Questions to ask your real estate agent before pulling the trigger on your first farm
Slade Priest sits behind a buck that came off a nice piece of hunting land. (Slade Priest photo)
Editor’s Note: The Realtree and Realtree United Country crew will be producing weekly content on Realtree.com to help educate the existing and prospective land buyer. From things as simple as establishing a budget to little-known secrets on land buying, we’ll have it all. And as always, you can go to RealtreeUC.com to see all of the available property listings in the area you’re shopping.
No. 1: What’s Your Total Budget and Down Payment Going to Be?
First, what is the maximum amount of money you want to spend when all costs are accounted for? Don’t just consider the list price, because there’s more to it than that.
“Everybody usually knows how much they can spend up to,” Priest said. “But remember, whenever you decide your budget, different banks require different amounts down before approving the loan. Banks will require at least 10% of the sale price down, and usually it’s more like 20%. That’s with pretty good credit. If you have bad credit, that’s a different conversation. There are ways to use equity in your home as a down payment. So, there are a lot of different ways you can make it.”
The best way to ensure a good down payment is to save up the cash for the down payment. You can also pull money from your 401k or use equity you’ve built up outside of your home.
No. 2: Do You Want a Turn-Key Property, or Can You Invest Sweat-Equity?
Some want a property that’s ready to hunt. Others would rather buy cheaper land, and improve it over time. The latter is often a way to save money.
“Turn-key properties are becoming more demanded because we live in a fast-paced world,” Priest said. “We don’t always have time to put sweat equity into a property. It’s nice to show up and all you have to do is hunt.
“But if you’re someone like me who would rather buy a property and put some sweat equity into it, you can often find ground for less money per acre,” he continued. “Maybe the box stands and food plots aren’t already there. Maybe it doesn’t have a camp or a structure. Maybe it has no food plots, ponds, trails or roads. These improvements make your investment more valuable if you do the work – and the property will appraise for more once those things are done.”
Other factors that affect listings include: Access, easements, road-frontage, tillable land, availability of mature timber and more. Keep these things in mind when analyzing the value of a property.
No. 3: Do You Require Living Quarters and Utilities?
Not every tract comes with housing. And not every property can have housing put on it, mineral rights and other factors depending. In some places, while primarily in towns and cities, air rights (everything above the land) is becoming a thing. It’s important to know what you want in a property before you begin the search. This will make the search process much easier.
“As far as extras, when you begin looking on the internet and thinking about a land purchase, you need to ask yourself if you want a cabin or if you want to bring family and friends there,” Priest continued. “A lot of the time, a property that doesn’t have any utilities is much cheaper. Maybe you’d be okay with a property that only has solar power – but remember, you’ll have to invest in solar panels and equipment.”
Utilities are some of the most expensive additions you can make to a property. Utilities involve heavy machinery. Cheap rates and heavy machinery aren’t synonymous.
Finding the right property will make long days in the treestand seem much shorter. (Bill Konway photo)
No. 4: What Improvements Do You Want to Make?
Even if the property is turn-key, you’ll still probably want to make some changes after closing to make it your own. Those changes cost money, too.
“Getting a property more and more turn-key costs more and more money,” Priest said. “Many land searches start on websites such as RealtreeUC.com. As you’re shopping, remember that price isn’t always a reflection of value. You could have property A that’s turn-key and a lot pricier, and property B that’s cheaper, but really rough. But property A might be a much better deal because it might cost you so much to get B in property A condition.”
Maintenance costs and additional improvements are big expenses to consider, too.
“What’s it going to cost to bush hog it? What’s it going to cost to maintain a pond? What’s it going to cost to maintain roads? What about erosion and other challenges?” Priest said. “If you just let a place go and don’t spend time and money on it, it isn’t going to be worth what it was the year before.”
No. 5: What Are the Interest Rates on Land Loans?
Interest rates are oftentimes downplayed by prospective land buyers, but a point or two’s difference can mean thousands of dollars in extra cost over the long haul.
“Interest rates are definitely going up,” Priest said. “And I’m not a banker. Let me say that. But I deal with them every day. Different banks deal in different ways. Your conventional banks, they have opportunities that maybe a land bank doesn’t. On the other hand, land banks have systems the traditional banks don’t offer. You have to decide what works for you. About 5% or 6% is pretty normal for recreational land. A place you’d put a house on might get a better interest rate, but in my area, you can expect 5% to 6% interest rates and 10% to 20% down with good credit.”
No. 6: Have You Planned for Property Taxes?
This is an annual cost outside of the initial sale. It recurs every year and typically slowly increases throughout time. It’s something you must factor into your budget.
“When you’re determining your budget, you have to consider taxes,” Priest said. “This is something that’s going to be very county and area-specific. Where I’m at in southwestern Mississippi, you can expect $3 to $4 per acre on property taxes. Call your Realtree land pro and county tax man to see what the rates are going for where you’re looking to buy land.”
It takes time to find the right tract of land. But using a Realtree United Country land pro will help speed up the process. (Josh Honeycutt photo)
No. 7: Have You Considered Closing Costs?
While this isn’t as costly as the land sale, interest rates, improvements or taxes, closing costs are part of the deal. This is yet another expenditure to plug into your budget. To be clear, closing costs can include things such as appraisals, attorney fees, commissions, title searches and other minor costs. The good news — oftentimes you can negotiate it into the deal that the seller pays these fees instead.
“This is going to be different in different areas,” Priest said. “In our area, they have a scale sheet. It’s a percentage of the cost of the land. For your average deal around here, closing costs are usually about 0.5 percent of the sale. If it’s a $100,000 sale, you’d be looking at about $500 in closing costs. Every attorney and title company is different.
“This is why it’s so important to not rush it when you talk to your Realtree land pro,” Priest continued. “A lot of the times, these are the largest purchases of peoples’ lives. Yes, it might cost a little extra to have someone represent you. But you wouldn’t do brain surgery on your own. Don’t go through the land-buying process by yourself, either. Have a land pro — who does this every day — help save you money in the long run. He or she can answer all of your questions in a timely manner. The land pro also can help you find exactly what you’re looking for.”
Once you have all of these budget-related questions answered, then you’re ready to begin your search for the perfect piece of hunting paradise. Go to RealtreeUC.com or call a Realtree United Country land pro today.