, but for the most part New Mexico is still a very rural state, deeply rooted in its ranching heritage.  The fifth largest state in the U.S., New Mexico offers vast wide-open ranch land, gorgeous sunsets, and breathtaking scenery, stunning even at times in its vast nothingness.  Even with all that immense ranch land surrounding us, land brokers in New Mexico are hard to come by.  It makes for an interesting conundrum in a state you would expect to be chockfull of land brokers, given how much land there actually is.

new mexico land

Land transactions gone badly are said to make up one of the largest percentages of all the total E&O (Errors & Omissions Insurance) claims in the state.  Why is that?  In the case of New Mexico, much of the reason is that there are so many agents not trained in land transactions trying to complete one as if they were a land expert when, clearly, they are not.  Sadly, most of them don’t even think twice about it until it’s too late and the damage has been done, thereby resulting in the E&O claim as part of a potential lawsuit or settlement.

The reasons are varied and complicated but, despite having more cows than people and being surrounded by vast ranchland, the majority of real estate agents in New Mexico are trained as residential agents with the rest being commercial but not commercial specific to land.  This is not limited to New Mexico, and occurs in most other states as well, but it is rather ironic in a state made up predominately of ranchland to have so many agents trained in other specialties but not land.  The result is there are a large number of agents who are not prepared for the complexity that a land transaction brings with it, lacking the specialized expertise that is required for such a transaction.  In fact, many people, agents and customers alike, see land as being a simple transaction.  The thought process seems to go something like this: if there’s no house, then there’s no inspections, no repairs, and nothing to nitpick so it should be easy and fast-what could possibly go wrong?  Unfortunately, many things can go wrong and an agent who is naïve of all those possibilities generally only creates more problems.

expert land real estate agentThis is exactly why you need an expert land agent for your land transaction.  Residential and even general commercial agents are often oblivious to the challenges of land.  Too often they may have spent their entire lives living in town and don’t understand the basics of water wells or septic systems, or that electricity isn’t just automatically available anywhere and everywhere on demand and that, even if it can be hooked up, the cost may be exorbitant and entirely prohibitive.  Those are just a few of the issues that must be explored when a prospective buyer decides they want a simple country home.  For an actual working farm or ranch, it can become so much more complicated.  The bulk of the land in western states such as New Mexico is state or federally owned, meaning those leases must be negotiated as part of a sale as well as any private leases that may also be included.  Water rights issues, mineral rights issues, and easements just to name a few must also be considered as well as countless other complexities unique to the land like soil types.  As mentioned at the beginning of this article, land agents are not always prevalent so finding one can sometimes be a challenge in and of itself, especially in a rural area such as New Mexico.  Putting the time and effort into finding the right agent is of absolute importance as it will determine the entire outcome of the transaction whether you are the buyer or the seller.

Here are a few tips to get you started on finding a qualified land agent:

  • Make sure they are experienced and have the resources to deal in your type of transaction. This means finding a farm and ranch broker for farms and ranches, transitional land brokers for subdivisions, timber agents for timberland, and so on.  Be careful not to confuse a general commercial agent for being able to handle your land transaction.  The word commercial typically means in-town businesses, not necessarily land. So if you do decide to hire a commercial agent, make sure they are the right type of commercial agent.
  • Big name brokerages are not always better. Unless they only deal in land transactions, a big name brokerage may be a very dangerous thing, so be cautious if you decide to go this route.  If you are considering using a larger brokerage, see if they have a farm and ranch or commercial division, Most of these brokerages are primarily residential and the agents may not have the experience needed to successfully conduct your land transaction.  If you call or walk in wanting to list your multi-million dollar ranch for sale, you do not want to get an agent who got their license last week that has never done a land transaction before and who just happens to be on call today.  Make sure you are working with a reputable agent, not just a company name. There can be a big difference.
  • Big name Realtors® are not always better. You may find you recognize a name but is it a name known for the type of transaction you are wanting to do?  They may be good at what they do or do a lot of marketing. However, if they aren’t knowledgeable in your specific transaction type, you may actually end up worse off than if you’d gone with a less recognizable name but who had the relevant experience and expertise to handle your property type.
  • Remember your goal of buying or selling. A brokerage or agent may have a lot of listings which makes them seem more prestigious.  But, are those listings like your listing? And are they selling?  If not, why not?  If you are trying to sell, do you want your property sold and closed, or do you just want it listed or tied up in escrow?  Find the agent who can get it done by asking to see a track record of successfully completed land transactions like your own.  There is a big difference between listing properties and selling  It’s easy for an agent to make lofty promises that they can get a certain price or can make this happen or make that happen, but is it reasonable and can they actually do it?
  • Find an agent who has connections and isn’t afraid to use them. None of us are experts on everything.  No two transactions are ever the same so no matter how seasoned or experienced, it seems there’s always something new or unexpected.  Find the agent who has a large network and isn’t afraid to consult others for opinions and seek help when they aren’t sure of something – and who isn’t afraid to admit they don’t know everything.
  • Use a local agent if possible. As long as they have the experience required, a local agent is typically best because they are familiar with and know the nuances of the area and they are readily available. However, if the local agent is not as experienced in your type of transaction, you may be better off with someone who has more expertise outside of the local area.  Sometimes, the best case scenario is to have one of each.  In this case, find either a local or non-local agent and then request that person team up with the other.  Agents do not have to be from the same office in order to co-broker a deal.  When you have one of each, you can pair one agent’s local expertise and availability with the resources and knowledge of the non-local agent to create an amazing team that can work for you in a way that neither party could do on their own.
  • If you still don’t know where to start, consult a resource such as the Realtors® Land Institute (RLI), www.rliland.com, which is a nationwide organization of land brokers. With over 1,300 members across North America, and over 500 of them holding the elite Accredited Land Consultant (ALC) Designation, RLI can connect you to an expert in your area. And that expert, by virtue of their membership in RLI, has access to a network of other members in RLI who can and will provide expert advice as needed as well as open up a whole new pool of potential buyers. You can even use the free Find A Land Consultant search tool on their website to find a qualified land agent near you.

Author Bio: Beth Myers is the Qualifying Broker/Owner of Rafter Cross Realty, LLC, located in Lovington in the Southeastern corner of New Mexico.  Beth is a former educator holding a Bachelor’s degree in Business with three majors, two Master’s degrees, and a Ph.D. and having taught nearly everything from kindergarten to college level before transitioning into real estate and eventually opening her own brokerage.  Now she is a multi-million dollar annually producing agent/broker in her small town and the surrounding areas, specializing in residential and farm & ranch sales.  She serves on the local, state, and national levels, as a Board Member and Treasurer for the Lea County Real Estate Professionals, a Board Member for the New Mexico Multiple Listing Service, and as a Committee Member for the Realtors® Land Institute Future Leaders Committee.