Large tracts of ranch land are one of the biggest requirements for a successful cattle operation, and that invariably opens up the timeless debate of whether it’s more beneficial to own or rent your pasture.
Some cattle operators in Florida choose to take the “rent” path, and for good reason. However, before you completely disregard owning your land as a viable move for your agribusiness, it’s critical to weigh all of the advantages and disadvantages. As American writer Mark Twain once advised, “Buy land, they’re not making it anymore.” The benefits of owning land include:
★ Land is an Asset. The land owned by a farm or ranch is the most valuable asset on the balance sheet. It’s also an asset that is not going to break down, run away, or be stolen (like many of your other assets). The reliable asset that land presents equates to collateral for borrowing money. Whether a rancher wants to buy livestock or other materials, expand the operation, make repairs, upgrade equipment, or simply make it through a downturn in the market, owning farmland can sometimes mean the difference between scraping by and making a profit.
★ Land Ownership Equals Control. Just like you can’t paint the rooms of a rental house any color you’d like, all the decisions about rented land are in the hands of the landowner. As a renter, you must run all changes by a landlord, and the fact that you don’t own the land creates a measure of uncertainty that can only be alleviated by land ownership; with leases being short term, such as year-to-year, the uncertainty of whether the land will be available to you and your operation, or whether rental rates will go up, is a constant concern. Owning the land means you have a measure of control in an industry where control is fleeting. Having control, in this one area at least, is a good feeling that operators can rely on when the weather or the markets just aren’t cooperating.
★ You Reap the Benefits of Improvements. Cattle ranching generally requires a significant commitment to improving the land and water. Soils need to be amended, invasive plants need to be cleared, and water sources need to be protected. Making those amendments and improvements to the land constitute a considerable cost, and they increase the value of the land significantly. Unfortunately, the benefits of those efforts are reaped by the landowner, and not the renter, when the lease is up, which can be as soon as the next year if your lease is year-to-year. As a landowner, the benefits that come with improvements made to the land will be reaped by you and your operation alone for years to come.
★ Land is a Hedge Against Inflation. Inflation is on the rise, and land prices have historically beat inflation rates, making land a sound investment. You can rest assured knowing that your hard-earned dollars are going towards owning something and are accumulating for your operation’s benefit. With renting, the money you pay towards rent isn’t building wealth for anyone but the landowner.
★ Owning Land Can Turn into Leaving a Legacy. As a landowner, you also have the power to make choices about the long-term considerations for your land. Want to leave the operation to the next generation? Thinking about using the land for hunting leases? Considering a conservation easement for a long-term legacy? These options are only possible if you own the land.
Buying farm and ranch land isn’t always simple, but having the right lender can make all the difference. It pays to partner with a team who is knowledgeable and looks beyond the superficial credit of farmers and ranchers. If you’re wrestling with the idea of renting versus owning your own ranch land, our experts here at AgAmerica Lending can help you crunch the numbers and determine if ownership is the best course of action for your agribusiness.
This column is sponsored by AgAmerica Lending.
BIO: Donald Harden, a Relationship Manager for AgAmerica Lending, grew up in the cattle and citrus business, managing a family ranch of several thousand cattle and horses. He has more than 30 years of experience in the real estate business, and more than 20 years specializing in agricultural sales. Over the years, Don has been honored to serve the ag community in many facets, including as a director and on the board of the cattlemen’s association, as a manufacturer’s representative for ag equipment companies, and as a beef cattle specialist for a national feed company. For more information about Don and the AgAmerica team, call 844.238.5312 or visit AgAmerica.com.
