Real Estate

Advantages and Disadvantages of Buying Farmland

Buying farmland can be an attractive prospect for many, for a number of different reasons. Whatever your reasons; it is imperative to have a full understanding of what you are getting yourself into, because the legal processes are often more complicated when it comes to buying farmland.

Depending on which state you are in, there are certain laws that will prevent you from buying farmland unless you can show that you have farming experience or own another parcel of farmland. These laws exist to protect the integrity of farmers and to prevent the complete urbanization of agricultural land in the country.

That being said, it is not impossible to own a farm plot. It depends on how you plan to use the plot. Read on to familiarize yourself with the pros and cons of such an investment.

Advantages of buying farmland

Owning farmland can generate one of three main incomes; You can earn income by selling the crops and products, leasing them from a farmer, or renting a house built on them.

  • Perhaps the only advantage that tempts people to invest heavily in farmland is the tax exemption. Profits you make from your farmland will not be subject to estate tax, which is a type of tax that is typically levied on profits made from property.

  • You can also grow your own crops and apply for government grants, if you’re ready to invest your time and energy. You can rent your land to other farmers and share the profits, but that would largely depend on various natural factors.

  • You can choose to share crops and let someone else plant crops on your land. You can take a portion of the dividends as payment. This way, you can ensure that your land is taken care of as well. You can reap great benefits in the long run. You can receive tax credits, or even divide up your land and sell it for a large profit.

Disadvantages of owning farmland

  • The main disadvantage would be adjusting to the drastic change in lifestyle, as you would have to move closer to your farmland, which is probably in a rural area. Even if you don’t, regularly traveling to your plot to ensure its upkeep will take a long time. Unless you have a trusted relative or friend nearby, you’ll also need to invest heavily in protecting your land from invaders.

  • If you plan to lease the land to a farmer, the profit you make depends on the quality of the crops. Too many extraneous variables, like weather and water supply, affect the product, leading to unreliable profits.

  • There are laws that restrict building a farmhouse or vacation home on your farm parcel. You will need to be familiar with these additional laws to avoid legal problems.