How to Invest in Land

Posted: Thursday, January 09, 2025

Author: Greg Fay, Founder | Broker | Licensed in MT, SC


I initially wrote the article, ‘How to Buy a Ranch,’ for our first issue of Land Investor magazine back in 2014. Although most of the information is timeless, a few things have changed since then. So, I’ve decided to update and refresh the article in honor of the 10th-anniversary edition of Land Investor magazine.

Before I start with How to Invest in Land, some of you may wonder Why Invest in Land. Great question.

Investing in land was a niche market when I started my career in 1986 and founded Fay in 1992. Very few people understood the unique attributes of land as an asset. Over time, this has changed, and the most dramatic accelerator was COVID-19. An entirely new audience realized land is an excellent investment and the most effective way to maintain social distance. My family and I retreated to our ranch during COVID-19, and there wasn't another person within a mile. I hesitate to say this due to the amount of suffering COVID-19 caused, but it was one of the best family times we've had.

The pandemic exposed land investing to a much larger audience, and I don't see that genie being put back in the bottle. Although the motivation of investors during the pandemic was insulating their families, they have since realized some of the other attributes of land as an investment that a smaller audience has understood for decades.

First and foremost, large tracts of land are a finite tangible asset. There is less of it every year due to subdivision and aggregation. Unlike residential or commercial real estate, they're not making any more of it. Supply is low and decreasing, and demand is growing, which is excellent for the investor when it's time to sell and challenging for the buyer.

Two people wearing cowboy hats ride horses through a vast, grassy landscape under a cloudy sky, moving toward distant hills and cattle.

Fay sells land from coast to coast, and the types of land and value drivers differ regionally. We sell working farms and ranches. We sell land for hunting and fishing. We sell timber properties, quail plantations, and equestrian properties. Our clients don't buy land to subdivide it. They understand the unique value of keeping land together and are more likely to aggregate. This means when we sell land to an investor, we go to work to purchase contiguous land and increase the holding size. In the rural land markets from coast to coast, the larger the land holding, the more unique and valuable it is.

Land is not subject to the volatility of residential and commercial markets because of the lack of supply and because it is an under-leveraged market. Most landowners fall into two categories: they have owned the land for generations with little to no debt or bought their land within the past couple of decades and paid cash. When the bottom falls out of the real estate market, and the residential and commercial markets are saturated and feeling downward pressure, landowners don't sell. With few exceptions, landowners stand pat when the market is slow. As a result, land is far more resilient to and affected less by downturns. Due to the lack of debt in the land market, most landowners can choose to sell when the market is strong. Although there is little downward pressure on land when the market is slow, landowners position themselves to take advantage of strong markets, resulting in excellent appreciation gains.

There are several reasons to invest in land, but I will only mention one more: owning land can be one of the best things you can do for yourself and your family. As a landowner, I can attest to this. We own a working ranch in Montana with partners, and it has had a tremendously positive impact on our two teenage boys. When we go to the ranch, they don't ask if they can play video games. They are outside being kids, and the adults are outside being kids as well.

A small waterfall flows over rocks, surrounded by dense trees and bushes with golden-yellow leaves, creating a warm autumn scene. Sunlight filters through the foliage, casting a serene glow over the landscape.

When I founded Fay in 1992, we focused on working farms and ranches in Montana. We were the first to assign value to the recreational attributes of these ranches and market the quality of the hunting and fishing components to out-of-state investors. Since then, we have expanded into other land market segments and now sell land from coast to coast in the United States. We have offices from Alaska to Charleston, South Carolina. I am an avid outdoorsman and have owned a working ranch in Madison County, Montana, since 1995. I deeply understand the beneficial relationship between productive agricultural land and quality fish and wildlife habitat and the value this marriage can produce in the land market and your enjoyment.

Over the years, I've worked with competent and incompetent land brokers. I've seen well-managed land realizing its potential from both a revenue and recreational standpoint and poorly managed land functioning far below its potential. Along the way, I've learned a few things. However, one of the most wonderful aspects of land is that no two pieces of land are the same, and there is always more to learn. The following is the process I would follow if I were embarking on the wonderful adventure of investing in land.

STEP 1: EDUCATE YOURSELF

Be an information consumer. Take advantage of the information available to you. Fay is one of the most significant information providers on land investing through both our magazine, which we've published for ten years, and the articles and blogs published directly on landinvestorguide.com. Fay also has the Land Investor podcast that you can stream on the Land Investor website, Spotify, and Apple Podcasts. Take the time to read these articles and listen to the podcasts. Doing your research will significantly affect your understanding of land, the various ways to create value with land, and the vocabulary used by people involved with land daily.

A small stream winds through a grassy, rocky landscape with autumn trees. Two people walk along the bank under a bright, partly cloudy sky with rolling hills in the background.

STEP 2: IDENTIFY YOUR GOALS

Now that you've immersed yourself in the available information on investing in land, it's time to identify your goals. Why do you want to own land? For purely investment purposes as an asset to securely bank your cash and enjoy the appreciation over time? Does your land need to generate revenue? Does there need to be a recreational component? Will your family and friends join you on the land? Do you want to create value by improving the land for recreation or agricultural production? Do you want the land near your primary home so you can visit on the weekends, or will this be a destination investment in a distant state where hunting and fishing are world-class, and it exposes your family to a different part of the US?

STEP 3: RESEARCH THE LAND MARKET WHERE YOU INTEND TO INVEST

The third step is to search the internet for ranch brokerages that service the states you are interested in and have the expertise you need. Download a few brochures on properties that appeal to you. Start organizing the brochures by state, price range, and property features.

Note the companies with the listings of interest to you and those with the most informative websites and professional materials.

Through this process, you will also become more familiar with the terminology specific to the type of property you want to buy. Try to stick with credible sources of information. Avoid the next-door neighbor who had an uncle who once owned a ranch back in the '80s and wants to tell you all about owning land.

Along those lines, much of your information is subjective depending on the property type. For example, fishing guidebooks can be a helpful source of information when searching for a fly fishing property. However, please don't put too much stock in them. Fishing guides and fly shop owners are almost always the information source for the authors, and they may not want the public to know how good a fishery is—or how bad. The authors are anglers, and their opinions may not reflect yours.

Several small wooden cabins sit on a grassy plain under a blue sky with scattered clouds, with distant mountains visible along the horizon.

Additionally, some stretches of historically less productive rivers can improve due to work by the state, Trout Unlimited, or private landowners. You will get ten different answers if you ask ten anglers their opinion on a river. What may be appealing to you may not be to the next guy. Be wary of the amateur expert. The advice above also applies to hunting, views, towns, tractors, shotguns—you understand. Pay attention to what you like: what attracts different people to different pieces of land is very personal.

Other information is more objective, such as acreage amounts and type. How much irrigated ground does the ranch have, and what irrigation is used (pivot, wheel line, hand line, flood)? How much hay does the ranch put up, and how many cows will it run? What's the age and condition of the timber stand? How many bushels of wheat per acre will the ground produce? Is the area known for the wild populations of Bobwhite quail, or will you need to supplement it with released birds to achieve your goals?

There is a limit to what you can learn online. Your internet research will likely open your eyes to how much you don't know. Don't let this scare you. Becoming knowledgeable about buying land can be a fun process.

STEP 4: FIND A LAND BROKER AND GET BOOTS ON THE GROUND

The next step in the process is finding a broker who has the knowledge you need. Suppose you've been doing your homework, consuming information on investing in land, and reading about available properties. In that case, you've probably started to understand which companies are the most professional, and you may even gravitate toward a particular land broker. Like most businesses, the best companies attract the best agents in the land brokerage arena. If an agent is a hard-working, competent, trustworthy person, they want to be at a company where they can realize their potential.

Use a land broker to purchase land. Purchasing a ranch is not like buying a house. It is a far more complex transaction with value drivers and value inhibitors that change regionally. You will rely upon your land broker's knowledge when buying a ranch. Choose your agent carefully. When you find a good land agent, stick with them. Some terms and concepts will be foreign to you, but learning them is part of the fun. Throw a recreational, agricultural, or income component into the mix, and the importance of finding a knowledgeable broker you can trust who shares your interests grows exponentially.

A winding stream flows through lush green bushes and grass, with distant snow-capped mountains under a cloudy sky in the background.

There are three characteristics to look for in a broker. The first thing is finding someone you like. You may spend several days in a truck looking at land together. The process is much more enjoyable if you get along. When you go online to do your preliminary research, pay as much attention to information on the brokers as you do on the properties. Read their biographies and watch broker videos.

The second important broker attribute is knowledge. If elk hunting or bird hunting is a priority, your agent should know about the local populations and where the best opportunities are. They must have agricultural or forestry knowledge if you plan to invest in a farming or timber property. How hard do they work? Are they passionate or just pretending—or not trying at all? Your broker must also understand the land, which only comes with experience and time on the ground. A good land broker will see positive and negative things you would never have noticed.

Do they understand what makes a quality timber stand and the areas where the elk genetics produce trophy bulls? Do they know what needs to be researched during due diligence? Can they recognize red flags? Do they understand the importance of a sustainable agricultural plan and its positive impact on fish and wildlife populations? Do they have experience solving the problems that will come up during the purchase process? Do they have a track record of negotiating good deals for their clients?

The third critical broker asset is trustworthiness. You must build a relationship of trust with a broker who is passionate and knowledgeable about land. In that case, your chances of making an informed investment that reflects your goals will increase considerably. Trust is the key.

You'll know you are on the right track to building a relationship of trust with your broker if you answer the following questions correctly: Is your broker trying to sell you every ranch they show you, or are they looking at every ranch through your eyes and only getting excited about a ranch that fits your needs? Are they listening, paying attention to your reactions, and understanding all the vital factors? Are they pointing out the good, the bad, and the ugly, or just the good?

I can't remember selling a ranch that didn't have a negative aspect. Some you can live with, some you can't. You need to know the negatives and their potential impact on your goals.

You'll know you've found a good broker when they call and tell you a ranch has come on the market, and you need to look at it as soon as possible —and you trust their judgment. Be loyal to this land broker. If you work with several brokers, you won't be a priority to any of them. Find the right agent and stick with them.

A small stream flows through a grassy meadow with tall yellow-green grass and clusters of light purple wildflowers under a bright sky with distant mountains in the background.

STEP 5: CLOSING THE DEAL

The last phase of finding your ranch now begins. Your journey becomes real when your boots hit the dirt. You'll start confirming your priorities and what appeals to you and your family. You will learn more in one day of looking at land with a good broker than in weeks or months of obsessing over websites. However, you won't get much accomplished if you take a few days from a family vacation to look at ranches with your young children. You will need to focus on the task at hand when looking at ranches to make the most of your time. Only the decision-makers should attend until you have made the final decision or made an offer. If you have a family vacation scheduled for July, come out in April, May, or June to look at ranches. You may be in due diligence or ready to sign closing documents when you return with the family.

Know who the broker is representing. If the broker you've decided to work with shows you one of his/her listings, they will represent the seller. If it is not one of their listings, they will represent you.

Manage your expectations. As I mentioned before, there is no perfect property. You can spend a lifetime looking at land if you don't understand this point. You and your team can solve some problems, but some cannot. You need to decide what matters most and what you can live with.

After you've looked at some land, maybe you can't stop thinking about one of them. You find yourself daydreaming about being there. It's time to make an offer. Be prepared for what's ahead. The pace of this process may be frustrating.

Giving a seller at least three days to respond to an offer is customary, but a week is often provided. In many circumstances, family discussions need to occur. An attorney needs to review the document, and a decision to accept or counter needs to be made.

Often, this is a very emotional process for the sellers, and recognizing this by the buyer can go a long way. For many landowners, memories are scattered throughout homes, barns, fields, and valleys, not to mention blood, sweat, and tears. You are not buying a commercial building. The tone is critical. It is essential to show respect for the people who have dedicated their lives to the land, often for multiple generations. They need to feel good about whom they are selling their ranch to.

Often, a counteroffer is drafted and delivered to the buyer's agent. The essential deal points are the price and terms. Earnest money is customarily 3% of the offered amount.

A scenic landscape with green fields and bushes in the foreground, forested hills and mountains in the background, and a partly cloudy blue sky above.

A due diligence period generally lasts from 30 to 60 days, with 45 being the average. The due diligence period is an inspection period in which the buyer can research what they have agreed to purchase. If everything checks out, the deal moves ahead.

Most of the issues discovered during due diligence arise in the Title Report, which, for a 100-year-old ranch, can be an interesting discovery process. I have represented clients on land who did not have insurable access and never have. For several decades, no one cared or bothered to check, and no one knew until we discovered it while researching the title.

Hopefully, you won't run into anything quite this egregious, but it seems there is almost always something to clean up on the Title Report. Title inspection is where an experienced real estate transaction attorney comes in handy (more about that later).

Another critical aspect to delve into is the physical inspection of the land, which often involves a Phase 1 Environmental Survey. Some things can surface during the Phase 1 inspection, but the most common items are underground gas tanks that have never been removed or were removed improperly. Many other issues can arise, most of which can be solved. The water rights need to be researched to ensure the irrigation water that is represented does exist, is sufficient for the acres being irrigated, and is being applied in the place and manner in which it is supposed to be. In some areas, a mineral search and remoteness test may be needed, depending on the likelihood of the presence of extractable minerals.

During almost every due diligence period, some issues with the land are discovered. A good land broker has the skills to solve problems and the team to help them. Most issues can be solved, but it may take patience, understanding, and cooperation between all the parties to get through the process. Some deals extend beyond 60 days if due diligence items have not been satisfied and the parties have agreed to extend the due diligence because there is a reasonable expectation that the issue will be resolved given the additional time.

One of the most essential qualities a broker must bring to the equation is the ability to bridge the gap between buyer and seller (or the other agent) and to keep the deal running as smoothly as possible. Things can get a bit emotional during complex transactions, so your ranch broker needs to maintain a level, unemotional, solution-oriented demeanor throughout the process.

A deer stands in a sunlit clearing, partially framed by trees with green and golden autumn leaves in the foreground. The scene has a warm, natural, and peaceful atmosphere.

Remember I told you how important it is to find an agent you like? It's a two-way street. At Fay, we have an unwritten rule: we try to work with kind people. We feel this is in the best interest of our clients and the communities where we do business. We don't want to bring someone into an area that will not be a good neighbor. Then, they become a problem for all the surrounding landowners. This also makes for smoother deals and keeps our clients out of the courtroom.

You must make an informed purchase and research the ranch thoroughly before purchasing. Therefore, we recommend you have an excellent land transaction attorney representing you during the purchase process. I believe there are two types of attorneys: problem solvers and problem creators. Your broker should have developed a relationship with two or three of the best land transaction attorneys in the area. Take their advice and hire one of those attorneys.

If you take a chance and hire an attorney your broker has not recommended, and they turn out to be a problem creator, it will make it much more challenging to get anything purchased.

A competent land transaction attorney is extremely valuable to the process and adds another set of skilled eyes to make sure you fully understand what you are buying and any issues discovered during due diligence are resolved in a manner that is in your best interest. Ranches are complex animals and need to be thoroughly researched before purchase to avoid future surprises.

Deciding to purchase land is the start of a great adventure. Hopefully, you will see some beautiful countryside during the process, meet some great people, and make new friends. Additionally, it's an opportunity to learn and experience new things. Follow the advice I've provided, and you’ll have a good chance of making an excellent financial investment that may have the added benefit of being a place where your family and friends gather to create memories and strengthen relationships.

Have fun, good luck, and congratulations on your decision.

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