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• Whether using cash or borrowing money, buying farmland should include a well-researched financial plan.
12. How is the property zoned? Will your plans for the property conflict with existing zoning restrictions? Are there conservation easements that could restrict use of the property? This factor has a significant impact on your valuation of the property, particularly if your plans conflict with current zoning restrictions. Make sure that you understand the assured leases that may go with the property -- many of the states in the west have a large percentage of their ground that falls into this category (bureau of land management, forest service, state land, national grass land).
13. How will you hold deed in the property? Will you own it individually, jointly with a spouse, in a family owned entity (corp., LLC, LLP) or in a trust? The pros and cons of how you own the land will depend on your long term goals.
14. Are there any environmental problems? The last thing you want to buy is a costly environmental problem. Paying for an onsite environmental audit before you buy the land may be worth the cost and will help ensure you are not buying into an expensive cleanup.
15. How long will you actively farm? Make sure your financing plan matches the rest of your intended career as an active producer. Will you fully retire all debt from the acquisition before you retire? Do you have sufficient life and disability insurance?
No one knows more about financial budgeting and cash flow planning than your banker. ABA recommends making an appointment to talk with your banker about the significance of purchasing land and how it will impact your business.
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