average price for rural land was $2,150 per acre in 2011, refl ecting the most current fi gures available. This aver- age is a 3 percent increase over 2010, and both years fall into a period that the Real Estate Center described as “subdued” and “extremely quiet.” “These numbers illustrate 2 obvious points,” Ho-
meyer says. “First, land is a signifi cant expenditure compared to returns. Second, the value of land in Texas is continuing to climb, which, in my estimation, makes it a good investment.” For a producer considering purchasing land, the
fi rst question that has to be asked is: Why do I want this land? Sometimes the honest answer may be un- expected, he says. “As a personal example, my family and I had in-
stalled broiler houses on our property in Burleson County,” he says. “An adjoining piece of property be- came available and we purchased it. Ultimately, the decision was driven by our desire to create a buffer between our operation and the neighbors. We knew we couldn’t control who might move onto the property and how they might react to our ag operation.” Situations are different. Some people may have ready
cash and need to invest it, making a land purchase the best solution — particularly in these uncertain eco- nomic times, he says. These people need to consider whether they are looking for a long-term investment in which they are going to invest in improvements or a short-term investment that they are hoping to fl ip and capitalize on quickly. Others may be looking to expand their operations, which should lead to additional questions, including:
Can I fi nd lease land that accomplishes my production and life goals? “On paper, at least, leasing is always cheaper than
purchasing land,” Homeyer says. “But good lease land can be very hard to fi nd, and then a producer has to deal with the uncertainties inherent in leasing.” De- pending on producers’ motivations for buying land, lease land may not help them achieve their life goals. For instance, if the goal is to put the family original homeplace back together, then lease land is not even a consideration, he says.
What am I going to do with the land? In this era of tight margins, it is diffi cult to make
land payments based on a single-faceted operation; therefore, any piece of land needs to have the potential for multiple income streams, be it commercial road
tscra.org
The value of land in Texas continues to climb, which, in the opinion of many, makes it a good investment.
frontage, commercial rental facilities or rental houses, hunting or fi shing leases, hay production or some other enterprise, Homeyer says. “When producers consider purchasing land, they
need to consider its full potential,” Homeyer says. In his own experience, he looks for land that has the infrastructure to help generate rent income. The land where his broiler houses are located is also the site of a 3-bedroom/2-bath rental house. His family is using the house as a rent house, but,
because of their proximity to Texas A&M and the demand for lodging during football weekends, they are considering converting it to a lodge. With prices in the area, the family could generate almost a year’s worth of rental income with just 7 weekends of use, Homeyer says. Of course, if the land purchase necessitates additional
enterprises, producers must evaluate the startup costs, operating expenses and the demands on their time to determine whether or not the additional enterprises are feasible, he says.
What rights come with the property? In this era when energy companies are developing
shale fi elds this is a crucial consideration, particularly as it relates to water rights. As it was explained in Texas Wildlife magazine: “Under Texas law, groundwater is part of the surface
estate. As such, oil companies have the automatic right to use as much as of the surface and groundwater as they reasonably need without securing the surface owners’ permission and without having to pay for it. This rule can be offset, though, with a surface-use agreement or surface-damage provision negotiated in the lease. When the surface and mineral ownership is split,
legally speaking, oil companies do not have to negoti- ate with either the surface owner or the mineral owner for the use of the groundwater. The mineral owner has rights to it even though the groundwater belongs to the surface owner. Why? Because the mineral owner has an ‘implied
March 2013 The Cattleman 39
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