What Should You Know Before Buying Farmland?
Posted on: 12 September 2017
The loss of farmland due to urbanization has led many investors to focus on buying the remaining acreage in hopes of making a profit. Although it is possible to make a profit on farmland, you must take steps to protect yourself. If you are planning to invest in farmland, here are a few tips to help you make a smart investment.
Review the Tax Information
One of the last considerations that some farmland investors make is the taxes on the property. However, the taxes have a bearing on whether the land is affordable from year to year. Without knowing the details of the taxes, you could be surprised to learn that in a few years, you will not be able to afford to continue to hold onto the land.
To avoid this unfortunate scenario, you need to research the history of the taxes on the property and pay attention to information, such as the valuation of the property and the zoning classification. You also need to know what impact changes to the land will have on the taxes. For instance, if you decide to build a structure on the land, how much could your taxes increase?
Know the Department of Natural Resources Classification
Some farmland comes with restrictions on what can and cannot be done to the land. The Department of Natural Resources, or DNR, is charged with ensuring that the land is protected. To do this, the DNR classifies land according to its resources and composition.
If you are unaware of the classification for your land, you could be faced with challenges if you decide to make changes to the land. For instance, if part of your land is classified as wetlands, you could be prohibited from taking any steps that could result in part of the area being dried. To do so, could result in changes to the ecosystem in the area and you could face serious fines.
Knowing the classification can also be a positive. Depending on the classification, you could potentially qualify for special tax breaks. There could be additional requirements that need to be met to qualify for the breaks. If you know beforehand, you can take the time to make a judgment on whether the land is right for you.
Work with a real estate agent who is experienced in dealing with farmland and the special considerations that come with buying it. He or she can provide additional guidance on what you need to know before making a decision.
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