Whether your farm has been in the family for generations, or you’re a first-generation farm owner looking to scale up your investment, selling an agricultural property can be a complicated and stressful process. Here are a few tips for getting the best results when. selling your farm or ranch.
Get the property appraised
Start by hiring an agricultural real estate appraiser to determine the value of your rural property. Make sure this appraiser specializes in agricultural properties, as they have knowledge of factors unique to rural properties, including water and irrigation, soil conditions, climate and crop yields, easements and zoning restrictions, and consumer trends in agriculture.
If your agricultural property has sentimental value, or if you’re simply interested in limiting your direct involvement in the work of maintaining a farm, you might consider leasing your property rather than selling. This can help provide a source of steady income, while ensuring that you retain ownership of the property down the line.
Understand what you’ll be taxed
As a business entity, a farm is subject to a variety of complicated taxes beyond those of a standard residential property. Whether you come out ahead on the sale of your agricultural property may hinge on how well you’ve prepared from a taxation standpoint. For instance, various tax rates and treatments apply to the different types of assets involved with the sale of a farm or ranch, including land, livestock, structures, and equipment. When allocating the sales price to the assets of your farm, be sure to consult an experienced tax professional.
Take great photos
Like any real estate listing, farm and ranch properties benefit from high-resolution, professional photography that highlights their best qualities and attracts buyers. Before putting your property up for sale, invest in a good camera or photographer to capture images that showcase the natural beauty of your property, along with the possibilities the land offers.
Don’t forget capital gains
When you sell your land, you’ll incur federal and state taxes, which are typically due in the year following the sale. If the property sells for a value greater than your purchase price, then you will owe a capital gains tax, which can be as much as 20 percent depending on your income. If you intend to purchase a new agricultural property, consider a 1031 exchange, which enables you to defer a capital gain indefinitely or until a replacement property is purchased.