8 Tips for Purchasing Farm Property in Iowa: What You Should Know Before You Buy
There are 35.7 million acres of land in Iowa and 30 of them are farmland.
That means 90% of the entire state is farming property. Iowa farmers are proud of their number one ranking in the United States. Iowa ranks number one for producing soybeans, corn, pork, and eggs.
In 2015, Iowa grew 18% of America's corn crop. That's 2.5 billion bushels of corn! They also rank second in America for red meat production. Every year Iowa generates billions of dollars in agricultural exports and farm commodities.
Are you looking to purchase a farm property? Continue reading to learn about 10 purchasing tips you need to know.
1. Research the Farm Property
First, you'll want to research your farm real estate area. Take into account all of the local demographics when you're making your purchasing decision. Ask yourself if the location you're considering will make you happy.
Next, determine if the income you'll receive there will meet your budget requirements.
2. What Information You'll Need
After you find a quality location for sale, you'll need to continue your research.
Collect the following demographic information:
- What are the large corporations in the area?
- What types of houses are in the area?
- What's the history of the location?
- What are the local amenities?
- Is the location in a commuter friendly area?
- What are the transportation choices?
- What are the upcoming construction projects?
Ask all of these questions for every farm property you're considering buying. The great news is you can discover a lot of the demographic information online.
If you aren't able to find what you need on Google try using Census data for the ages and income.
3. Find Out the Value
To find out the value of the farming property, you'll need to get an appraisal. Make sure you hire a certified appraiser to establish the farm's value.
There are several different ways to evaluate the land, but appraisals are the most efficient and accurate evaluation method. Your appraiser will take into account any buildings or other structures on the property. Certain buildings can help raise the value significantly while others won't make a difference.
It all comes down to the condition of the buildings and overall land. The size of the farmland will help you determine if it's the best to use. You have to decide if the property is large enough to meet your intended purpose.
If you want to make a living off of the farm it'll have to be rather large. The average farm size in Iowa is 351 acres.
4. Professional Crop Insurance
When you become a farmland owner, you need to get professional crop insurance. The agency you choose to write the policy should work closely with the insurance providers. When an agency has close ties to the underwriters, they can provide you with the most up to date coverages.
Quality insurance providers in your area include:
- Rain and Hail
- Grinnell Mutual
Crop insurance plans are always changing and your policy will need to stay relevant. Make sure you update your insurance plan whenever your coverage needs change. If you buy a new piece of equipment, have your agent add it to your policy right away.
5. Know the Market Condition
Before you go all in, find out if the market is in your favor. Will you be able to generate enough income to cover your expenses? For example, if you're growing organic foods, will the area have a market for it?
If the locals aren't interested in organic food, will you be able to turn a profit? There will always be cheaper, nonorganic options for consumers to buy. Also, if the locals love organic food, what's your competition like?
Is there already an established organic producer for the area? You need to take into account every aspect, both long-term and short-term. The idea of buying a farm is thrilling, but there are a lot of logistical steps and calculations to make.
6. Cash Flow for Farming Property
Now's the time to evaluate your business's or household's financial health. Determine what type of investments the farmland will cost you. Next, determine how much you can expect to spend to get everything in working condition.
If the area doesn't have good sales trends, you could be in for a disaster. However, in a certain situation, low revenues could be in your favor. If the sales trends are temporarily low, your purchasing price could have a discount.
Find out if the offering price matches the projected revenue for the upcoming year. Really take your time and don't let any financial institutions rush your decision.
7. Renting Your Farm
After careful consideration, you may find you prefer to rent your farm. Even if the rental price is high, you'll free up a lot of your cash. Without having to purchase the land, you can focus on properly managing the area.
Before you sign a lease, find out your total land payments per tillable acre. Next, research how your potential rental property compares to others in the area.
8. Types of Land
Usually, the land options you have will be either improved or unimproved. Another name for unimproved land is raw land. Unimproved property isn't bad, it's just undeveloped.
With an improved land purchase, you'll have important amenities. Improved properties will have things like:
- Quality structures
- Excellent condition buildings
Remember, the location will always be more important than the development of the land. If the location doesn't match your demographic requirements, the improved land won't make you money.
Find Your Management Team
Finding the perfect farm property can be easy with the right help.
Midwest Land Management can help you with your specific land needs. We are a team of experts who take pride in providing quality customer service. Our agency focuses on helping clients with farm management, crop insurance, and farm real estate brokerage transactions.
Contact us today and we'll let you know how we can help.