3 Factors to Consider Before Buying Land

So, that parcel of land you've longed to own is finally coming up for sale. Emotional land buying can pump up that purchase price, warns Quint Shambaugh, a principal with Pinion.

"Too often buyers find themselves facing improvements after the purchase that can add considerably to the per-acre cost," Shambaugh says. "They may think they know the property because they farm near it or simply don't think to ask some basic questions."

Raised on a six-generation farm in central Illinois, Shambaugh co-founded and developed a drainage water management company called DIGS Associates to help landowners create and implement strategic land- and water-management plans. The company has since become part of Pinion, a food and ag accounting and consulting firm, based in Lenexa, Kansas.

Pinion Land Advisory based in Moweaqua, Illinois, offers analysis, development and quality control of capital improvement plans that take in a wide range of considerations. Here are three areas Shambaugh suggests asking about prior to a land purchase:

1. Put a value on improvements. Subsurface drainage tiling, dirt-moving, irrigation, access to water for irrigation: Put solid numbers together on all needed improvements before the purchase, he urges. "The way the topography lays out for subsurface drainage is an area often overlooked, and the average cost right now for a pattern system is around $1,200 per acre. We often see those project costs exceed $2,000 per acre. I've seen the cost of improvements more than double after a shoot-from-the-hip estimate. An improper capital-improvement estimate can incrementally drive the land cost up," Shambaugh says.

2. Check your watershed. Understand with whom you will share water and how. Will you be running drainage water across neighbors' land, or will they be putting water onto your land? Will you be sharing common water sources to irrigate? Is the farm part of a drainage district, and will that district have jurisdiction over any infrastructure on the farm you are considering? Is there a water allocation? "If you don't understand your watershed, you don't understand that farm," Shambaugh explains.

3. Size up conservation and community projects. Does the parcel have Conservation Reserve Program (CRP) ground? Are there waterways or terraces that have been paid for with Natural Resources Conservation Service (NRCS) dollars that can't be altered? Are there conservation easements or other contracts? "What are the conservation opportunities that might address a resource concern?" Shambaugh asks. "Are there opportunities or commitments to a utility or community projects such as wind, solar, pipeline or carbon capture?"

Keep in mind that no property is perfect, he adds. "On many farms, improvements can also mean opportunity. What we like to try to avoid is situations where you buy a farm, for example, that is wet and you plan to drain it, but suddenly realize the outlet is a mile away and passes through the property of a neighbor known to be difficult. That's when you wish you'd had a capital-improvement plan made ahead of the purchase," Shambaugh says.

"There's nothing more exciting than buying a farm. It's a thrill to own something that has potential of solid year-over-year return and gives you a chance to build equity in something that can pass to the next generation," he continues. "We just want to make sure that excitement doesn't get in the way of doing a full workup on the land, just as you would any business."

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