How to Buy a Farm: 7 Simple Ways to Get Started - United Country Real Estate

February 11, 2022
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Buying a farm is smooth sailing with this guide from United Country Real Estate.

How To Buy A Farm: A Beginner's Guide

A farm is a primary source of food for the general population. It is the belly of all types of industries. Without farming, the entire human race will go hungry. Approximately 23% of farms are point farms, occupying 6.6% of farmland acreage.

So, if farming is your natural talent, you are in luck. You can survive. However, for those who dream of owning a piece of land to turn it into an exclusive farm or organic farm or any type of farm for that matter, we mean serious business.

You may ask yourself "How much to buy a farm?" How much money, time and work will it take to start your farm. Whether your purpose in buying a farm is for everyday home consumption or if you want it to be a source of income, you need to intensely consider many aspects of farming such as:

  • Financial aspect
  • Loans available for farm ownership like direct farm ownership loans
  • Farm labor
  • Type of farming you want to engage in (organic farm, dairy farm, commercial farms)
  • Farming operation
  • Crop choices
  • Aspects of property ownership

So, before you drop your cash into purchasing acres of land, and engaging in farm ownership, here are frequently asked questions about buying a farm that you can try to answer to know if you are ready to buy a farm:

  1. Is it wise to buy a farm?

  2. Farm investors say that direct farm ownership has many benefits including a potential for income especially nowadays that consumers are leaning towards local agriculture, urban farming.

    Food demand is never going to stop so as long as you have fresh produce that can be consumed, you can earn.

  3. What do you look for when buying a farm?

  4. To ensure that your farm will be sustainable in the long run, consider these aspects of farm business and farm ownership outlines:

    • Your purpose, vision, and values
    • Location of the farm
    • Size of the land
    • Business plan (include food demand and food operations)
    • Business management experience including farm policy
    • Education and training in an Agriculturally related Field(ex. crop rotation, crop choices, organic produce
    • Managing risks
  5. How many acres do you need for a farm loan?

  6. According to the United States Department of Agriculture, a loan applicant "may not own more than 28.2 acres when the loan application is submitted."

  7. How much does it cost to buy a farm?

  8. The Department of Agriculture reported that the average real estate value of a farm including the value of the land and buildings or structures on the farm is $3,380 per acre for 2021.

  9. Is farm property a good investment?

  10. Did you know that small farms in the U.S. are considered to be the backbone of the agricultural industry? In fact, 97% of all U.S. farms are owned by families. This percentage talks about how sustainable investing in farmland property can be.

    Forbes indicated that "farmland has delivered a higher average annual return than most asset classes in the last 29 years (1992-2020)."

    Here are the reasons why farm property is a good investment:

    • Farmland is a natural hedge against inflation.
    • Farmland provides attractive returns paired with low volatility.
    • Farmland is a good source of passive income.
    • Farmland is uncorrelated with other asset classes.
    • Technology enabled platforms make farmland investing easy.
  11. How much down payment do I need to buy a farm?

  12. The U.S. Department of Agriculture grants farm ownership loan programs to those interested in buying farm land. Loan applicants for the Down Payment loan for buying a farm are required to provide 5% of the purchase price of the farm.

  13. Buy A Small Farm With Room To Grow

If you are a beginner in farming, it is best to start small, and then scale up as you learn through your experiences in the farm. With farming practices that you do yourself, you will know the best ways to manage your farm so you will gain profit.

Buying a Farm

  • How to Buy a Small Farm/Hobby Farm
  • To start small in farming, get a hobby farm. The USDA considers a 179-acre land or less in this category. It's a great way to learn farming practices and the basics of farming operations.

    The main purpose is for you to master how to manage a farm well, not to provide your main source of income.

  • Go A Little Bigger With A Point Farm
  • When you are more ready, you can grow your hobby farm into a point farm. The USDA defines a point farm as farms with less than $1,000 in sales but with points worth at least $1,000.

    The points in point farms refers to the assigned "dollar values for acres of various crops and heads of various livestock species to estimate a normal level of sales".

  • Find A Mentor
  • A mentor in farming is a great resource because they have learned through years of hand-on farm experience.

    So, if you don't have any experience in farming here are five places where you can get your mentor:

    • The Young Farmers Coalition
    • ATTRA (The National Sustainable Agriculture Information Service)
    • Government run local extension service
    • Beginning Farmers
    • Trade magazines and popular books on farming

  • Separate Fantasy From Reality
  • So, you want to start the farm of your dreams. You need to understand the physical labor that it entails. Farming is not for everyone. You might be expecting a quick return of investment and an easy road ahead.

    The labor required in farming is not the same as the labor needed to work in an office.

    You may even need to work more than regular working hours. So, be ready for the work and the risks because the success in farming is dependent on several factors that you will need to give your time, heart, mind, and effort.

  • Consider Focusing On One Kind Of Farming
  • When you buy a farm to manage, learn best by focusing on only one kind of farming and master it well. This will prepare you to take on other farm practices in the future.

  • Create A Business Plan
  • Have a roadmap to start-up, profitability, and growth with a well-defined and solid farm business plan. It will serve as your foundation when you want to apply for a loan or government grants.

    Most importantly, it will lead you to where you should be in your farming experience.

  • Learn Where To Look For Properties

Not all pieces of land are farm lands that can be productive and will give you a good return on your investment. Finding the perfect farm land will require some research and a knowledge on important aspects like:

  • How the land was used prior to selling
  • The nutritional value of the soil
  • The drainage system
  • The farmland's topology
  • Existing infrastructure (do you need them or not?)
  • Accessibility to roads and market (distributors and retailers)
  • Biodiesel production including mineral or gas rights, if any
  • If you are ready to make your own oasis in farmland, know these basics well and learn more using local resources and through the internet. Consider careful and thoughtful planning when buying a farm.