How to Build Wealth by Renovating and Upgrading Ranches

So why are these ag producers renovating ranches? It is important to understand the why behind their actions. With the growing costs of land, it is difficult for young ag investors to afford the land necessary for a long-term and sustainable operation. They are constantly battling to find land to lease and to develop partnerships with landowners. Their long-term goal for the business is to be self-sufficient rather than rely upon land owned by others. One option for growth and sustainability is to buy, upgrade and clean, and sell. They can then reinvest profits into a larger agricultural property. Everything about their operation can be moved except the land. They can move equipment and livestock, and they can even move their family. Although a move takes physical work, it is still a possible and probable way to grow. And because they dream of owning a sustainable ranch business, some young ag producers find it necessary to renovate and upgrade ranch properties.

Second, it is necessary to understand the process of renovating and upgrading ranches. How do you accomplish a DIY ranch renovation? The old saying states, “The money is made on the buy.” This rings especially true for upgrading agricultural land. The buyers are hunting for a reasonable purchase price to leave room for value-added projects over the next few years. This buyer not only needs a good purchase price but also, they need a production property. The property needs to assist their agricultural business sufficiently. This means finding a property with good water, grass, and production ground. After purchasing the right type of property, they look to the market to tell them how to do it. According to past sales, what do people in the local and national real estate market want in a ranch property? There is a popular book called “The Seven Habits of Highly Effective People” by Steven Covey. In the book, he refers to an illustration called “green and clean.” The story tells us that he contracted with his son to mow and care for the lawn. The contract simply stated that the lawn was to be kept ‘green and clean.’ The real estate market points to the process of DIY ranch renovating in the same manner. Many of the properties that can be found for a good purchase price are often delinquent in more than one way. They are dirty, unmaintained, and often an eye sore. The market indicates to the DIY renovator that they need to make it “green and clean” for it to be appealing to other buyers.

After the buy, the real process is cleaning, maintaining, and developing an appealing property.

• Cleaning: This is the process of removing all unwanted junk left by years of former landowners. It is spraying weeds and burning slash piles.
• Maintaining: This is the process of making the ranch functional. Does everything work? And can you teach anyone how to use it? Often unmaintained irrigation pumps, gates, corral systems, barn doors, and other items have a multistep system for them to work. These types of items need to be fixed and must operate and function easily and smoothly.
• Developing: This is the process of adding new buildings, corrals, storage, irrigation systems, and more. These not only assist in making the business more sustainable, but they also add value and help make the ranch more eye appealing and functional. This is the remodeling process. Past sales show what ranch buyers want. A DIY ranch renovator must purchase a dilapidated and dirty property for the correct purchase price, operate their own ag business, and prepare the property for the best resale opportunity.

Third, it is necessary to understand the potential gains in a DIY ranch renovation. What are the results of swapping ranch properties? The obvious answer to this question is monetary gain. The purpose behind the hard work, the late nights, and the early mornings is to find financial gain. Although not guaranteed success, many young farmers and ranchers have successfully renovated and upgraded ranches in partnership with banks such as the USDA, Farm Credit Services, and Ag America Lending. Their financial gain allows them to partner again on a larger farm or ranch. Ultimately, this helps them achieve their goal of a self-sustainable ag business, affording them to do what they love with their time, money, and energy. They are using ranch upgrading to build a long-term ag business while becoming savvy land investors. Another result of ranch renovating is the tax gains. Although the purpose of this article is not to give tax advice, many ranch renovators may find there are tax advantages in performing a 1031 tax exchange or receiving a tax benefit from selling their primary residence.

Finally, the renovation can often lead to more efficient operating costs. As functionality on the ranch improves, labor hours may decrease. As cleanliness on the ranch occurs, maintenance and wastefulness decrease. As developments on the ranch occur, systems become more efficient and less costly. The potential for gains on a ranch renovation offers diverse and helpful opportunities for ag businesses. Any gains resulting from the renovation bring the ag producers one step closer to being self-sufficient.

Many young farmers and ranchers around the United States continue to start small and slowly build their ag business through renovating properties and making wise land investments. The people participating are tough. It is not for the faint of heart, and the process is not simple. The work involved in being successful is significant. The gains are not guaranteed, and they can vary during turbulent markets. However, several have become significant landowners, and they operate self-sustaining ag businesses. Ranch renovators provide a glimpse into the heart of American opportunity.