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Don/Adobe Stock September 29, 2022 Rae Hartley Beck is a writer and editor with over eight years of experience in personal finance. Her work has most recently appeared in Bankrate, MoneyWise and Investopedia. Rae specializes in credit card rewards, investing, real estate, home improvement, lending and financial advice for millennials, Gen Z, Gen Alpha and their parents. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Bankrate logo The Bankrate promise
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Are you yearning for a wide open space to call your own, with chickens, horses, and a never-ending supply of fresh vegetables? Has a documentary like “The Biggest Little Farm” on Hulu drawn you into a visually stunning dream of agricultural life? You might be great at growing tomatoes, but buying a working farm and keeping it solvent takes significant capital, long hours and deep knowledge of agricultural science. Here’s everything you need to know before cultivating farm ownership. Why buy a farm
Before buying a farm, you need to ask yourself what your goals are. If it’s just for , you may want to reconsider your plans. “Farms don’t generate much cash until they’re paid for. Even then, the return on investment is low compared to more traditional investments,” warns Brian Hawk, a senior lender with Bank Iowa, one of the leading independent Agricultural banks. In fact, “there typically isn’t enough profit margin to allow for a manager,” adds Hawk. Other options like you can lease out for grazing or timber may be a better alternative if you’d still like to invest in acreage. If you’d like to buy a farm to live on, you’ll need to decide what size and type of property you’d like to have. Orchards and vineyards work best in certain areas of the country, while apiaries and dairy farms are best suited to others. Then there are hobby farms, which can be operated almost anywhere. Different types of farms
Hobby farms: A hobby farm does not view making a profit as the primary goal. The main purpose of a hobby farm is enjoyment, and it usually actively costs the owner money to maintain. Hobby farms can produce fruit and vegetables, eggs, milk and meat for the families that own them but typically don’t turn a profit or employ workers. Working farms: Working farms with a specific limited scope may be easier to pick up for a novice than a full commercial farm. Established orchards and vineyards will already have crops in place, and your only job will be to maintain them. They’ll typically have experienced staff that can show you the ropes slowly over time, and you’ll only have to learn how to manage one type of crop. Similarly, apiaries and dairy farms may be easier to start in, especially if you can learn the process from the existing staff. Where to buy a farm
Before you start looking for a farm, you need to narrow down the “geography, terrain, and soil types you’ll need to consider,” says Garrett Ruple, owner of Ruple Properties, a rural properties brokerage based in San Antonio, Texas. Certain crops thrive in sandier soils, whereas others prefer heavier, more nutrient-dense soils. “Certain native grasses produce the best grazing habitat and only occur in some regions. Average rainfall, water, and mineral rights are important factors when choosing a region to start a farm in,” adds Ruple. If you have no idea what you want to grow, contacting your state’s agricultural extension office and enrolling in some classes is a great place to start. Once you’ve narrowed down a region, find a local rural to guide you through the process. Working farms don’t come on the market as often as houses do. You may find yourself waiting years for the perfect property in the ideal area to go on the market in your price range. A small hobby farm may be the perfect starter for a complete novice. A good hobby farm will have a “house in relatively good shape [on] around 5 to 10 acres,” a size that will allow a beginner “to have a couple of animals and not get way over their head,” says Al Wisnefske, managing partner with the Land & Legacy Group in West Bend, Wisconsin, which sells rural properties. Hobby farmers primarily will “be working a regular job, but then on the weekends and at night, they’ll be taking care of their smaller farm,” adds Wisnefske. Questions to ask before buying a farm
Before buying a farm, there are several questions you should ask. Chief among them is how much time and money are you willing to sink into your farm and whether you will have income outside of the farm to support yourself and your family. Once you’ve picked out a farm, you’ll need to find out the following information about the property: Acreage Water rights Irrigation systems Soil analysis Drainage systems Crop history Grazing history Pesticide usage Blight/disease history What equipment comes with the farm Age and condition of buildings In addition, you’ll want to get a sense of the condition of the farmhouse, the way you’d commission a for any house you’re considering buying. If there’s none, you need to verify that the allows a farmhouse to be built if you intend to live on the property. If you’re purchasing a currently operating farm, you’ll want to have an accountant look at its financial statements for the past several years — the same way you’d evaluate the balance sheet of a business you might buy. You also need to ascertain the number of employees, both permanent and seasonal, the property requires to operate. Purchasing and financing a farm
Farms typically have significantly larger purchase prices than most homes and are available from fewer lenders. The best option to finance a farm is through the . The USDA has numerous programs for beginners, women, minorities and Native American farmers and ranchers. If you can’t qualify for one of the USDA programs, you’ll have to go through a private lender focused on agricultural enterprises. “Farms are complex businesses. Farm loans must be underwritten carefully with income and expense projections into the future,” says Hawk. If you’ve never worked in the agricultural sector, you may have difficulty proving your future earning potential and qualifying for a loan. Once your deal is closed, you’ll want to have as much money in reserve as possible. Compared to owning a home, repair and maintenance costs for a farm are astronomical: According to data from the National Agricultural Statistics Service, the average per farm expenditures were . And there’s a long list of incidents and accidents that aren’t always covered by regular homeowners insurance. You will certainly need to get a special farm owners insurance policy, a hybrid form of coverage meant to protect you both personally and commercially. Even so, that protection often has limitations, especially when it comes to crops and fences. SHARE: Rae Hartley Beck is a writer and editor with over eight years of experience in personal finance. Her work has most recently appeared in Bankrate, MoneyWise and Investopedia. Rae specializes in credit card rewards, investing, real estate, home improvement, lending and financial advice for millennials, Gen Z, Gen Alpha and their parents. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Related Articles