Tag Archives: legal
Kiambu man defiles pregnant cow
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15 Must-Ask Questions Before Buying Farmland
American Bankers Association The increase in crop and livestock prices have generated significant profits for many farmers, which some are using to buy additional land. Growing demand has driven land values to record highs in many areas. Whether farmers are using cash or borrowing money, buying land should include a well-researched financial plan. “Farmers should consult their banker throughout the land buying process, to ensure decisions made today best position them to prosper and obtain credit in the future,” said John Blanchfield, senior vice president of agricultural and rural banking at ABA. “When it comes to buying land, you cannot spend too much time researching all of the contingencies.” Given current market conditions, ABA’s Agricultural and Rural Bankers Committee, made up of leading agricultural bankers in the country, has developed the following recommendations for buying farmland: 1. What is your business’s financial condition? Consider needed investments, expected expenditures, and crop conditions to determine if buying land is the best use for your cash. Are there other opportunities that can provide a better return? 2. Have you created a pro-forma cash flow? Research sales trends and expected revenue of a potential plot of land to determine how well the purchase fits within your plan. Does the potential return meet your objectives? Your banker can help you develop this essential planning tool. 3. Given your revenue forecast, are you overpaying? If you are paying a premium, how long will it take you to recoup? Determine how much your business should prudently spend on a land purchase and the revenue needed to justify your purchase and stay within those targets. 4. Have you thought long and hard about it? Never be rushed by a broker and never confide your best price or financial goals with a party working for the seller. Don’t buy impulsively or make a deal before visiting the property numerous times. Rework the standard broker’s purchase contract with your lawyer, deleting what you don’t like and adding what you want, before presenting the offer. 5. Does it make more financial sense to rent the land rather than owning it? Rental rates are high, but renting frees your cash for other activities. What will be your total land payment per tillable acre owned and how does this compare to cash rents in your area? Whether using cash or borrowing money, buying farmland should include a well-researched financial plan. All in with cash? Water source? 6. Should you go all in with your cash? Talk to your banker about alternatives to using all cash in the transaction. Land is an illiquid asset and purchasing it will impact your farm’s liquidity. Your banker can work with you to structure a loan that will enable you to acquire the land you need while preserving some of your working capital for necessary expenditures. 7. How much land are you acquiring? Sounds simple, but many times there is confusion about how much land is actually being purchased. Know exactly what you’re getting before making a bid. See if the land has been surveyed and make sure it matches the details of the offer. If the land has not been surveyed, work with your attorney to determine the acreage based on the legal description or consider having the land surveyed and determine who will pay for it. Make sure that there are no special easements tied to the land. If there are, make sure you spend time studying them and understanding them completely. 8. What does the land appraise for? Are there some comparable sales in the area? Appraisals are expensive, but they are the best way to establish value. Even if you do not get a full appraisal, attempt to find some comparable sales to determine if the purchase price is reasonable. 9. What is the soils story? What is the capability of the soil you are buying and how does this impact your revenue forecast? Good soil is paramount. Know the type of soil you’re buying and the history of annual crop rotation. Any seller should be more than happy to provide you with a soil’s profile and information about past farming practices. 10. What is the water source? Is the property irrigated? Do the water rights convey with the property? Adequate water is essential to establishing the value of the property. Account for water cost in your financial plan to ensure this cost doesn’t negatively impact your return. Make sure all water wells are registered with the appropriate authorities. Each state has its own water laws so make sure you are familiar with the state that you are doing business in. 11. What do you know about the gas, mineral, and wind rights for the property? Do these rights convey to you as the purchaser? Have they been surveyed or severed from the surface rights? Are they currently under lease? If so, under what terms? Have a thorough knowledge of property rights, as mining and drilling can have an impact on surface and water quality, access to the property, and the viability of the farm or ranch. Zones and deeds 12. How is the property zoned? Will your plans for the property conflict with existing zoning restrictions? Are there conservation easements that could restrict use of the property? This factor has a significant impact on your valuation of the property, particularly if your plans conflict with current zoning restrictions. Make sure that you understand the assured leases that may go with the property — many of the states in the west have a large percentage of their ground that falls into this category (bureau of land management, forest service, state land, national grass land). 13. How will you hold deed in the property? Will you own it individually, jointly with a spouse, in a family owned entity (corp., LLC, LLP) or in a trust? The pros and cons of how you own the land will depend on your long term goals. 14. Are there any environmental problems? The last thing you want to buy is a costly environmental problem. Paying for an onsite environmental audit before you buy the land may be worth the cost and will help ensure you are not buying into an expensive cleanup. 15. How long will you actively farm? Make sure your financing plan matches the rest of your intended career as an active producer. Will you fully retire all debt from the acquisition before you retire? Do you have sufficient life and disability insurance? No one knows more about financial budgeting and cash flow planning than your banker. ABA recommends making an appointment to talk with your banker about the significance of purchasing land and how it will impact your business. Continue reading
US Property Prices Still Historically Low
Axis Property Investment, a firm located in the United Kingdom (U.K.), is telling clients that now is the time to invest in U.S. property provided the historically low interest rates and property bargains. The firm quotes rates as low as 3.6% for 30-year mortgages, which it says are even lower than what they were in the 1950s. Experts there warn, however, that buying property in the U.S. is different from buying in the U.K., particularly when it comes to pricing and the warranties that come with the home. Buyers are advised to do thorough research before jumping into any foreign market. For more on this continue reading the following article from Property Wire . A 30 year fixed mortgage currently costs as little as 3.6% in interest to service each year and this has made houses more affordable and driven a big rise both in mortgage applications and in refinancing to cheaper deals, experts claim. For those considering property investment in the US, the climate is favorable and hotting up. Low, but rising prices and increasing average rental rates make it possible to achieve much better yields than in the UK, says Axis Property Investment. It also points out that rental vacancies are now at their lowest levels in over a decade, while the homeowner vacancy rate is at its lowest point since March 2006. Selected regions in the US can easily give a rental yield of well above 5%. It points out that properties are often sold as seen and you can be taking on a property with associated problems either in terms of the fabric of the building or debts linked to the address which may be passed onto the new owner. It believes that more research needs to be done into prices before buying as property valuation in the US is different. Other issues worth checking if you are renting out the property is where there is a tenant before you buy. ‘A pre-tenanted property means there will be no initial void period and your income stream will start to flow into your account. Furthermore, there is also associated hassle and stress with an empty property such as the chance of vandalism, or the higher insurance premiums you may have to pay for an empty unit,’ the report says. The firm also recommends that overseas buyers commission an independent property inspection report and for investors to have a realistic exit strategy. ‘We are currently at the bottom of the US property cycle just at the point where prices are starting to rise. In order to derive the greatest overall returns, you should be looking to sell at the top of the cycle and this will take some time to arrive, maybe even a decade from now,’ it says. Continue reading
