Best way to buy a farm?

[Joseph Schommer]

Hi BP Community!

I recently found an incredible off-market deal on a farm that I'd like to move to and run.  I'm wondering what the best way to buy the farm will be:

A: Through my company (which will be a vertical integration to the farm) or

B: As a primary residence.

C:  Through a different company that I can start for the sole-purpose of this farm?

D: Something else?

Thanks so much for all you do and I look forward to your sage advice!

[Mason Moreland]

@Joseph Schommer

If you can buy the whole thing with a primary residential loan, do that. The terms will be significantly friendlier than an Ag credit loan (higher LTV, lower INT, longer AMMO). Some lenders will not lend on rural residences depending on their location, so keep that in mind and don't let a lender string you along for 30 days only to find that out at the end...

An SBA loan is also a possibility depending on farm type, your qualifications, and the price. They can have some pretty crazy good terms; 80-90% LTV, prime+ 2% INT, 20-30 yr AMMO. The downside is they can take 45+ days to get done sometimes and take a ton of paperwork on your end. If you do this, definitely go with an SBA preferred lender so you don't have to wait on SBA approval, too.

You can use an FCS institution if you can't get a standard primary residence loan or SBA loan. They do rural residence and farm loans. Typical terms would be 65% LTV, 10-20yr term (usually 15), prime+2%.

DM me if you run into any issues or need someone to bounce questions/ideas off of! Can also point you to some potential lenders to look into if you need some direction. We primarily deal with Ag development loans (buying land and developing/operating vineyards) here in TX but the process is similar across the spectrum of Ag.