Do you find yourself checking the classified ads for cattle ranches for sale in your area? (Probably not, because who looks at the classifieds anymore? We’re more referring to whatever modern channel you might be using to look for ranches for sale…)
Searching for ranches for sale and landing the right one can be one of Earth’s most satisfying experiences. Having your own piece of land that you work on, live off of, and call home is truly the American dream. Producing food for others is one of the greatest callings a human can fulfill. Not to mention, if your ranch is operated smartly, you might find it to be a cash cow (pun intended).
However, if you do it wrong, your ranch could become a living nightmare. Before getting into the ranching business, make sure you are aware of these common ranching mistakes:
- Feasting during the good seasons, and not saving for the famine seasons.
Even the best ranchers in the business can’t avoid some dry spells. Problems like weather conditions, ecological mistakes (the recent oil spill that put Alabama and Tennessee in an emergency position, anyone?), and disease can take a successful, profitable ranch, and throw it in the red. The trick is, when you get a good payday, set aside some of your earnings so that when tough times inevitably hit, you can ride it out without having to call it quits.
- Making critical decisions based on the tax implications.
There are a large amount of agricultural tax benefits available to ranchers. By all means, you should take advantage of any tax break that you get, some years it will be the single reason that you are able to pocket any money. However, what you should not do is make important strategic decisions based on what will give you the instant rewards in tax credits. If you want to stay in the game for the long run, you need to make your strategic choices based on what will put you in the best position in ten or fifteen years from now. The agricultural tax credits are designed to keep you afloat today, not to help you run a successful ranch for years to come.
While we’re on this subject, you should always use a tax professional who specializes in agricultural taxes to advice you on the tax implications of your business choices. Agricultural tax law is complicated and very different from most industries. Getting it wrong could turn into a nightmare and cost you big in penalties from the IRS when they discover your mistake (and they will).
- Assuming that running a ranch is a low maintenance project.
Cattle seem like relatively self sufficient animals; how much work could it really take to run a small ranch? In fact, while cattle do generally tend to their own needs, a lot of time is required to maintain land that is suitable for cattle to subside on. Additionally, if you want the type of cattle stock that will make you money, you have to tend to their medical care and make sure they stay healthy and thriving. This requires time and resources. It’s not uncommon for even the smallest “part-time” ranches to require 20 hours per week or more of labor. If your ranch is just a side hobby and you don’t have this kind of time to dedicate to it, you’ll have to hire labor to keep it afloat. This will become a huge drain on any potential profits.
- Overestimating the cattle capacity of your land.
Your land will only be sustainable for your cattle if there is enough space for some land to be used while the rest replenishes itself. You should not just take the seller’s word for how many animals the land has supported in the past; there is no guarantee that the ranch wasn’t being run to failure and that the animals were able to stay healthy on the land. While looking for ranches for sale, do your research with the USDA on the land use study, and make sure it supports enough cattle to be successful.
Do you have any other questions about purchasing and operating a ranch? Please share them in the comment section below!