Benefits and Risks of Owning Agricultural Property

Storm on farm

Agricultural property offers a great deal of potential to homeowners. However, it can also come with risks, particularly if you have no experience owning agricultural land.

Before rushing into buying an agricultural property, you should make yourself aware of the advantages and disadvantages that come hand in hand with this type of home ownership. These benefits and risks can help you to determine, which kind of property is right property for you and your family.

Benefits of Owning Agricultural Property

Return on investment

One of the biggest advantages of owning agricultural property is the potential return on investment that it offers. In addition to the possibility of increased value of the property itself, the real ROI tends to depend on how the buyer chooses to use the land rather than the value of the land itself. For example, the annual return on investment from cattle stock can yield anything upwards of 25%.

Tax breaks

One of the best ways to save on property taxes is so own a property with an agricultural classification. The property tax laws vary from state to state, so you will need to check what tax relief is available on agricultural homes and land in your area. However, most states do so through use-value assessment, which bases tax on the potential earnings from agricultural production rather than the full market value of the property.

If you aren’t sure of the tax breaks you will be entitled to, seek the advice of a specialist in your area.

Self-sufficiency

An increasing number of people are becoming concerned with become self-sufficient and reducing their carbon footprint. Whether you want to produce crops on a mass scale, or simply focus on small-scale self-sufficiency, agricultural property presents a perfect opportunity for homeowners to do their bit towards sustainability. Some experts estimate that even a quarter of an acre of land is enough for a small family to produce enough food to live on.

Agricultural homes remain a stable investment even when the property market is uncertain

Investing in any sort of property can be a big step, and it is understandable that homebuyers may have a sense of trepidation, particularly if there is uncertainty in the market. However, agricultural property has repeatedly demonstrated its ability to perform well in all market conditions.

Risks of Owning Agricultural Property

Insurance premiums

If you have never owned an agricultural property, then it may come as a big shock to know that rural home ownership usually goes hand in hand with higher insurance premiums. The age of your property, the distance from town, the number of outbuildings, and the amount of livestock you have are just some of the elements that may increase your insurance costs. Make contact with an insurance broker with experience in agricultural structures, so you can obtain the best quote possible before you put in an offer on your dream home.

Infrastructure cost

Agricultural properties often come with a great deal of infrastructural costs – barns, stables, fencing and a range of outbuildings can all add up. Although they might be in good condition to begin with, infrastructures may require investment in the future, and the more infrastructure your land has, the greater the cost may be.

Risks posed by the elements

Damage by natural forces can be a common problem for agricultural homeowners. This could include damage caused by winter storms, flooding, wind/tornados, drought, and wildfires. You may need to take significant preventative steps to help reduce the risk posed by the elements and any associated insurance premiums.

Soil quality

If you are buying an agricultural property you are probably already thinking about what crops you can harvest. Assessing soil quality on any agricultural land included in your purchase should be a high priority. It is vital that you know what your soil limitations may be before you commit to a property. If you are interested in organic production, it would be worth investing in soil testing that checks for residues and heavy metals that may prevent your ability to grow produce that is classified as organic.

Access to water

Water law is extremely complex. You will need to check the quality of your drinking water to ensure it is safe for consumption, as well as finding out what your responsibilities are with regards to irrigation and usage. Before committing to any property purchase you should check your water rights by speaking to the water master in your area.