The valuation of ranches and finding the price per acre is substantially different than other types of real estate. While residential and commercial real estate prices typically rely on MLS data based upon numerous transactions within a defined market area that can be defined as “comparable sales,” most ranchland sales are not published on a MLS database, there are relatively few transactions that close within a two year time frame, and there is no defined market area. Due to the uniqueness of ranches, two properties can be adjacent to one another and be vastly different properties with few comparable traits. In addition, there are real absorption trends for ranches and demand is not driven by growth, thus proximate comparable sales data can be scarce. When looking for data, we often have to look at sales beyond two years or expand our search regionally or nationally to find a comparable sale. Due to the lack of applicable market data, we must look further for proper valuation. When we evaluate a ranch or sporting property, here are the top factors that affect value:
Water is a key valuation component, especially in the West, and a pivotal cornerstone in acquiring ranchland. Unless the water rights are sold off, they will stay with the property. Recreation, agricultural income, wildlife habitat, and overall ecological health of a ranch all depend on water. Understanding the specific water rights attached to a ranch is crucial; age, volume and source are important issues. Just because you have a visible stream or river running through your deeded acreage does not necessarily mean you can use it. Sometimes there are separate markets for the water itself, but often it is the contributory value of the water right in the form of irrigated and sub-irrigated acreage, ponds, lakes and riparian areas that need to be considered.
Access is a fundamental issue to land ownership and access issues need to be scrutinized when evaluating a ranch. Do not assume that access to a ranch is deeded or insurable and title commitments need to be reviewed. Are you purchasing non-contiguous properties and is there access to these parcels? Lack of certainty to insurable, deeded and year-round access off a public road will impact values. Note that this access issue also relates to the rights of others to cross your deeded ground to reach adjoining land or to access water ditches. Also, is the ranch accessible to amenities; how close is the ranch from regional airports, resort towns or groceries? Is the road to your ranch maintained by the county or the state? These are all considerations that certainly impact land values.
Availability of recreational resources on a ranch and adjoining public lands play a substantial role in influencing ranch values. 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. 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. For instance, Cross Mountain Ranch participates in the RFW and receives an extra 100 elk tags for its membership, an obvious positive impact to value.
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.
#4: Adjacency to Public Lands
Ranch values are typically enhanced due to adjacency to public lands as these lands may act as open space. Leases on adjacent public lands may increase the grazing capacity by a substantial amount and also allow properties with significant hay production to rotate cattle off prime irrigated meadows during hay season on to public lands, affording greater operational efficiencies and profitability. Four or five years ago we sold Sandy Ranch, a desert ranch that ran over 1,000 head on only 6,970 deeded acres. This ranch was able to run such a sizeable operation because it leased 170,00 acres of BLM land and 72,000 acres on National Forest. In addition to this operational aspect, neighboring public lands can increase the sporting and recreational opportunities of a ranch, which also enhances value.
The value that improvements add to a ranch depends on the size, use, and scope of the property. Operating/working ranches benefit from good functioning working improvements. Well maintained barns, corrals, gates and fences enhance value, while visible signs of deferred maintenance can significantly reduce value. A balance of well maintained facilities is typically the objective as often times sellers have issues in recapturing values on over improved properties.
#6: Agricultural Production
Ranches and farms by definition produce livestock or crops and often there is an opportunity to generate income from such operations. While financial records my help, not all ranches or farms are operated alike and the management, and scale of such operations differ wildly. 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. This is especially true with regard to ranches like Cinch Buckle Ranch and Antelope Springs Ranch where owner’s focused management techniques have restored the grasses and strengthened the landscapes’ overall ecological diversity, leading to increased livestock capacity on both ranches. The increased capacity, combined with their extensive investment in water infrastructure and ranch improvements, has allowed them to enjoy a level of profitability that would have been unimaginable on these ranches years ago. Custom management, combined with the continued appreciation of the land make both ranches unique investment opportunities.
#7: End-of-the-Road Privacy
End of the road privacy with unobstructed view-sheds of mountain peaks and sweeping meadows are some of the most important features that add value. Ranch buyers tend to look for the secluded private settings that ranches offer and the peace that this solitude provides. Ranches at higher elevation on the western slope will see a higher price per acre simply due to climate, location, and proximity to national forests. The location of your ranch is perhaps the most significant factor in the overall valuation of a property.
Although there is no market approach to determine ranch value, these aforementioned factors will help us formulate our valuation of your property.
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