Country/Farm Niche?

10 Replies

So I'm closing on a fixer this weekend. 3bed/3bath sitting on 10 acres. About 2 miles from my house. I'll be doing some major renovation, and plan to re-fence the pasture for horses. I'm thinking it might be a good niche around here. I would put about $3000 on the fence. And probably get $100-$200 more per month on rent. Do you think it's worth investing on fencing?

I never though about buying rental property in the country (even though I live on a farm). But after finding this property on MLS, I keep thinking it might be a good niche. I remember I looked all over for a house to rent in the country before we bought ours. I would also think that tenants that bring horses will tend to stay longer, since you don't have many/almost none rentals with pasture, even though it may take longer to find tenants. I'm about 1 hour from Charlotte, NC, and 20-30 minutes from 4 smaller but growing cities.

Anybody out there with experience on country rentals? Any tips are much appreciated.

No experience with country or farm rentals, but if the numbers for the property already make sense as a rental, then I would definitely invest an additional 3k one time(plus some ongoing fence maintenance and repair) to get extra $1800 (avg)  per year in rent.  Just run your numbers to make sure that 1) it will bring in the extra rent you anticipate and 2) there is a need for it in your market. My gut tells me that if you get a family to move in and bring their horses with them, they will probably be there for a while.   I would just question how many renters have horses or want to have them - its an expensive hobby.  Have you thought about running a teaser ad to see what respnse you get?  @Paulus Anglada

Thanks @Derek B. That's a great idea. I noticed 1 ad on craigslist looking for a house with pasture for horses, that fit's the property I'm closing on. The guy is willing to pay $1K more than I plan on listing it for, when ready. But I may put a teaser ad on craigslist to see the return I get.

Yes, I agree, 10 acres fenced (with a barn or stable) should be 250/300 a month. Hate to see a horse stay in open pasture without shelter, wouldn't allow it.

I had 4 stables in a barn, corral and 7+ acres of pasture and I had offers to lease it, but didn't. One offer was $600 as I recall, (no house, my second home was across the road) but it was also a great location very close to town.

Check the insurance policy on ag. exposures, liability if some kid gets in or if they get lose an jump on a car or some such.

Sounds like a nice place and it should be a great rental, yes, pick the right tenants and they could be there a long time. Good luck :) 

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

You're right @Bill Gulley I need to consider increased liability exposure with the horses.

But I would also make sure to include in the lease contract that pet/horse liability and fence upkeep is tenant's responsibility.

Liability for fencing is one thing, keeping it in good condition to normal wear and tear is really on the land owner, not the tenant, damages are something else.

As to tenants doing maintenance, a minor fence repair is not a capital expense really, it can be expensed off, minor issues. Ag property can be commercial, if any business is derived from the property by the tenant, like raising horses for sale, giving riding lessons maybe. They can then take on maintenance issues.

A residential lease, the tenant can't capitalize expenses for improvements or expense items as they have no means to do so as a residential tenant, so that falls to the one who has the financial advantage, the owner. You depreciate improvements, tenants do not, unless they have a business purpose as a commercial tenant. 

Either you or the tenant can obtain insurance. Your cost on insurance is figured in with your costs to lease, the tenant still pays it.  :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Originally posted by @Bill Gulley :

Liability for fencing is one thing, keeping it in good condition to normal wear and tear is really on the land owner, not the tenant, damages are something else.

As to tenants doing maintenance, a minor fence repair is not a capital expense really, it can be expensed off, minor issues. Ag property can be commercial, if any business is derived from the property by the tenant, like raising horses for sale, giving riding lessons maybe. They can then take on maintenance issues.

A residential lease, the tenant can't capitalize expenses for improvements or expense items as they have no means to do so as a residential tenant, so that falls to the one who has the financial advantage, the owner. You depreciate improvements, tenants do not, unless they have a business purpose as a commercial tenant. 

Either you or the tenant can obtain insurance. Your cost on insurance is figured in with your costs to lease, the tenant still pays it.  :)

Thanks for this informations. I myself am interested in learning way to monetize agricultural and commercial properties as per my long term goal. Currently I have one vacant property free and clear that I am about to cash flow. Any more best practices or references to information such as forums or books to peruse these niche?

What do you know about agriculture?

And, the 10 acres, don't forget you need a water line to the inside of the fenced area..

The Ag niche is hot, it is also an area where there is much less competition from small investors. I think, in the forums, this is the first ag question in 5 years.

Believe it or not, there is land maintenance, mowing, clearing, cleaning, fence repair, erosion and drainage, and soil conservation. You don't want to be mowing 10 acres with a lawn tractor a 38" deck, you need equipment and a place to store equipment.

I don't know what you mean by a "lot", we speak in terms of acres or fractions of an acre. Small parcels, like a 1/2 acre might be a garden, not really an ag venture.

Knowing the value of an ag operation/land is knowing the highest and best use, what is it good for? From that your valuation begins. You need to know the ag business, to identify that highest and best use, can't put horses on just any area, can't grow corn or soy beans just anywhere (although they try growing corn everywhere in IL. )

Dealing with a farmer, you gotta speak farming, a rancher speaks ranching, at least to a degree you need to understand the business.

Books, ? Don't have a clue, I can tell you that your local conservation department will have advice, ag extension offices, I'd begin there. :)    

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

First ag question in 5 years?  You're forgetting my buddy Derek, who was going to make millions growing corn on a 3 acre lot in New Hampshire...

Bill,

Thanks for your response, comments and questions. I know a decent amount about agriculture as per my degree in environmental science and my full time pursuit as president of a precision agriculture company.  I'm always looking to learn more though. I speak with farmers regularly and I am already connected with conservation departments, local USDA reps, land trust folks, etc.

Originally posted by @Richard C. :

First ag question in 5 years?  You're forgetting my buddy Derek, who was going to make millions growing corn on a 3 acre lot in New Hampshire...

I can't think of any agricultural commodity that can produce millions in revenue off three acres. If one exists I want to buy those seeds. How did Derek's corn operation turn out?