Whether you are an experienced member of a multi-generational ranching family or an out-of-state landowner who visits your property several times a year, understanding and managing leases on ranches for sale is a vitally important part of ranch ownership. Leasing additional land from government entities or other private landowners is a way to expand the land you control, and can greatly increase opportunities for grazing, hunting, or recreation. Leasing your land to others – whether for agriculture, recreation, or specialty uses – is an effective way to generate revenue to generate a return on your investment.
When purchasing a ranch, it is important to fully understand any leases that are in place, as they can greatly affect the economic or agricultural viability and functionality of the property. Below are several examples of common lease scenarios that we routinely encounter on Rocky Mountain ranches.
Public Lands Grazing Leases – Many large ranches either border or surround parcels of public lands owned by the Federal or State governments. These public lands can be leased from the government for a variety of purposes, most notably for agricultural grazing uses. While the lease rates and terms can vary depending on the government agency and specific location of the property, leasing public lands is a way for landowners to expand their grazing operation at a cost that is relatively low compared to purchasing additional deeded acreage.
Red Hill Ranch is an excellent example of a ranch that combines deeded and leased acreage. The ranch consists of over 2,000 deeded acres but also includes approximately 450 acres of leased BLM land. This BLM land has been leased by the current owners for almost 50 years, and is not separately fenced or delineated in any way; for all intents and purposes, it is just a part of the ranch. For a low annual payment, the landowners are able to increase their controlled acreage by well over 20% of their deed acreage, which increases their livestock carrying capacity, their privacy, and the overall appeal of the ranch.
Private Grazing Leases – If there are no public grazing leases available in a certain area, landowners looking to lease additional property can approach other private landowners. For recreational-minded landowners who have no interest in running a cattle operation, leasing their grazing to neighboring ranchers is an ideal way to generate revenue, preserve the overall health of their grasses, and maintain their agricultural tax status. For landowners who live out of the area, engaging a responsible and knowledgeable lessee provides the added benefit of knowing that someone is watching over the ranch while the landowner is absent.
Hunting and Fishing Leases – Ranches that are located in prime hunting habitat or that have high quality, private fisheries can be extremely attractive to private guide services and outfitters. Even though Colorado and the western United States has abundant public lands for hunting and fishing, those with sufficient means and resources prefer to hunt and fish on private property. Outfitting services will eagerly enter into leases with landowners in order to enjoy exclusive access to the private property for them and their clients. Depending on the specific area and habitat, hunting or fishing leases can be much more lucrative to the landowner than agricultural or grazing leases.
For example, the owners of Three Creek Ranch near Granby, CO entered into a lease agreement with an Orvis-endorsed fishing guide service, which has proven to be a rewarding relationship for both parties.
Specialty Leases – While the examples above are some of the more common lease agreements, there are endless examples of ways that landowners can lease their property to generate income. One of my current listings has a lease agreement with a cell phone tower company, which generates enough annual income to pay all property taxes, insurance, and several other ranch expenses. The tower company also maintains one of the ranch roads, which in an added benefit. Another of my listings has a lease with a horseback operation that takes paying customers riding throughout the property’s spectacular landscape. I’ve even been approached by music promoters hoping to lease ranches for multi-day music festivals (As you’d imagine, I’ve yet to have any landowners agree to this!).
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For ranch buyers, it is extremely important to fully understand any leases that are in place prior to your purchase and to ensure that the leases can either be transferred or terminated without any additional expense falling to the buyer. For landowners entering into lease agreements, ensure that your lease documents are effective, well written, and thorough, as they can have long lasting effects on your ranch, its value and its future marketability. At Mirr Ranch Group, we are highly experienced in leases on Rocky Mountain ranches, so please contact us with any questions.