Purchasing farmland is a major financial decision to make. It is a step closer to achieving your goals – farming, building your dream home, or setting up a company. Therefore, you must consider all financial ramifications and possible pitfalls before purchasing the land.
Many factors, including rationality, prudent decision-making, and emotional stability, are crucial when faced with major decision-making. If you are thinking of buying farmland, here are the 12 important questions you should ask yourself to avoid any regrets and get the most from the investment.
Why Do You Want the Land?
The land is a versatile investment on which you can do farming, build your home, set up your business, or build rental property. When buying land, ensure that you know why you need the land and if it is suitable for your needs. For instance, if it is for farming, do you intend to do crop or animal farming? And if it’s for business, which other factors might influence it?
What Is Your Required Farm Size?
People need different land sizes depending on the purpose of acquiring the land. If you intend to build a home and settle on the farm while working elsewhere, you may not need as much land as someone who plans to do farming, whether crop or animal, while living on the farm. Besides, large-scale farmers need more land compared to small-scale farmers.
Do You Have Adequate Capital to Purchase the Land?
How do you intend to acquire the land? Do you have ready money, or do you plan to pay in installments? The good news is that numerous firms offer farm mortgage loans, and you can always run to them when in need. At this point, you could consider taking farmland loans if you don’t have enough capital.
What Is the Value of The Land?
The land is among the fewest investments that have appreciated over the years. However, you must conduct an appraisal to determine its value before purchasing it. Ensure that the value is equivalent to its buying price. You might need professional services here.
What Is the Soil Type?
Quality soil is a non-negotiable factor when buying land, primarily for farming. Research adequately about soil types and ensure that you are comfortable with them before investing your money. Organizations that offer farmland loans could also help with soil testing and other services before giving you a loan.
Is There A Reliable Water Source on The Farm or Nearby?
Water is a vital aspect of farming and general living. Before buying the land, ensure that it is properly irrigated and the water rights conveyed with the land – if you intend to do farming. Besides, water availability plays a vital role in determining the value of the land.
Is There Ready Market for Your Produce?
Farming is a broad subject classified as either animal or crop farming. Whatever you intend to farm, whether goats, dairy, chicken, maize, fruits, and veggies, ensure that there is a ready and reliable market nearby for your produce. Most farm produce is perishable and should be sold off immediately after harvesting. Lack of a ready and reliable market can result in huge losses and frustrations.
How Do You Intend to Hold the Land Title Deed?
Land ownership comes with a legal proof – title deed. You can hold your title deed individually, jointly with your spouse, as family-owned or in a trust. Before buying the land, ensure that you know how you intend to hold the title deed depending on your plans. The land is a long-term investment. Therefore, you should focus more on the future regarding the ownership type you choose for convenience and avoid potential legal issues.
Are There Any Environmental Problems in The Area?
Pollution has significantly affected today’s air, land, and water pollution. All these types of pollution result in ugly environmental issues, which make some areas unsafe for living or working. Therefore, before buying your land, you should research and ensure that there are no environmental problems in the neighborhood for your safety and that of your project. To avoid throwing your money into polluted land or neighborhood, invest in onsite environmental audit services for safety.
Have you considered your age and health?
Buying land and investing in it is a costly move that requires hefty finances to succeed. Sadly, most people don’t have enough money to fulfill all their desires on the farm, which pushes them to get farmland loans and mortgages. Before obtaining the loan to purchase and run the farm, take time to determine how much money you will be borrowing and if it is worth it – based on your age and health.
Ensure that you get a loan that you can service and complete as soon as possible and leave more time to lead a peaceful and debt-free life. Why should you get a huge loan, acquire land, and die or become incapacitated before you complete servicing it?
Are You Willing to Take the Risk?
A farm requires significant financial investment to purchase and run. However, there is no guarantee that you will make huge profits every year, especially in the initial stages. However, rewards will come after a while with the right skills, determination, and commitment.
It is a risk that you must be willing to take to enjoy the fruits in the end. Most farmers invest in farm insurance to protect the farm from potential risks as they wait for their day of celebration and rejoicing.
Renting or Buying? Which Is a Better Option for You?
While renting is considered a costly investment long-term, it frees your money for other engagements. On the other hand, buying land could be costly in the beginning but could be easier with time. So, depending on your circumstances, which one is more convenient? Renting or owning?
Take time to assess all the relevant aspects, and you will make the right decision – whether to buy land and build (or farm) or operate on leased land and property.
Buying land isn’t an easy step in life. It affects your present life and future besides your personal and professional life. Thus, before taking any step, you must ask yourself all the above questions to clear any doubts and stay safe from possible future regrets. Where you need professional help, consult agencies like companies that give farmland loans.
References:
- https://missourihomefarmland.com/2020/01/30/questions-to-ask-yourself-before-buying-a-farm/
- https://www.agsouthfc.com/news/blog/10-questions-ask-you-buy-land