Buying a farm as an investment is one of the more creative investment types that people are approaching these days. It’s noteworthy because these properties are literally made to produce money, and yet they can often get overlooked in the market because of the perceived work that has to go into them.
If you’re considering buying a farm, and you’re not sure if it’s the right choice for you: here are the most important things to consider.
How to Buy Farmland
The top thing to think about is how you’re going to buy your farmland. Do you have the money to pay in full, or are you more interested in a lease-to-own option? The better way to start a farm investment is to talk to a realtor or agent specializing in this type of land specifically. They’ll be able to discuss what trends are happening in your area, which property has flooded or isn’t growing anything, and which properties have been on the market for the longest. Although the final choice is up to you, they can steer you in the right direction.
What Makes A Property Worth Buying?
Look at various properties and decide what you want on a farm and what’s not necessary. If you’re going to make the most money for what you buy, underdeveloped farmland that hasn’t been worked on yet is a great investment. Sellers don’t want to put the work in to finish it, and this type of land often sells for far less than fully developed farmland. You should still go through the fields with a professional and ensure that the soil and lands are healthy: but this is a great way to start out saving money.
Can You Build Value In the Farm?
You can build value into a farm. By ensuring the soil is rich and healthy and updating any buildings on the land, you can create a ranch or farm that others would kill for. It’s important not to update the housing too much because this may make people think the farm is too updated for their tastes and won’t work well as a business location. Instead, invest in the parts of the property that will bring back the most value, like the soil, the amount of workable land, and leveling the grounds so that they’re perfect for growing.
Property Tax Breaks for Farms
If a major concern for you is how much the property taxes will be at the beginning of every year, there’s good news for you! Many states, like California, offer large property tax breaks for people who own farmland. This means you’ll save money on taxes compared to what you’d spend on a completely residential property, and you can put that towards updating the lands.
Is Leasing Out the Land an Option?
Farmland investment returns show up a lot faster if you lease or rent out the plots to a farmer. This will ensure the land stays active and keeps growing as you continue to put time into the property, waiting for the value to go up, and you’ll gain a return as it goes. If you rent out the entire property, you’ll gain more of an income, and you can even request a portion of the produce they grow as part of their rent. Leasing can take longer and requires property management, but it also ensures that you don’t have to do the hands-on work yourself.
How Soon Would Selling Be A Good Financial Decision?
Many people rush to sell when the property value goes up, but you shouldn’t speed through this process! If you bought your land through a lender, you should wait at least five to ten years before selling. This wait ensures that you’ve paid off your interest completely and that anything above the price you bought it for is pure profits. Wait until a great sellers’ market is at its fever pitch, and then make your return on your investment.
Farms Are Fantastic Investments When Done Correctly
Any investment can be done incorrectly. However, there’s been a large push to invest intelligently in recent years and put your time and money into good financial decisions. If you plan and buy intelligently, you can ensure that any farm is a good investment. Take the time to decide who will be working the land, how long you want to keep it, and whether it’s a good buy: and you could make a major return!