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How To Buy Farmland: A Beginner’s Guide

Women in Agriculture Land

Many people dream of buying farmland, having the space to grow and build a successful farm operation, and having the ability to be more self-sufficient. There’s a lot to consider when buying a farm. It takes planning, resources, knowledge, and hard work to be successful.

Here we’ll talk about some baseline details as a beginner’s guide to making your dream a reality. This includes determining your farming needs, learning how to operate a farm, and working out the details of your business. If you are ready to get your hands dirty, here’s a guide on how to buy farmland.

For those without a farm background, something to consider is looking for a mentor or an opportunity to work on an existing farm. Explore the various enterprises available (cash crops, beef, dairy, hogs, vegetables, etc.) and determine what direction appeals to you most.

Once you’ve settled on the direction you’d like to take for your own endeavors, you will want to begin understanding the capital (cash) needs of your operation and answer some specific questions.

  • How much farmland will you need to buy?
  • Are there specific types of buildings/improvements that are required?
  • What types of equipment will be necessary?
  • What are your projected income and expenses for the first 12-18 months of operations?

Next, you’ll want to put together a written financial plan for your operation, including:

  • A list of all resources needed, such as livestock, equipment, and any supplies you’ll need.
  • A demonstration of how your plan will make enough income to cover operational expenses, debt payments, and living expenses.
  • Any non-farm income sources that help you maintain the resources and expenses necessary to keep the farm afloat.

Profits are often thin and your income may depend on shifting market forces and weather patterns. You have to fill many roles, especially on smaller farm operations.

Surround yourself with a team of experts, mentors, and resources. A team of professionals can help you iron out the details in your plan, figure out what other questions to ask, and help you dial in your plan to get to a place of execution. This team could include an accountant, a farm consultant, a lender, a nutritionist, and/or an agronomist.

Formulate your overall business plan to help you understand your business profile and vision, financing needs (including a projection of income and expenses), business organization type (LLC, partnership, sole proprietorship, corporation), management tools (technology, equipment, software), market considerations, employee management, as well as contingency plans for those unexpected things that will inevitably arise along the way.

Assuming your plan predicts a greater income than expenses and hasn’t scared you off from the prospects of farming, the next step is to look for properties that fit your budget, your proposed operation’s needs, and your desired location.  Take your time and include a mentor in your search and showings. Understand the improvements that each property may need, and how that impacts your buying power for each unique listing.

Next, it’s time to talk to your local lending expert. There are a variety of programs available for purchasing farmland and equipment and for operating funds. A conventional loan will require a minimum down payment of 20% for the farmland based on the purchase price. There are programs available through the Farm Service Agency that offer low to no down payments on farmland purchases.

An experienced, trusted lender will be best positioned to assist you with a solid written plan and some capital (cash/down payment) to invest and guide you to the best financing package, tailored to your needs and those of your operation.

With proper planning and by surrounding yourself with the right people and resources, purchasing farmland can be a rewarding and fulfilling experience. Heartland Credit Union is here to guide and assist you through the credit union loan process. We want to be on your team and help you to achieve your dreams.