How to Make the Most of Your Land PurchaseSeptember 1, 2021
As a farm or ranch buyer begins to contemplate a purchase of rural land, they very likely will need to consider how they can generate revenue from that farm or ranch operation. The most obvious answers usually come from the standard livestock and crop operations, and we have discussed how these can be approached and managed by a new farm or ranch owner in past blogs. In this article we’ll think outside the standard box and explore some of the other revenue generating possibilities that may be available to a landowner.
People around the world honor and glorify the image of the American Cowboy. The magic of the West is still alive in states like Wyoming, Arizona, Nevada, Texas and of course Montana. Many ranch owners are taking advantage of this mystique by adding working ranch vacations to their standard livestock and crop operations. Guests stay in comfortable quarters and enjoy great home cooked food but by day they are immersed in working alongside the cowboy crew moving cattle, branding calves, doctoring yearlings or whatever task needs to be done that day. Of course, the guests are paying for this experience, so the ranch owner gets some help with the work and generates a little revenue on the side. Also, in Montana, the dude ranch business is a significant part of the tourism industry and there are often dude ranch specific properties on the market for sale. Owners of these ranches have found that offering people the experience of having a Montana ranch vacation is both fulfilling and profitable and has become a rewarding way of keeping the Western spirit alive.
In Montana many large ag properties offer the sportsman spectacular opportunities to fish and hunt in a private setting. We are seeing ranch owners take advantage of the recreational resources they have on their properties by leasing hunting and fishing rights to local outfitters or by becoming licensed themselves and setting up an outfitting business of their own. This has enabled them to generate additional revenue from the resources they have protected and enhanced over the years by operating their livestock and crop operation in a sustainable manner. Not unlike the dude ranch concept, fishing lodges are popular properties in Southwest Montana where we have some of the best flyfishing opportunities in the world. A great example of this would be an 18 Land Company listing near Twin Bridges, MT known as the Three Rivers Angler’s Retreat. This property is a fine example of high-end accommodations placed in a beautiful setting with the ability to generate solid seasonal revenue for the owner.
As long-range shooting has gained popularity in the United States some ranch owners near larger towns are creating shooting ranges on their ranch properties. As rifle ballistics and optics have improved so has the need for space to shoot long distances. Often these sportsmen are shooting upwards of 1500 yards so it requires the amount of space that a large ranch can provide while maintaining safety for people and livestock. This has created an opportunity for owners of large tracts of land to create shooting ranges that charge a fee for membership and services.
A very common way to generate ag land revenue is through a standard agricultural lease. Essentially, the farm or ranch owner is renting his land to an agricultural operator for an agreed upon annual or monthly fee. Often, the operator is someone established in the local area and has all the equipment and capabilities necessary to operate the property in a sound and sustainable way. This arrangement allows the landowner to receive passive income from his property and enables the renter to enlarge his ag operation without having to borrow large amounts of capital to purchase more land. Also, if the landowner is an absentee owner the renter can caretake the property while the owner is away. There are many ways to structure a lease agreement, but the best ones are always beneficial to both sides.
We have only touched the surface of ways farm and ranch land can be used as a source of revenue and a landowner with good business insight will probably discover many more. At 18 Land Company we want to help our clients see all the opportunities available and then find the ones that fit them the best. Please contact us and let us show you how we can help you find your perfect farm or ranch property.
If you have questions or would like to talk to one of us about how to make the most of your land purchase, we welcome you to contact us.
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