Written by Justin P. Bierschwale
Challenges facing rural landowners today vary greatly throughout the U.S. depending upon a multitude of things including property types, state regulations and ownership goals. To look at the challenges present in the rural land market through a national lens is challenging in and of itself. On the broad spectrum, I offer the following thoughts:
In many of the country’s rural areas, property’s market value has become disconnected from the property’s income producing capabilities to varying degrees. The difference between production value and market value is most pronounced in the recreational ranchland market, but even farmland has seen somewhat of a “disconnect” in recent years. Determining the right time to transfer property has proven to be a challenging decision for many.
In terms of long-term holdings, I feel the national economic trends still point toward rural land as an outstanding place to hold wealth. If I were a landowner or considering investing, I would first determine my ultimate financial goals. If I were averse to risk, then I would hold the ownership I have, riding the dips and peaks ever-present in the rural land market and enjoy what I project to be a steady rise in rural land values over time. If I was willing tolerate more risk for the sake of growing wealth, I would pay close attention to the peaks we are seeing in the market today, primarily in the farming ground of the Midwest.
Property management is another challenge facing rural landowners today. In the progression of our country, citizens have become more and more disconnected from rural property and lifestyles. Many of the children who were raised on the farm or ranch have moved on to urban areas to capitalize on the rewards of higher education, but they maintained a tie with the land and grew up knowing how best to manage it. We are now seeing the second generation raised away from the land come of age. Their knowledge of how to manage the land is not at the level of their parents because they spent little time actually living from the soil.
To people who find themselves facing this situation now or in the future, I would recommend finding a professional who has the knowledge and the demonstrated ability to offer the most sound management advice, truly looking after a landowner’s best interest. While it can be difficult to see the value in paying a third party for property management, particularly of recreational-type ranchland, owners need to be aware that improper management can lower the value of the land. Sometimes it costs money to maintain value. The Midwest and other parts of the country have a history of farm management companies. I predict we will see a similar industry grow around ranchland in the coming years.
To piggyback on the point discussed above, absentee landowners are constantly searching to find tenants for property. Tenants may provide both the ability to generate some yearly cash income, but, more importantly, can serve as a management component in the property owner’s long-term goals. I see many landowners who seek to maximize rental agreements with potential tenants. More often than not, this situation leads to a large turnover year-to-year and little regard for proper maintenance. It is often times better to find a good quality tenant and charge rates that may be construed as below-market in order to keep the high-quality tenant who takes adequate care of the property in place. Trust between those utilizing the land and those who own the land is critical in any long-term holding situation. While the capitalistic principles of the U.S. prompt us to maximize our income at every turn, it should be noted that when it comes to rural property there is more to the equation than the total dollars involved.
In 2010, Justin Bierschwale co-founded the Bierschwale Land Company LLC with his father and brother. The company, which is a full-service brokerage, appraisal and consulting firm, was a natural outgrowth of Bierschwale Appraisals and is based in Junction, Texas. Justin has lent his talents to many committees within ASFMRA and is currently serving as the chairman for the National Education and Accreditation Committee. He received his ARA designation in 2008.
JUSTIN P. BIERSCHWALE ARA, MRICS, MAI | Bierschwale Land Company, LLC | (325) 446–3052