By Rik Thompson, Broker Associate, Republic Ranches, LLC
You’ve worked hard, perhaps built a business, and been diligent about saving and investing your money for years. Maybe you are very fortunate and have benefited from an inheritance or some other type of windfall. However you got there, now you are at the point where you can start working on realizing a dream you have had since childhood: owning and operating a ranch. You probably didn’t grow up on a ranch, but maybe you spent your summers working on one. Deep down, you know that is where you are supposed to be, and now you can act on it.
It is hard to explain this yearning many of us have, particularly those from the western United States. Many Americans could trace their family history to a farm or ranch if they looked hard. The population shift to big cities occurred in the last 125 years or so. Given the current state of affairs in cities, many want to go back to that simpler way of life.
There are many things to consider as a first-time ranch buyer looking for a property beyond a personal recreational investment. How will a ranch fit with the rest of your investments? Will your family be primarily based there? How about the time and expense required to run a ranch? A ranch is a business. Like any other business, those considering purchasing a ranch should do their due diligence to determine what they’re getting themselves into. A good ranch broker will help you in this process, but first, some fundamental questions need addressing.
First and foremost, how much money can you afford to spend on a ranch? Will it be a cash transaction, or will you need financing? Are you going “all-in” living and working there, or is this just a part of your portfolio? What return on investment do you require? You must first and foremost discuss this with family and advisors and have numbers in mind.
Once you know what you can afford, you need to determine how much revenue you need and how to achieve it. Typically you’ve already decided to have a cow ranch, a hunting ranch, or a combination of the two. It boils down to a numbers game with cattle, whether you are running a commercial cow/calf operation, a registered breeding operation, a yearling operation, or some combination. Hunting has a similar calculation: what kind and how many hunts do I need to sell on my ranch to turn my needed profit? Farming is also a big part of many production ranches if they are located in a suitable precipitation area or have irrigation possibilities. Natural resources such as timber or mineral rights (oil and gas usually) are a significant consideration. Wind and solar power generation are prominent in places like New Mexico.
To support the desired cow or hunting operation’s size, how much land do you need, and where is the best area to look? Do you want a desert ranch, a mountain ranch, a high plains ranch, a hill country ranch, or a place with a mix of topography and range types? Other things to consider in this decision are how close to a town you want to be for goods and services, off ranch employment, medical care, and so on. Schools might be a consideration, depending on your family situation. If you live full-time or part-time on the ranch, there may be more considerations such as the distance from your other home. Maybe you need a ranch airstrip or a local airport nearby. I have seen several good ranches up for sale because one or more of the owner’s family members were too far from city conveniences to suit them. Here in New Mexico, many ranches are 150 miles or more from what many people consider essential town services like a large grocery store, a Walmart type of store, or a doctor or dentist. What a shame that is not always thoroughly thought out and discussed before the purchase, which often means the property ends up back on the market.
Do you want all deeded land, or should you look for a mix of deeded and lease land? Here in New Mexico, many ranches are a combination of deeded land and lease land. Lease land can be owned by the US Forest Service, the Bureau of Land Management, the State of New Mexico, an Indian Tribe, or a private or commercial entity. Some ranches here consist of a headquarters area with housing, barns, corrals, and so on consisting of a section of deeded land or less, and many thousands of acres of government lease land. I recently brokered a ranch transaction where the headquarters itself is located on government lease land, and a large part of the balance of the ranch is deeded acreage. The cost of a mixed deeded and lease land ranch can be much lower than an all deeded land ranch, of course, but one must consider that there are annual lease payments. In the case of government land, the lease payments are usually very reasonable and can, in most cases, enable the ranch owner to operate the ranch economically. As with any lease, the ranch operator must abide by the land owner’s rules on using the land. In the case of government leases, the operator must regularly work with government range managers and wildlife managers. Even with lease payments and dealing with outside land and wildlife managers, the price of a mixed deeded and lease land ranch can make it possible for many people to realize their dream of ranch ownership, especially in New Mexico.
Ranch ownership and operation takes many forms. Revenue sources such as livestock, hunting, farming, natural resources like oil and gas, wind and solar power generation, recreational vacation ranches, and more likely, a combination of several things are necessary to make a ranch profitable. Add to this the kind of lifestyle you desire for yourself and your family, and you can see a lot of thought needs to go into the ranch purchasing decision.