Preparing for a Farmland Purchase

Ready to buy farmland? Read this first.

- By Natalina Sents Bausch Digital Director natalina.bausch@ agriculture.com

Buying farmland can be one of the biggest decisions a farmer makes.

For many operators, purchasing land is a long-term investment in building their legacy.

The farmland market can be extremely competitive, so preparing for a transaction is necessary to increase your likelihood of success.

Before a purchase, consider several important factors:

Financing

Getting your finances in order is critical before purchasing property. Work to establish a relationship with your banker from the beginning.

Be prepared to share your farming experience and plans with your lender, said Kasey Heindel, assistant vice president and branch manager for Community Bank and Trust in Columbus Junction, Iowa. “Are you row cropping? Is this something that’s been in your family? Do you already have equipment?” are all questions she or another lender will likely ask. If you plan to rent out the ground, also expect: “Is your rental income going to cover your payment on the ground? If not, how will you pay the difference?”

Besides your future goals, be prepared to prove your financial track record with tax returns; pay stubs, if you have an off-farm job; recent bank statements, if you're self-employed; and an up-to-date profit-loss statement for your farming operation.

"Having your ducks in a row" and communicating with your financial institution is key, said Travis Smock, a land broker with Peoples Co., "so that when a property does become available, you have the ability to move quickly."

As a first-time farmland buyer, you may qualify for a lower-cost loan through the USDA's Farm Service Agency (FSA). “USDA offers really good first-time farmland buyers low-rate guaranteed loans,” explained Travis Selby, Illinois and Indiana land broker and auctioneer at Ag Exchange.