Ranch and farmland development

[Jeff Lee]

Howdy BPers -

I'm looking to combine ranch land with STR cabins in central/east-central Texas. Does anyone have any experience with buying acreage below market value, rehabbing ranch land, or have financing tips for acreage + construction?

I realize there are a lot of non-traditional moving parts to this project, such as: Where can off-market ranches or acreage be found? At what point is it more cost efficient to buy "nice" land (e.g. for cattle or hay production) rather than buy cheaper mesquite/cedar/cactus infested land and try to rehab it? In other words, how can we apply BRRRR to ranch land?

Tags: Ranch, Farm, Cattle, Cow, Acreage, Acre, Agriculture, Cabin, Brenham, College Station, Somerville, Navasota, La Grange, Giddings, Bastrop, Schulenburg

[Henry Clark]

Easy answer:  Please don't do Cattle or agriculture unless your in it for a hobby.  But lets go through the numbers.  Even though I am going to do cattle, basically the same applies to crops.

There is a saying in Texas; "Big Hat, little cattle".  Lets see what that means.

1.  Do you understand the 10 year cattle cycle.  This has held true since around 1880 except for one 10 year period around 1990.  It is one of the few golden rules in business cycles, most people have never heard of; it is really interesting if you ever get someone to walk you through it.  You can actually read the future.  Basically a 5 % swing in the "Cow" herd, that's momma cows, dictate the whole market.  You have to adapt to different parts of the cattle market to make money or survive.  Cow/calf,  grass yearlings, bred heifers, sell everything you have, feedlot, etc.  You have to be able to adapt to the Cattle cycle.  Forget purebred, it will take you years to learn the business and get a reputation.  Plus you have to have an "eye".

2.  Believe you are thinking of having a Cow/calf operation.  Selling at weaning time.  Lets see what it takes. 

- Soil/rain-  35 inches of rain will take about 3.5 acres of "fertile" pasture for a cow/calf pair for the year, where I'm at. Still need winter feed, in Iowa.  Grew up in West Central Louisiana, 20 minutes from East Texas. Huffman area is Houston metroplex so you can't buy anywhere near there, your paying future real estate development price.  East Texas look out for Clay soil, even though your getting 55 inches of rain, it doesn't all soak into the ground, it runs off.  Brenham, look out for Sandy soil, even though your getting 55 inches of rain, it soaks into the ground and away.  Your looking for good soil, otherwise you need more acres for fewer cattle.

- mother nature- Brenham, look out for droughts.  You have to sell off part of your herd.

-  Profit per weaned head-  I'm going to make this real simple.  Lets say you average over a 10 year period, $100 profit per weaned calve per year.  Lets make it really great.  $300 per head per year, profit.  It takes 5 acres.  Don't do winter feeding, so you need more acres.  Cheaper than where I'm at paying for hay or corn.  Hopefully have corn stubble.  

-  Lets pay off the land in say 10 years.  Change the numbers as you see fit.  $5,000 per acre x 5 acres needed / $300 profit per year = 83 year pay off.  For now forget NPV, property taxes, interest payments, bankers wanting their principal before they die.

Lets try it again.  We wanted 10 years.  To make that work we need to buy land at $600 per acre x 5 acres needed/ $300 profit= 10 years.

Lets try it again.  We want to pay off in 20 years.  To make that work we need to buy land at $1,200 per acre x 5 acres needed/ $300 profit - 20 years.

Disregard Covid which just made you go bankrupt, because the feedlots didn't want your calves, because the meatpackers were all sick and couldn't process beef, and no one could afford $5 hamburger meat.

Research the 5 acres per head.  Research the average 10 year $300 profit per calve.

Basically you need to find ground in the $600 to $1,200 range with a cow/calf carrying capacity of 5 acres per head.

- Now lets do "Big Hat, little cattle math.  How well do you want to live, assuming you are raising the animals.  Lets say $100,000 profit per year; even without paying the banker back, assuming no loan outstanding, or paying income tax.  $100,000 per year/ $300 per calve per year = 333 head of momma cows.  Assuming a live calve rate of 90%, then you need 333/.9= 370 head.  At 5 acres per head, you need 370 x 5= 1,850 acre ranch.

Even at 370 head of cows, you would be Big Hat, little cattle.

-  1,850 acre ranch at $900 average = $1,665,000;  or

- 1,850 acre ranch at $6,000 average = $11,100,000 if you buy in a metroplex area and can find land for $6,000 per acre.

The most I ever owned was 33 Cows.  One happy bull.  And 130 yearlings which I would run on grass then either sell or take to the feedlot.  In the hopes of making $100 per head, and not losing $500 per head if I fed them out.  It took me 15 years to learn everything I knew about cattle which wasn't much.  

Buy 40 acres and a few Llamas and some ducks, geese and guineas.  Its actually great.

If you are "really" wanting to get into animal production, I can show you where you can buy 20,000 acres for $500 USD per acre.  Your going to raise an animal which is in high demand in the United States and we import over 80% of the meat.  Costs $11 per pound versus $4 per pound for the comparable cut of beef.  Still recommend you don't do it.

You asked if you can rehab or BRRRR cheap land.

Two of the quickest ways:  a.  Get two bulldozers with a heavy cable and large steel ball in the middle and drag the brush.  Then burn next year.;  b.  Rent a skidsteer with a Forestry attachment and go to town.  This will take quite a while, and not very good around rocks.  The reason it is cheap land, is because it is not fertile.  Preferably don't burn it, you want the carbon and nutrients to go back into the ground, thus mulching with the Forestry attachment is better.  This type of ground though, you might need 20 to 30 acres for a cow/calf pair.

Good luck.