How to buy a farm
How to buy a farm
In this article, we begin to tackle the question of how you go about buying a farm. Interestingly enough, we are actually all farming people. It’s been a part of our lives since prehistory where hunting and gathering simply wasn’t enough. We wanted to grow our own food, domesticate animals in order to guarantee milk and meat om an on-demand-basis. Sure, we have evolved substantially over time – particularly in the last 100 years where it’s all about technology, phones and planes. But make no mistake, we are all reaping the benefits of farmers and farm labourers hard work. Your tea, coffee, food, even your clothing is the result of farming.
But a large number of urban and suburban dwellers have plots of land or allotments that they use for organic growth, while others are simply content with growing a tomato or regenerating an avocado with matchsticks and a glass of water. We need to grow stuff. And farmers are the superheroes of our survival as a species. You probably don’t need to be reminded of this, but we hope to keep reminding people of the importance of our unsung heroes.
So, we start with the dream of buying a farm and move on to realization.
Buying, owning or managing a farm is, in a lot of ways, like starting a family. It’s not a quick ‘thing’ you try out for a while and see if you like it. It is a serious, lifelong commitment. It is a multifaceted undertaking which will surprise you along the way, no matter how informed you are. As they say, “Every day is a school day”.
So make sure you’re serious about buying a farm be you even consider the next steps. Are you passionate about it? Are you able to make sacrifices in order to make the farm succeed? Good. Then let’s move on.
Decide on what size you can afford and what you can manage.
You know the old adage: Don’t bite off more than you can chew. Make sure aware of every eventuality that you’re likey to encounter. In real life, you can’t foresee everything. But the more angles you consider and the more research you do, the less chances you have of nasty surprises. So don’t go for the biggest bite you can possibly take. Leave a little space for ‘those other things’. If in doubt, aim for the 80/20 rule. Buy 80% of what you think you can afford and what you think you can manage.
The financial planning around buying a farm is of paramount importance. With an undertaking the size of this, the outlay can be stupidly expensive to start with. So make your plans, do your research and make sure you have a backup plan to avoid bankruptcy.
Understand your market
Put your business brain on. At the end of the day, we’re all salespeople. We sell our time or products, or both, for money. If you dream of buying a farm and living the quiet country life, consider that you will have to have a fairly sophisticated cash flow system in place. Good questions to ask yourself are: Who will buy most of my product. Will I be selling locally? Or will I be supplying larger brand with regular contributions? How far will I have to travel to sell my products?
Who are your competitors? What are they doing that makes them successful? What are they doing that’s costing them revenue. What are they NOT doing that’s costing them revenue? How can you be different without being weird?
Consider the lifestyle
Consider what is expected of you as a farmer. Be present at fancy functions? Have a high ranking social media presence? Knock off work early on a Friday? No…not really. You work with nature. And nature is unpredictable. Nature, in some ways, will be your boss. You do what it says when it says. This can be anything from fighting frost in the middle of the night, to manage flood waters for days on end.
Farming is not a lifestyle – it’s a life. Your life is farming. Average working hours on a farm are 70 – 90 hours. That’s double the average traditional job hours and probably 100 times the physical input.
Do what is right for you. Too often we allow the market and the money to dictate what we should be doing. After all, money buys happiness, right? To a degree, yes it does, but to a larger degree, you will need to be fulfilled in what you do. If you’re not, you’re either going to stay in it to pay the bills, or you’re going to get out. The point is, you might like cows more than you like grain. The idea of a live animal appeals more to you than plant matter. Whatever your preference, make sure you’re spiritually invested – to some degree – to help the long-term plan succeed. In short, make sure you enjoy what you do.
The actual process of buying a farm
First and foremost, you need to make a few common sense decisions. Are you interested in the property? Is it right for you? Remember, what worked for somebody else, might not work for you. So be sure, mentally as well as emotionally, that you want to do this. If you have bought property before, buying a farm will have many similarities. Similarities such as, determining price, negotiating with the seller, due diligence and thorough checks.
Set your budget.
Just the same as buying anything, you will consider the cost, continuing costs and unforeseen costs. Consider the following points and make sure they are written down and clear in your mind.
The cost of the land or farm you are buying – This will be determined by the area as well as how much infrasructure there is on the land. Obviously land with buildings and functioning systems will be more expensive than a piece of land that is just, well, land. Developed land in the U.S. costs $106,000 per acre – on average. Undeveloped land is valued on average at $6,500 per acre and farmland at $2,000 per acre.
Unforeseen costs – look up farmers blogs, articles, forums, anything you can find online and do research. Most importantly though speak to 3 ot 4 experienced farmers. Farmers in the region you’re buying as well as outside. Varying opinions and experiences will be invaluable to you.
Getting a loan
Again, this will take considerable research and conversation with the right people. But start off with your bank and check to see if they offer any agricultural plans. Get all your information and then find a agricultural leasing company to talk to. Compare your notes and decide which is the best route to follow. USDA NAME AND LINK are well known for helping buyers onto their feet. Try to prequalify your loan to help speed things up
Find a realtor
Realtors are not hard to find. Find one in your area who knows the-lay-of-the-land. Decide on one you like and trust. The area you intend to buy in will also have its own requirements and guidelines for submitting offers and your realtor will know how to handle these.
Make an offer
Your realtor will handle this. You simply tell him what you want to pay. He goes to the seller’s realtor (or representative) who talks to the seller. The seller will then either accept the offer or present a counteroffer to their representative who then goes back to your realtor and ultimately back to you. There can be a bit of backwarding-and-forwarding, but that is the nature of the beast. Just make sure you’re aware of prices in the area to make sure your purchase will be fair and accurate.
Hire an inspector
Any property will have to pass inspection in order to be legal. One can imagine, that with a farm the list of inspections and criteria are considerably bigger than buying a house. Also, these criteria will be dependant on what you intend to farm. The seller might have an inspection pass that is still valid, but you might want to do it again to make sure. If the farm does not pass inspection, consider what needs to be done and renegotiate the deal. If there are a lot of violations, chances are you’ll be faced with more problems in the near future. The decision is yours and each scenario will be unique. But make sure you don’t lose.
Set up the contracts.
If all is well: you’re happy, the inspection was successful, you feel the price is fair or good, you need to seal the deal with a contract. Contracts make us feel like we’re signing in blood. With the scale of purchasing a farm, the blood can feel a bit redder…Anyway, make absolutely sure you can secure a mortgage if you need to. Also, go through your notes, talk to a friend about it and lastly do a walk-through of the property before you sign anything. The seller and you will both have to sign the escrow papers which will be handled by an escrow officer.