When you buy a ranch, it is quite different than buying any other form of real property. This is particularly true in the West, where there are many complex issues and particularities of real property laws and state regulations that need to be considered.
Our collective group has years of experience in the ranch brokerage industry and many of us trained in water, public lands, conservation, business and wildlife in previous careers. We are well versed in what makes or breaks a ranch purchase. To help you in your search, consider the following things when you buy a ranch.
10 Things to Consider When You Buy Land
This factor is important with most real estate transactions, but is an entirely different issue when finding one of the best places to buy a ranch or sporting property. Our expertise ranges from Montana to New Mexico and Colorado to California, and these locations vary widely in their offerings.
For instance, just within Colorado alone, properties in the front range are different in terms of elevation, weather and topography than those in the mountains or west slope. Elevations can range from 5,000 feet to over 10,000 feet above sea level, landscapes ranging from prairie grasslands, to high desert scrublands and on to montane forests.
Properties in the mountains offer spectacular alpine vistas, trout fisheries, and abundant wildlife. They are also closer to snowpack and the source of many rivers that irrigate lands throughout the state. However, these areas have much shorter growing seasons, impacting yields from crops.
Land in the front range has a longer growing season and the water rights can be so valuable that they outweigh the value of the underlying ground. Many of the ranches in the mountains are adjacent to large swaths of public land, such as a National Forest, National Park, Bureau of Land Management land, state land or wilderness areas, which has an impact on the land, value, and use of the ranch.
Ultimately, location impacts income generation and appreciation.
A unique consideration when you buy land for sale is access. When we think of residential and commercial real estate in town, access to the property is almost always assumed.
However, when dealing with rural real estate, access should never be assumed, and ensuring legal access and understanding the rights of others to cross your property are some of the most important issues to understand during the due diligence process.
Be sure to consider the following:
- Is the property accessed from or near a county road?
- Can you access the property year-round?
- Does the road to the property cross a neighbor’s before it reaches the property?
- What about that two-track that crosses my property?
- Are others using it to access their property?
- What if the access road crosses federal or state land? Do you have deeded or permitted access?
While there are many state laws that may entitle you to access, these rights are not always guaranteed and this can create significant problems with title insurance and valuation.
Whenever you are preparing to buy a ranch, it is prudent to obtain an updated title commitment to make sure the property has a clean title and there are no unknown exceptions or encumbrances that could impact your purchase.
Make sure that you go over certain aspects of title like:
- How was the land conveyed? General Warranty Deed or other?
- Are there any encumbrances in Schedule B-2 that impact the property?
- Are there easements going through the property?
- Do neighboring properties have the right of first refusal?
- Are there any use restrictions on the property?
- How are the mineral rights owned?
- Are there any liens?
- Note that if the property is enrolled in certain federal and state ag programs, there may be use restrictions on the property.
In addition, it is vital to physically review the property to look for signs of unrecorded easements and potential fence line issues. Are there ditches that traverse the land that deliver water to other property owners? If so, they likely have rights to access your land to maintain these ditches.
#4: Water & Water Resources
When you look to buy land, water rights are increasingly one of the most crucial factors if not the most important factor in the purchase. Water is a critical component to ranch operations, whether it provides value through agriculture or recreation.
Especially in the West, nearly all water has been claimed for use, so while you may see a stream meandering through a property, you are not necessarily legally permitted to use the water in it, even for watering stock. An understanding of basic characteristics of water rights, like where they are diverted and used, how they have historically been used, and how old they are is therefore absolutely essential when purchasing a ranch property.
Water rights in many states can be sold, leased, and encumbered separately, and they are not always owned by the person owning the land. “First in time, first in right” applies, meaning the older the water right, the more valuable and reliable the right.
After doing your due diligence, the water rights can be one of the most valuable assets of your ranch.
#5: Mineral Rights
One of the most common questions we get about any of our listings is if mineral rights are included in the sale of the property. As most ranch buyers know, mineral rights, just like water rights, can be owned separately, and a landowner can own the surface estate but not the minerals beneath it. The mineral rights are not insured by standard title policies.
Including minerals in the purchase can add value to the land, especially if there is mineral potential and at the minimum, provide security and reduce impacts in the future.
Much of the land in the West was once owned by the federal government and title issued to private landowners through a “patent.” Depending on the date of patent, some of the minerals may already be reserved to the federal government or a portion of the minerals may have been retained by previous owners. It is important to order a mineral report on the land especially in productive mineralized areas.
#6: Conservation Values
When you buy a ranch, conservation values are an important consideration. Protected natural amenities such as pristine scenery and wildlife help sustain property values and attract new investment. For instance, economic studies from the Headwaters Economics show that wilderness designation on adjoining public lands enhances nearby private property values.
Does the ranch currently (or can it) participate in federal or state programs that may assist with range, crop, water, stream, wildlife or timber improvements? There are several programs out there that can offer cost sharing and technical support.
Landowners can be paid for conservation and stewardship activities while maintaining agricultural and ranching operations on their land. A variety of approaches, including conservation easements, wetland mitigation banking, grassland carbon sequestration, and watershed investment funds, pay landowners for the ecological services they provide.
In addition, there are tools like conservation easements that landowners frequently use to take advantage of the inherent conservation values. A conservation easement is a voluntary agreement where a landowner permanently restricts uses on the land in order to protect certain conservation values. Easements may provide a number of financial advantages for landowners including:
- Federal income tax breaks for a donation
- Colorado conservation easement tax credits
- Real estate ad valorem tax breaks
- Estate planning and family heritage preservation
- Land value enhancements due to adjacency to protected land
- Affordable farming & ranching land
Availability of recreational resources on a ranch and adjoining public lands is an essential element to consider. Many buyers purchase ranches for recreation, be it for fishing, hunting, hiking, ATVs, or other uses.
Perhaps one of the greatest impacts to value is the presence of wildlife or fishery habitat and the availability of hunting tags for the specific area.
Rivers and streams that have a functioning fishery obviously increase the value of a ranch and vary based upon the quality of the stream and the fish that reside within them. It is important to understand upstream diversions and annual flow rates to see if there are any potential demands that could impact the fishery.
Hunting licenses differ from state to state and different programs exist like Cooperative Wildlife Management Units (CWMU) in Utah and Ranching for Wildlife (RFW) in Colorado that substantially increase the number or private tags available to hunt elk, deer, and other species on your ranch.
Species matter as well and we have sold ranches in the past with landowner tags to hunt bighorn sheep. Although it is hard to monetize these, something like this is so rare and unique that it added substantial value to the ranch.
As a potential buyer of a ranch, you should have an understanding of the ecology of the property and the condition of the habitat, both on the ranch itself and any adjoining public lands. The baseline inventories provided by conservation easements and biological assessments within a grazing permit are both good resources for finding out more about these issues.
#8: Agricultural Use
Ranches and farms by definition produce livestock or crops and often there is an opportunity to generate income from such operations. While financial records may help when you buy a ranch, not all ranches or farms are operated alike, and the management and scale of such operations differ wildly.
Grazing operations generally require access to grass and water for livestock, and in the West, this often includes grazing leases on public lands. As an option, landowners can also lease out their properties to other operators to graze cattle without the need to actually own cattle.
In order to grow grass hay, alfalfa and other crops, water rights are required and as previously discussed, water rights can add substantial value to the land. Beyond just studying current operations, one should understand carrying capacity and alternative management techniques like holistic range management as these methods can greatly enhance value.
#9: Proximity to Public Lands
Perhaps one of the most unique attributes about the West is the abundance of public lands.
The overwhelming majority of the federal government’s 610 million acres falls under the jurisdiction of four agencies: the Bureau of Land Management (BLM), the National Park Service, the US Fish and Wildlife Service, and the US Forest Service. The Interior Department oversees the first three agencies; the Forest Service is under the Department of Agriculture. Each of these federal agencies has its own rules and procedures about access to and use of its lands.
In ranching, the use of public land grazing permits can be crucial in making the operation pencil. Grazing permits are essentially leases with one of these federal agencies or state land boards in the various western states.
More than 155 million acres of BLM land is used for livestock grazing. That works out to nearly 18,000 permits and leases held by ranchers who primarily graze cattle and sheep. Permits and leases generally cover a 10-year period and are renewable if the terms and conditions of the expiring permit are being met.
The history of the Western states is closely tied to livestock grazing and while the cattle and sheep empires of the late 1800s have waned, much of the culture of the rural West is still closely tied to this heritage. Many rural communities are still dependent upon ranching for their economic livelihood, and most ranches out West utilize federal and state lands for at least a portion of their grazing lands.
Public land leases have the advantage of being very affordable and in return, can reduce your carrying cost per animal unit when you buy a ranch. When searching for a cattle ranch, determine how much public land is available adjoining or near the property. Adjoining public land leases not only provide affordable additional grazing lands, but additional recreational opportunities as well.
It is also important to review Forest Plans and other such management documents to better understand how these public lands are managed and used by the public.
#10: Personal Property & Fixtures
When you buy a ranch, these properties often come with operational infrastructure related to livestock and farming activities. This personal property or chattel may include
- Actual livestock such as cattle, sheep and horses;
- Water infrastructure such as pivots and pumps for irrigation;
- And equipment.
In most situations, the livestock and equipment is not included in the list price but attached fixtures are part of the offering.
A new landowner needs to consider fairly quickly if they want to continue to follow the prior owner’s use and operations, and either:
- Own livestock and fertilize, irrigate, grow, and harvest crops themselves,
- Or perhaps lease out operations.
Also ask yourself:
- Should existing livestock be acquired and or the brand?
- Should the new owner acquire the public land leases that have been a functioning part of the ranch for years?
Livestock need to be inspected, evaluated and assessed by professionals and often this part of the transaction falls outside the purview of the sale of the real property itself.
To experienced ranchers, basic infrastructure in good condition is essential no matter the operation. Depending on the type of operation and operational strategy of the ranch, working facilities could be just as crucial.
- Basic infrastructure: This pertains to fencing, cross-fencing, piping, water tanks, gates, and cattle guards. If you have hundreds of miles of fencing in poor condition and it all needs to be replaced, this could cost a rancher millions of dollars.
- Working Facilities: Year-round cow-calf operations especially are in need of turnkey working cattle ranches for sale with facilities in good repair such as corrals, chutes, scales, medical facilities, etc.
While this is not an all-encompassing list, definitely look for these top features when you buy a ranch. As always, please feel free to reach out to us with any questions or help in finding that perfect property.