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How to buy a ranch

How to buy a ranch

With an overview of this quintessentially American livestock farm, as well as tips on effective due diligence and how to raise funding to buy a ranch

The history of the American ranch is a long and romantic one, conjuring images of dusty cowboys and ambling longhorn cattle.

Of course, there’s a lot more to the American ranch — both in the past and today — than the stereotypes Hollywood has given us. In fact, they were among the first sources of real wealth in the New World, while a who’s who of the Old West would read like the National Ranch Owners Association member roll.

As just one example out of thousands, the famous Waggoner Ranch in the Red River Valley of Texas was established in 1849. During its long and storied run as an active cattle ranch it played host to President Teddy Roosevelt, produced one of the most famous quarter horses of all time in Poco Bueno, and made the Waggoner family exceedingly rich.

When the ranch went on sale in 2014, it comprised “the largest contiguously fenced property in the US,” an area spanning six counties that’s larger than more than 60 sovereign nations. Its selling price of $725m made it the highest priced real estate listing the nation has ever seen.

Ranches versus farms (there’s a difference!)

While farming is vulnerable to wild swings in prices, ranching — which deals almost exclusively with raising livestock rather than planting and harvesting crops — has been a steady source of appreciating value for its exponents, who tend to build their fortune across the west and southwest and pass them down through the generations.

This is because the true heart and soul of a ranch is the land itself. Although its price may fluctuate in the short term, quality land never truly depreciates.

Some ranches have diversified their income beyond cattle into more exotic animals, tourism and recreation geared toward outdoor activities, therapeutic services, and corporate retreats, family vacations and other special events.

While farming has benefited dramatically from advancements in agricultural science and technology, ranching still requires very much a manual skill set. And it’s often this rustic, old-fashioned quality that draws people to ranches for rest and relaxation or to take up the ranching lifestyle themselves.

There’s no denying that purchasing an active ranch isn’t the same as buying a plot of land away from the hustle and bustle of city life. The following tips can help anyone succeed as a rancher if they have the necessary drive and determination.

Complicated

A ranch is a much more complex, demanding undertaking than, say, a general store, laundromat or shoe shop. It’s important to be aware of the challenges involved, lest you be drawn to the vocation based on an overly romanticized notion of the lifestyle.

Depending on the size and type of ranch you’re interested in, a ranch for sale could include some or all of these things:

  • A family home
  • Various forms of commercial real estate (including land and existing structures)
  • Existing livestock, feed, watering apparatus and related machinery
  • Ranch hands and laborers employed by the ranch

Ranchers should also possess (or hire out) two unrelated but equally vital skillsets:

  • Knowing how to breed and care for animals
  • Knowing how to run a successful business

While you could compensate for your own deficiencies in these areas with hired talent, doing so will eat into your profit margins. That’s why successful ranchers tend to start with a passion for the land and the ranching lifestyle.

If you don’t possess those, there are likely other entrepreneurial goals you would be better off setting your sights on.

Thorough research

With ranches more complicated than many businesses, conducting due diligence during the buying process is all the more important. This process requires you (or, better yet, an expert you trust) to review the ranch’s financial and legal records, research its reputation among suppliers and customers, and check the condition and value of every aspect of the land and other assets belonging to the business.

Here are three factors specific to ranches:

Land quality

More than any other factor, the success of your ranch will depend on the quality of the land itself. Be sure to have professionals test the soil, water, drainage and other specifics prior to settling on a final purchase price.

Review the current owner’s grazing and herding program and look for detailed records of what’s worked and what hasn’t throughout the property. This will give you a valuable head start on day one of your new life as a ranch owner.

Market conditions

The ups and downs of international commodity prices – and exports may well be an important part of your income – will make cash flow management challenging. There are many factors in the market that you can’t control or even accurately predict.

Animal health

The health and wellbeing of your flocks or herds will heavily influence the success of your breeding program and the amount of food and/or goods you can sell. Larger ranches will often have a licensed veterinarian on staff or retainer.

 

Doing your due diligence, with the help of experts in agricultural law, finance and ranch valuation, can ensure that no unexpected nasties that you should have known about beforehand will sneak up on you post-purchase.

Acquisition funds

Many traditional lenders shy away from funding ranching operations due to the unpredictable nature of the sector. From the current strong demand for leather in China to a herd’s ability to fight off an unknown infectious disease, numerous areas of uncertainty make it difficult to consistently turn a profit.

That said, funding sources that specialize in agricultural loans do exist. As with any other sector, a strong, realistic business plan is paramount.

Ranches vary in size considerably, but most include hundreds of acres of land at a minimum, along with several other assets. So you can expect buying a ranch to require a sizeable six- or seven-figure investment in most cases.

If you feel ready to take on such a financial commitment and the challenge of running a ranch, then check out the ranches for sale on BusinessesForSale.com.If you're not sure if you should buy either a farm or ranch, then this piece should be your next stop.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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