Taking the Leap

[midTN_Brangusman]

I have always had a dream of leaving the corporate world and purchasing a ranch and do cattle full time. Currently where I am located, land prices are through the roof and no land is available to rent. I have been trying to determine how much of a ranch's purchase price would be needed so I can write down some goals to work toward, since if there not wrote down they are just wishes. I know the typical down payment is 20%, but I am not necessarily talking about a down payment. How much would you feel comfortable borrowing?

 

[shaz]

I'm in Petersburg not far from you and land is getting pricey quickly.

How long until you actually retire? If longer than a few years I only see the cattle business getting worse until the truth about cattle's environmental and health impact comes out and people realize they've been fed a line of crap all these years.

 

[Rafter S]

I don't want to discourage you, but if you can afford to buy enough land to support enough cattle to live on you probably already have enough money and don't have to work.

 

[callmefence]

How would you expect a near retirement rancher to do by suddenly jumping into the corporate world????

 

[Caustic Burno]

How would you expect a near retirement rancher to do by suddenly jumping into the corporate world????

It's a journey more than a job IMO.
You better be a jack of all trades or you will go broke quick.
I worked corporate but I was raised with cattle, bought my first one at 14.
You will make more money herding stock on Wall Street versus living in Bugtussle. The lifestyle will be better in Bugtussle. I did both, I guess you can say I played corporate cowboy.
I am not a cowboy and have never been, I am a grass farmer.

 

[midTN_Brangusman]

I guess i should have gave more background information and maybe my post was misleading. I am 20 plus years from retirement, in mid 30's. Not new to cattle, been in it my whole life. Just thinking about changing my full time occupation. The original question was what percentage of the land value would you be willing to go into debt when buying land.

 

[shaz]

I'd say finance 80% of the land value. I'm not seeing any land sold for the tax assessor value. Usually 25% more. Interest rate is the big one.

I'm assuming you're not financing all your land? You already have an established farm and looking to add on?

 

[1982vett]

I guess i should have gave more background information and maybe my post was misleading. I am 20 plus years from retirement, in mid 30's. Not new to cattle, been in it my whole life. Just thinking about changing my full time occupation. The original question was what percentage of the land value would you be willing to go into debt when buying land.

Best keep your eye on retiring @ 50 with enough cash saved up to live on. In the mean time you could certainly invest in a piece of land...it is the investment. The rest is gaming taxes so you can keep and enjoy it.

 

[sstterry]

I'd say finance 80% of the land value. I'm not seeing any land sold for the tax assessor value. Usually 25% more. Interest rate is the big one.

I'm assuming you're not financing all your land? You already have an established farm and looking to add on?

I knew a Danny Beasely from Lincoln County many years ago, as I recall his father was a Vet.

Also, that Penguin that freqents this Board should ba able to tell you all about land and financing in Middle Tennessee.

 

[Caustic Burno]

I guess i should have gave more background information and maybe my post was misleading. I am 20 plus years from retirement, in mid 30's. Not new to cattle, been in it my whole life. Just thinking about changing my full time occupation. The original question was what percentage of the land value would you be willing to go into debt when buying land.

Best keep your eye on retiring @ 50 with enough cash saved up to live on. In the mean time you could certainly invest in a piece of land...it is the investment. The rest is gaming taxes so you can keep and enjoy it.

When retiring what most people forget is no one is going to give you a raise but you. As you age your earning opportunities go down.
The trick is not outlive your money at the same time not leaving any for your heirs to party on.

 

[kenny thomas]

I'd say finance 80% of the land value. I'm not seeing any land sold for the tax assessor value. Usually 25% more. Interest rate is the big one.

I'm assuming you're not financing all your land? You already have an established farm and looking to add on?

I knew a Danny Beasely from Lincoln County many years ago, as I recall his father was a Vet.

Also, that Penguin that freqents this Board should ba able to tell you all about land and financing in Middle Tennessee.

And probably sell you the land and arrange the finance

 

[Stocker Steve]

[quote=midTN_Brangusman The original question was what percentage of the land value would you be willing to go into debt when buying land.

Down payment on a piece does not matter. It is a question of overall cash flow and liquidity.

 

[hurleyjd]

I have always had a dream of leaving the corporate world and purchasing a ranch and do cattle full time. Currently where I am located, land prices are through the roof and no land is available to rent. I have been trying to determine how much of a ranch's purchase price would be needed so I can write down some goals to work toward, since if there not wrote down they are just wishes. I know the typical down payment is 20%, but I am not necessarily talking about a down payment. How much would you feel comfortable borrowing?

Land has to be sold sometime in the future to realize any profit. What drives the price of land is corporate people that wants the rural lifestyle. Problem in my area is you will not find any land for sale at a good price and also decent land. Land will cost you each year you own it whether it produces or not. A lots of times people think that if you have land you get a tax write off. Not true. You have to invest in thinks that depreciate to get a tax write off. Paying your taxes will get you further ahead. Cows are the most expensive pet you can own.

 

[Dave]

If you think that you will get positive feed back here from a bunch of computer cowboys on the idea of going full time rancher you are kidding yourself. You need 20/30% for a down payment. But realistically it is not the down payment to worry about. It is the balance. Will the property generate enough income to cover that balance and leave enough to live on. There are those properties out there but you will most likely need to search far and wide to find one.

 

[Caustic Burno]

I have always had a dream of leaving the corporate world and purchasing a ranch and do cattle full time. Currently where I am located, land prices are through the roof and no land is available to rent. I have been trying to determine how much of a ranch's purchase price would be needed so I can write down some goals to work toward, since if there not wrote down they are just wishes. I know the typical down payment is 20%, but I am not necessarily talking about a down payment. How much would you feel comfortable borrowing?

Land has to be sold sometime in the future to realize any profit. What drives the price of land is corporate people that wants the rural lifestyle. Problem in my area is you will not find any land for sale at a good price and also decent land. Land will cost you each year you own it whether it produces or not. A lots of times people think that if you have land you get a tax write off. Not true. You have to invest in thinks that depreciate to get a tax write off. Paying your taxes will get you further ahead. Cows are the most expensive pet you can own.

That is spot on.

 

[simme]

If you think that you will get positive feed back here from a bunch of computer cowboys on the idea of going full time rancher you are kidding yourself. You need 20/30% for a down payment. But realistically it is not the down payment to worry about. It is the balance. Will the property generate enough income to cover that balance and leave enough to live on. There are those properties out there but you will most likely need to search far and wide to find one.

What Dave said. I suggest you build a spreadsheet with all the expenses and all the income for a particular piece of property. As accurate as possible with reasonable assumptions. When the corporate world spends money on a new project, they put lots of effort into this step to ensure that there is a good chance of success. Get help if needed. How many head will it carry? What are all the input costs? Cash flow. Profit or loss. What is left after expenses to live on, pay for health care, save some for later in life. etc. If a detailed plan does not pencil out on paper, it most likely does not work in real time.

What kind of cattle operation? Cow-calf? That is year round cattle and hay will probably be a big expense. Stocker operation? Trader that buys and sells trying to time with the grass? Seedstock? A few master that after several years. Many fail. All decisions that go into a financial plan. If you have cattle only, it probably has to be fairly large to be able to generate the income. Other options might include pairing with another source of income. Here, there are lots of chicken farms. They fit well with cattle. Shared equipment and workers. Fertilizer from the litter. More steady income. Huge debt. Maybe a part time job paired with a smaller cattle operation - health insurance is maybe covered. Maybe a related business as a supplement - land clearing, custom equipment work, equipment repair, septic tank installations, feed store, fencing, etc. You probably know this already. Just mentioning some items. I have heard "Where there is a will, there is a way".

Sill not sure if your plan is to leave the corporate job now and jump full time into cattle or to purchase the land now and continue with the corporate job for 20 more years and then "retire" to a "full-time" cattleman. First one has more risk and deserves a lot of thought.

 

[Dave]

I know people who have successfully done it. Be prepared to work 16 hours a day 7 days a week. Be prepared to skimp by on nothing for a lot of years. And you said rent/lease ground is not available where you are and land price is going through the roof. So be prepared to move and move a considerable distance. Affordable land will be in the middle of nowhere. Maybe a few miles past the middle of nowhere. The affordable land I know of is an hour or two drive to the grocery store. Those looking for a life style in the country don't want to live that far out. That reduces competition in purchasing property. Look for a run down house and facilities. You can fix them up yourself. The places where everything is first class will cost more to buy but won't return a cent more.

 

[midTN_Brangusman]

If you think that you will get positive feed back here from a bunch of computer cowboys on the idea of going full time rancher you are kidding yourself. You need 20/30% for a down payment. But realistically it is not the down payment to worry about. It is the balance. Will the property generate enough income to cover that balance and leave enough to live on. There are those properties out there but you will most likely need to search far and wide to find one.

Thank you Dave for your sound advice, always appreciated!

 

[cowgirl8]

Find a place where there are a lot of weekenders. You basically get their grass for free. They get tired of trying to keep it mowed.. You can either graze it or bale it.. We almost never bale our own land now...