Market Makes Land Buys Tough

April 4, 2012 08:08 AM

Decisions about whether to buy land are never easy, particularly in the present market, and they have long-term ramifications. To assist farmers in making these decisions, the American Bankers Association has developed a checklist to guide producers through the process. The list includes the following points:

  • Access your business’s financial condition. Consider needed investments, expected expenditures and crop conditions to determine if buying land is the best use of your cash. Are there other opportunities that can provide a better return?
  • Create a pro-forma cash flow. Research sales trends and expected revenue of a potential plot of land.
  • Are you overpaying? If you are paying a premium, how long will it take you to recoup? Determine how much your business should prudently spend on land purchases and the revenue needed to justify your purchases and stay within those targets.
  • Give it careful thought. Never be rushed by a broker and never confide your best price or financial goals with a party working for the seller. Don’t buy impulsively or make a deal before visiting the property numerous times. Rework the standard broker’s purchase contract with your lawyer, deleting what you don’t like and adding what you want.

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