By Living Room Realty, April 16, 2018
By Living Room Realty, April 16, 2018
Buying a small farm or rural property? Thou shalt have more luck by following the 10 Commandments!
Size: How much land is enough? Unless you already have a plan, it’s hard to know initially what you will eventually use the land for. Most buyers feel that more land is better, but I advise on quality over quantity – how much of that land is actually usable? Also, be realistic to the land management time required. If you are looking at land without a plan, try to find a property with a variety of pasture and forest land.
Fencing: A good fence is your best friend – does the property currently have fencing? If so, what is the condition, and is it the right fencing for your intended purpose? If you need electrical fencing for larger animals, is there a way to access power? Good fencing not only keeps your animals safe, but it’s part of being a good neighbor. Nothing is more disappointing then getting a call from your neighbor about your goats standing on top of their brand new truck, or even worse your dogs looking to make a meal out of their chickens. If the property does not have fencing in place and you plan on raising livestock, factor in the cost for good fencing.
Equipment: If you are buying an existing farm, make sure you include good working essential equipment in your offer. I was shocked to learn that a new entry level tractor can cost upwards of $20,000. Buying used equipment is possibility, and those vintage tractors sure are cool looking, but not worth the headache unless you have machinery experience or a savvy neighbor willing to come over every time you have an equipment failure. When it comes to equipment, try to remember: you get what you pay for. So until you figure out what type of equipment you might need plan on renting, hiring or make friends with your neighbors and create a sharing economy.
Inspections: Invest in inspections – A general home inspection is common when purchasing real estate, but for a farm or rural property additional inspections should be considered. If applicable, these 6 inspections are worth considering: well, septic system, propane tank, oil tank, pest and radon gas. Having to replace or mitigate these items can be expensive. If the septic has a drain field, make sure the inspection includes not just the tank, but also the pipes and drain/leach field. Regarding the well, you will want to know what the well production is (how many gallons/minute), the depth and the water quality (potability and mineral contents). Good inspections are leveraging power during the negotiation stage of the purchase – remember what you learn from inspections might also be a shock to the current owners, so be respectful and fair when countering. You will save money and time down the road by investing upfront in inspections.
Land evaluation: Water, soil and drainage: This also falls under inspections, but I recommend taking it one step further. If your goal is to raise livestock or grow agriculture, make sure the quality of the soil is sufficient for what you need. Also where is the water coming from…. a well, water rights, or creek? Are they transferable or even legal? Also getting a clear idea of how the drainage will be for the property. If you are buying in the summer months make sure that back pasture you plan on using does not turn into a big swamp once the rains come.
Easements & Encumbrances: If the boundaries of the property are not clearly marked, I would recommend spending the money on a surveyor. This extra due diligence will save you time and money later down the road. Also, get clear understanding of any easements or encumbrances. These will show up on a title search, and if you have any questions, ask the title company or your agent for clarification. Consider heading down to the county planning office, especially if you plan on building, can provide a ton of valuable information. This information will also come in handy during your negotiation phase.
Budget: Don’t quit your day job. Don’t bank on the cider you will be brewing or eggs you will be harvesting to make a profit – especially not right away. You will want at least one stable income. You will mostly be laying out start-up costs: fencing, shelters, equipment, livestock. A retired couple I know ended up selling their farm and going back to work because the cost of running the farm was more then their monthly retirement checks. So, set realistic budget expectations and take the time to research the farm income you are hoping to bring in. (forum examples?)
Taxes & Zoning: some farms and forest land might be operating with a tax deferment, which reduces property taxes. This can affect your property taxes later on if you change the usage of the farm. Find out this information early on so you can have the sellers include any additional information you might need to keep the deferral current. Also, get a clear picture of what the zoning and permits are. (I was surprised how strict the building permits are!)
Community: The great knowledge bank – GKB. Be open to advice and ask questions. Even though you are eager to jump in and do it your way, you will gain more by listening and asking questions. I like to think of it like this: if you have a community of 10 farms with an average of 30 years experience, then that is 300 years from the great knowledge bank to pull from. Being humble in the beginning will save you so much time and money, as well as free up your mind to be more creative about the process. Remember: there is no one-way to run a farm, but why reinvent the wheel?
Agent: Ideally it would be best to work with an agent that not only knows the community, but also has experience owning farmland. They will have the inner knowledge of the community, permitting, usage, and will be a great resource after the sale closes. If it is a multi-generational family home, try and keep in touch with the previous owners. They can help you transition into property and troubleshoot all the quirks. Remember: you are allowed to interview agents, so take the time to find the best agent for the job!