Buying a ranch? Make it your passion

Why do you want a ranch? Get that settled first. Why are you even considering spending a 55-gallon drum or so of real money on some remote tract of dirt and rock?
 
Find your perfect piece of land and buy it.

By: Todo Myane

Ask the average guy what he’d do if he were to win the lottery. Chances are he’ll talk ranch.  There’s just something mythical about owning acreage.

It’s a throwback to our heritage or nature, a sense of adventure, control of our own destiny, perhaps a dormant agrarian gene buried in our D.N.A. Perhaps we’ve watched a few too many John Wayne flicks. The craving for land can be addictive, and I’m a card-carrying addict.

Ignoring the intangibles, investment means buying right and selling right, both of which require research of your desired market to make intelligent decisions.  Undertaken sensibly, land investment offers very tangible tax advantages, as well as estate planning options and lifestyle enhancements.

“Location, location, location,” yeah, right, but it’s true.

Decide on areas of interest, and then read up on those areas.  Read the local papers, visit with locals at the cafes, investigate census figures, and study water issues and availability. Determine trends, find locations of landfills, prisons, or other issues with potential to affect values.

Before you start investigating specific possibilities, determine your goal.  Are you intending to simply hold the property for a profitable resale, or do you picture years of enjoyment with your grandchildren on your Ponderosa? It affects your decision.  Then, as you proceed to check on specific ranches, remember that there is no perfect ranch out there, no utopia.  They all have flaws.  That can be a surprisingly hard concept to accept. But the more pre-investigation you do, the more likely you’ll be to locate tracts approaching your needs.

Then start looking.  Looking is half the fun.  Enjoy it!  Figure on looking at dozens of places.  They may not be making anymore land, but there are always more places coming onto the market.

Personally, I prefer the brush country of Southwestern Texas and chose to make it home.  It’s great country for men and dogs, as they say, but hell on women and horses.  I buy only country I love.  That way, if the market goes south and I’m stuck with it, that’s alright with me.

Quit looking for that great bargain.  It isn’t out there.  Sellers are sophisticated and know about recent comparable sales.  But they’ll usually give a little on price.

You’ve done your homework and you’re considering several places.  Don’t choose it if it doesn’t have water.  Test the water.  Have your attorney examine and explain fully any easements and mineral clauses, and ensure that it comes with an agricultural tax exemption that you’ll immediately personally renew after closing.

Cash may be king, but as a seller I like to finance land to the buyer. I can usually offer slightly better terms and feel assured that the land itself is my primary source of collateral.  Don’t overlook this possibility, whether buying or selling.

If you’re selling other real estate to buy a ranch, definitely consider an IRS 10-31 tax deferred trade through the use of a reputable exchanger. It’s a wonderful estate planning tool and can save you many thousands of dollars.

How old are you?  If you’re an old work horse like me, you’re probably adverse to risk. Cash out. But you young studs all want it now.  Go for it!

Of course you can’t afford it.  But if your wait extends to “one of these days” you’ll never be able to afford it.  Take a chance. If you fail, get up and try again.

Here’s how.  Bite off more than you can chew.  Try to have saved enough for a low down payment and the first of many long term note payments.

Sacrifice.  You don’t really need that new truck, and a little overtime never hurt anyone.  How bad do you want this ranch?  Lease out the grazing or farming, as well as the old farm house and the hunting.  Time seems to lessen the burden of payments.

Meanwhile, on weekends or after your regular job, invest a lot of elbow grease into your ranch.  Paint the front gate, grade the roads, cut a few kinks, and repair the barn roof.  The grunt work will help keep you in shape.

I know multi-multi-millionaires who dig their own post holes.  Get down and dirty!

If you’re the Bonanza, hold-forever type, you’ll manage some way to cover your note payments.  And if you’re the guy after a quick, easy buck, like me, put up a for sale sign.  Actually, be ready to sell it before your own purchase is even completed.  Or sell part for a good profit to help cover the cost of the part you want to keep a while.

Anything that makes you money is an asset.  A ranch is pretty much a liability until you sell it. It’s an attractive and desirable liability, for sure, but an expensive liability nonetheless.  Figure two percent return on brush land, more for farm land.  Certificates of deposit pay better.  Of course, appreciation in land values historically works to the owner’s advantage.

I recently bought a $2,500,000 keeper ranch and spent a year cleaning it up.  A buyer up and offered me nearly $10,000,000 for the place.  My Bonanza ranch quickly became an investment ranch.  Keep your priorities straight.  There’s lots of land out there.

Yeah, I know the stock market is nuts, and I’ve read the headlines about sub-prime markets collapsing.  So what? If everything else goes to hell in a hand basket, at least you’ve got the land.  If that’s not a favorable buyer’s market, I don’t know what is.

So why?  Because land is a real head rush with incredible potential. Because it doesn’t take a brain surgeon to play, only guts and desire. Because you look good in boots and a hat. Because you’re a survivalist, a tree hugger, a nudist, or a hermit. Because it’s none of our business.  Go for it.

—————————————-

Todo Myane is a ranch buyer in South Texas. For more information contact him at 830.279.7799

More Field Reports From The Land Report:

1. Buying land differs greatly from buying a house
   Residential real estate is a whole different ball game than the rural variety, and purchasing property in the great unknown is a big step for any urban dweller. Here are...
2. What a ranch broker is and why you should use one
   Home buying can often be accomplished over the course of a weekend. With only a car and the real estate section of a local daily, one can set off on...
3. How to Buy a Texas Hunting Ranch
   Regional Spotlight: Texas Hunting Ranch General Info: As temperatures across the country skyrocket this month, it’s almost inconceivable for hunting to cross anyone’s mind. Dove season is just a few...
4. Field Report: Timberland
   The following is excerpted from "Market Notes," a series of interviews in the Fall 2008 issue of The Land Report by Trey Garrison featuring some of the top brokers nationwide. The complete...
5. Sold! Oregon’s 42,500-Acre Ochoco Ranch
   The heavily timbered Ochoco Ranch, located in Central Oregon just 30 minutes from the red hot market in and around Bend, sold last week to a buyer from Texas who first saw the property...