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farm buying advice...

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  • #21
    If I were going to choose between the 6-10 acre properties, I would choose the one in the horsey community. Yes you 'could' trailer out but we all know how much easier that can be said than done. Having the horsey community at your fingertips would make it much easier for you to access those arenas, trails and other trainers when you need to. Also easier for your kids if they are riders also.
    We have had some doozies as neighbors and that would be high high on my priority list to live among folks who were interested in a similar lifestyle as mine. JMHO!
    Last edited by EmJ628; Jan. 7, 2013, 07:15 PM. Reason: eta: re-reading are the 6-10 both in the horsey area? I can't keep up :) either way I am jealous you have much better options than my area of the country!
    Me: In a long-winded explanation of who GM is and why he is Important to the Sport
    Mr EmJ: So what you're saying is GM is so Important he could get Chik-Fil-A on Sunday?


    • #22
      My opinion of buying a fixer is that you'd better be able to afford the full priced place because in the end the cost is the same, plus trying to carve out the time to fix stuff if you have anything else going on such as horses can be really hard.
      Somewhere I have a picture of my DD and myself standing in my old kitchen washing dishes. You can see she is about 18 months and you can also see that I have a big old camp stove setting where the cooktop should be - since I got pregnant right after we bought the house that means I camped in my kitchen for close to three years. Same with the baths, the carpet, heck, we didn't get that darned thing all finished off until we went to sell ten years later.
      Now, when we bought this place they'd had horses at one point, but I really didn't realize how poorly set up it was and how spoiled I'd been backyarding it as a kid. We're still working on it but in hindsight . . .
      Courageous Weenie Eventer Wannabe
      Incredible Invisible


      • Original Poster

        EmJ, this area is really special horse country and I was mad I overlooked it boarding on the wrong direction out of the city for so long. It's a small bedroom community that has written it into their land use plan to support equestrian development. This plus the beautiful trails and active land conservancy are pretty amazing. It's a combo of non-profit conservancy obtaining donations and purchasing parcels and private land owners connecting trails of an old rail right of way. Also an active pony club for my kiddo (I was a pony clubber) should she become a rider. It's all very tempting with all the historically low interest rates and depressed land values at the moment.

        Update: 40 acres place on the river has an accepted offer. (scratching off list). Last August a bank-owned property of 50 ACRES was sold nearby for $240,000! Had been valued at 500,000 the previous year. Argh, had I only been prepared then instead of just casually looking!! Such a STEAL.
        Last edited by Herze; Jan. 7, 2013, 07:34 PM. Reason: speling mistacks


        • #24
          I'd go for Curtain #3 - the better house on smaller acreage.

          Like bdj said: I pay for someone else to deal with the Making Hay headaches - then buy what I need.
          I have 2 horses too and hay is not a major expense compared to me trying to grown my own.

          And I vote for not getting more than you can afford now without boarders.
          I was a landlord too (2-flat in the city) for over 30 years and NTYVM to that ever again.

          I am picky enough about the way my horses are cared for to not want to even imagine dealing with a boarder's ideas of Right.

          IIWM, I'd want to be close to the trails and a place to ride or trailer to for an arena and/or trainer.

          Good Luck in your search - if my dream came true, so can yours!
          *friend of bar.ka*RIP all my lovely boys, gone too soon:
          Steppin' Out 1988-2004
          Hey Vern! 1982-2009, Cash's Bay Threat 1994-2009
          Sam(Jaybee Altair) 1994-2015


          • #25
            Have you checked with a financial organization that specializes in ag loans?

            The USDA has a beginner farm/ranch loan package available


            nevertheless, working capital is required


            • #26
              First, the economy. I would never count on boarding income of any kind, it might not last. Sounds like you're not going that route and that's good. Second, we've never qualified on any loan based on two incomes- just in case something happens to the second job, which is part-time anyway. Realtors will want you to include both, ditto banks, but that's asking for trouble. It downsizes your dreams but dreams often conflict with reality. Third, although this sounds like it's gone too, we'd never buy property near water or marshy areas, although we have done the second with a lot of research. You have to be very, very careful of restrictions. In one place we looked at, with a small stream, you could not have livestock within 100' of it. That can really cut down on acreage available. I would never, never buy river property. Where I grew up, over the course of time, rivers can change paths and then there is possible flooding. Ditto if you have young kids, why take the risk?

              If this is projected to be a life time investment, if there is such a thing any more, then how much work do yo want to HAVE to do 20 years from now? If you had to sell, do you have something that would resell fairly quickly? Being pragmatic isn't generally fun but it can save you a lot of grief down the road. When we had to sell a while back, we had a mid-sized home with a somewhat non-conventional small horse barn that could be easily converted to other uses. The job market will sometimes do that to you. We had built what we could afford and built something that could sell down the road and it still took quite a while. Long term, I would always opt for smaller acreage and buying hay because unless you are set up for it, you're at the mercy of finding someone who will, probably for shares, and get it done in the right time frame so the hay is worth something. Putting up hay is hard and causes a lot of worry if your summer weather is iffy.

              Can you subdivide what you buy? Check the restrictions. Sometimes it's already in the plans and grandfathered, sometimes you are stuck with 5 acres as the smallest lot, etc. Down the road, if you had to sell, you could then perhaps attrack other buyers than horse people, one for the house and one for a lot.


              • #27
                Not sure this is accurate for a farm business, or at this point in your decision making, but wanted to mention that our commercial loans for business rental property have 5 year terms at the end of which we have to refinance. Also we're in the fortunate position of being able to keep paying down the principal on these mortgages, but it's not always the case in a commercial loan or for borrowers.


                • #28
                  I think it is a great time to buy a farm, if you can make the numbers work. Real estate prices are depressed in many areas and interest rates are not getting much lower.

                  I highly recommend talking to another lender than your local bank. Talk to Farm Credit. You pay a slightly higher rate for a loan (versus residential) but you get dividends paid to you annually. Plus they understand all about farms, don't require commercial loans if you are buying the property and want to run a business on it, and have underwriting rules that work with acreage.

                  Speaking of acreage, buy as much land as you can afford. When Mr. IF and I stated looking 15 years ago, we thought 10 - 15 acres would work. The more we looked, the more we decided that more was better. We ended up buying 95 acres. About 5 years ago we added another 38 acres. There is only so much land that can be bought and truly having more than you think you need is a good thing.

                  Keep shopping and looking. It takes time. We looked for 9 months. And definitely talk to Farm Credit. They were instrumental in making it happen for us.
                  Where Fjeral Norwegian Fjords Rule


                  • Original Poster

                    I was worried about the river property for some of those reasons you mention, especially the small kids part (neighbors with pools make me nervous too and why does every property need a fake pond??) So if it's off the table, I don't have to decide that!
                    I also have been thinking about the resale potential for a farm too. Unless we find something super perfect, a fancier house might be easier to sell. In fact we are going to go have a look at a few to try to see what the lower price points get us. I'm a little concerned with some places that have been on the market a long time.

                    @Clanter and Ironwood
                    I called one local farm credit lender and they said 20% down was required at minimum for their loans, sometimes more than that depending on the situation - like 30%? Was that your experience? I don't know how a beginner farmer is supposed to get a farm loan with the high cost of land! I supposed they all inherit it and that's why young farmers are so few and far between. I felt like it was false advertising when they said they can help people "accomplish their rural dreams" and they had loans for people who didn't fit conventional financing rules. So only on the lower to mid-size priced properties could we get 20% down, in which case we may as well go residential.

                    My daughter is 13 months right now. I'm hoping no camp stove and I hear you, sometimes just paying upfront is better. I want to be able to have a vacation once in a while.


                    • #30
                      Originally posted by Herze View Post
                      I called one local farm credit lender and they said 20% down was required at minimum for their loans,
                      FSA has a special loan program to assist socially disadvantaged (SDA) and beginning farmers in purchasing a farm.

                      SDA’s include women, African-Americans, Alaskan Natives, American Indians, Hispanics, Asians, Native Hawaiians and Pacific Islanders.


                      I am not trying to encourage you buy more than you can pay for but the answers you have been told regarding 20% down are the standard responses... you need to know there are specific set asides for SDA applications and the government has not come close to meeting its desire rate

                      In my case, I wished i had purchased more land than we did


                      • #31
                        On Farm Credit, it is true that they require 20 - 30% down. Most residential lenders won't underwrite a property that has much land. With a farm, you are looking at a non-conforming loan that isn't going to be sold to FannieMae or FreddieMac.

                        If you don't have the down payment, then obviously you'll need to go to a residential and deal with their underwriting. Nothing wrong with that. There are some nice farmettes out there. It also may be cheaper for you just to buy a house and continue boarding.

                        I can assure you that Mr. IF and I didn't inherit money or land. We had jobs, invested and saved so that we had the down payment we needed. It was certainly worth it to us.
                        Where Fjeral Norwegian Fjords Rule


                        • #32
                          I don't know how many horses of your own you have now. Our last farm was 35 acres. We had more hay and pasture than we needed. It was a GOOD thing. If you find someone reliable who will cut your hay on either shares or if you pay them it will be to your benefit. You can always no-till pasture mix into the existing pastures/ hay field to improve them. 6-10 acres sounds big until you have animals on it and buying / feeding hay year round is expensive . We have 17 acres here now. No pastures for grazing ( just snacking) but a good sized hay field and I so wish that we had more land so that I didn't have to feed hay year round.


                          • Original Poster

                            Thanks Clanter! I'm not sure if we'd qualify because we don't plan on being full time farmers but I will certainly check it out. Interesting that one has to point out such programs.

                            IronWood, I in now way meant to imply anything about you personally purchasing your horse farm. I was thinking of agricultural farms with hundreds of acres. The difficulty of us paying for a small farm, it would seem impossible to break into farming without already have 100k to put down on a property. The anecdotal evidence I have been found while casually looking seems to show that most working farms are inherited and then split and then occasionally a piece of land is sold by someone. Kudos to you for making your dream happen all by yourselves!

                            We bought our first house in 2009. It was a pragmatic, conservative purchase and the listing price had dropped 40k in the two years it had been on the market. It's now been assessed by the city in 2012 for 30k less than we paid for it, even though when we bought it, it appraised out 13k above what we paid. So we've lost over 40k in value and cannot sell it right now because it's technically probably underwater. Despite doing extra payments every year to pay it down quicker.

                            It's just not as easy to sell a house and come away with a downpayment for the next house as it was 5 or 10 years ago. So that route to accruing a downpayment is shut down for us. At least it's a duplex and we can easily rent it for more than the mortgage to buy ourselves some time to regain some value. I wish I could stand on my own feet and not need my parents' help to buy a farm, but if I want this to happen before 20 years from now, I have to get some help. Having me a nice taste of humble pie in this process, believe me. But I figure buying in my 30's means the sweat equity will be a little less painful than sweat equity in my 50's.


                            • #34
                              Herze. You don't have to be a real farmer (feeding your family and 500 others from the land) Check with your local tax dept for the requirements of ag land use. There will be thresholds for acreage, income, use, etc. As long as you meet those requirements you're a farmer.

                              Getting tax deferments, exemptions, depreciation, etc on local, state & federal taxes is a bonus to having horses at home. I lucked out in spite of my ignorance at the time of purchase of our home/ farm.
                              Equus makus brokus but happy


                              • Original Poster

                                Hosspuller and Clanter, thank you so much for the advice! I will definitely check into it.

                                This whole process has made me wonder how anyone buys anything sometimes (don't get me started on conflicting information from different loan officers) but I suppose that may also be a byproduct of the stricter underwriting requirements the housing bubble brought.

                                Candyappy, thanks for your opinion on the size of farm. More grazing seems like a good thing to me too. I have two right now but would like to eventually breed a few more, and room to board a couple if we'd like, so maybe 6-8 horses in the end. The extra land above what I "need" now seems like nice insurance, especially after seeing hay prices this past year triple or more. When I was calculating costs in some sample scenarios, it seemed hay was definitely the biggest expense.


                                • #36
                                  I'll jump on the pile and also say that I would strongly recommend not purchasing anything you cannot comfortably afford without boarders. Everyone else has already said why, and they are right, so I'm not going to repeat , except that I can't but roll my eyes when people talk about boarding "income."

                                  Seriously, pick something AFFORDABLE. It is very hard to make money with a farm. And, farms are darn expensive to maintain. So, it is really worthwhile to choose something you can comfortably afford and have a cushion for all those expenses you didn't think about. Farm costs and maintenance can get out of hand FAST. Go for a good location and nice land. Then renovate/develop to suit yourself, as you can afford. You will have a lot more fun this way, and plenty of adventure.


                                  • #37
                                    I would also rethink the value of your duplex. The tax assessment value does not necessarily equate to fair market value. I can assure you that if I sold any of the real estate I own for its tax assessed value, I would have a line of buyers wanting to offer contracts. It might be different where you are, but I would be surprised if a 2009 purchase did not hold its sales price value in 2013.
                                    Where Fjeral Norwegian Fjords Rule


                                    • #38
                                      I bought my house in 2009, and I know the sellers took a $30k bath...I kinda felt bad. I'm taking a shoveling-beauty-bark break right now, getting the house ready to go on the market next week. I hope we walk away with less than $10k owed by us. DH says we shouldn't accept any offers that are less than break even, and it's just not plausible IMO. So it really depends on where you live, which OP has not shared.

                                      COTH's official mini-donk enabler

                                      "I am all for reaching out, but in some situations it needs to be done with a rolled up news paper." Alagirl


                                      • Original Poster

                                        Ironwood, I appreciate the suggestion. I realize the tax assessment is not indicate a market price, but from what I understand duplexes move slower even in good markets and our realtor said the market is really bad for them right now in our city and did not think we should attempt selling right now. There are a lot of foreclosures and the market is horrid, even compared to 2009. I'm in WI. The bright spot is that we can rent it easily and pretty much break even on the mortgage and expenses, so we may as well wait a while to see what we can get back out of it by holding for a bit. The drawback for farm buying is it rules out FHA loan with lower downpayment requirements as an option for the farm because the duplex is on an FHA loan, but we were simultaneously grateful for because we could refinance to these rock bottom rates without an appraisal in the streamline program. It would be harder if it wasn't such a good rental area. At least that part worked out for us.

                                        Jenners, I feel your pain.


                                        • #40
                                          I would not underestimate how wonderful it is to be able to ride to other horse properties, especially ones with arenas. Yes, you can hook up the trailer and go.. but one thing that has surprised me over the years is how many large properties there are out there that are really badly set up for other people parking a trailer there.

                                          When your child is older, if she is a rider, she will be able to get on the trail and ride her horse to her friend's house long before she turns 16. It makes going riding together so much nicer. It makes conditioning your horse easier - because you will cherish every moment of your day, and spending half an hour riding instead of half an hour loading and unloading and driving a trailer is way better for everyone.

                                          Consider how far you will be from school. Is the bus ride pleasant? Will you be driving your child to or from school? What about extracurricular activities and sports, or visits to friends? You will do some, maybe a lot, of driving when your child gets old enough for her own life. (Last summer, my daughter's 4-H sheep got more time in my horse trailer than the horses did!) Calculate that into your plans. Buying into a neighborhood where your child can walk to at least one friend would be especially wonderful.

                                          I love buying beautiful hay from my neighbor.

                                          Things that might be more expensive than you thought: homeowner's insurance and flood insurance.

                                          Before any final decision, make sure you know what your options are for internet and cell phone service, if those are important to you.
                                          If you are allergic to a thing, it is best not to put that thing in your mouth, particularly if the thing is cats. - Lemony Snicket