All Forum Posts by: Mason Moreland

Be careful with flood insurance, it's still insurance and they'll find any way they can to weasel out of covering things (LOL, sorry insurance folks).

Coming from a commercial/industrial floodplain permitting perspective, I would recommend most projects be raised to freeboard level (>6.7' in your case) at the lowest floor and engineered to pass floodwater underneath then apply for a LOMR (letter of map revision) with FEMA to remove the project from the floodplain. That is probably much harder for a residential property, but could also improve the value of the property. Not sure if the cost>reward though for residential. Just my 2 cents!

 I got you, TX fam! We specialize in AG RE investments and operations. We run one of the largest wine grape vineyard operations in the state (and east of the rockies) and syndicate capital for them. We also do traditional RE and are familiar with traditional row crop farming (though we don't do any right now).

You will want to do like @Henry Clark said first and foremost. The folks at your local USDA office need to be your friends. With row crop agriculture especially, you can live or die by what they can hook you up with (lenders/loan programs, subsidies, relief programs, insurance, other connections, etc).

Look up your local FCS (farm credit service) lenders. They will likely be able to get you the best rates possible if you can't get a fancy specialty program from USDA. I'd almost recommend using an FCS lender over anything federal at all anyways, because of the reduced headache and hair on most of their products.

Another overlooked source is SBA loans. They absolutely suck as far as having hair/documentation required with them, a lot of the lenders doing them stink, and generally federal products are yuck, BUT, they can have low interest rates and lend on some ag ventures that others won't. These are usually better loan products for specialty AG developments (vineyards fall in there), AG processing (gins, crop storage facilities, processing facilities, wineries, etc).

What kind of AG project are you getting into? That will also help steer what lender you should look towards. Also as far as interest rates., any special USDA program will likely be lowest. Interest rates are not terribly attractive right now for purchasing new traditional row crop ag land. Usually I'd bank on a 3-6% return on renting row crop ag land on a share crop basis here in TX back when INT rates were running ~3-5%. That gets you down to basically nothing right now, however, farm land prices are increasing rapidly in some areas as of late. You can make these interest rates work in some specialty crops still though.

-MM

We seem to have the best luck with furnished STRs or typical unfurnished LTRs here in Midland, Brad. There is some interest in MTRs from companies that have employees consistently coming out here for work, but there will be some work in marketing to and connecting with those businesses outside of MLS/Zillow/etc. You might try targeting those smaller businesses that don't use services to find places, but I wouldn't be afraid of converting it to an AirBNB type deal either. Our STRs stay probably 80% full with minimal effort, so long as it is super clean and consistently fast communication.

Sure do. 

We syndicate capital for, construct/develop “raw” row crop ag land into wine grape vineyards, and operate them here in Texas. 

Margins are super thin on renting farm land. You are either getting sub-4% CoC returns, no tax benefits, and little risk(cash rent) or you are getting 3-6% CoC, good tax benefits, but capital outlay, farm/weather risk, and you're more involved (share cropping Aka taking "1/3rds" or "1/4s" of crops). Neither are super appealing to me right now, especially with interest rates as they are now, but I'm sure someone has figured a way to make decent money at it.

I think there is the most opportunity in high value add specialty crops/perennial crops (things you don’t replant every year Aka trees, vines, asparagus, etc). That’s just my opinion though.

One thing I like about wine grapes of that the market isn’t really manipulated like other crops. No subsidies, major ISDA programs coercing you to do stupid things, price programs, government interference in general. California is a rough market though with unions, cost of and cartel involvement with labor, insane cost of land, depressed grape prices (over planted), and a general apathy to agriculture by the younger generations my age.

Good market if you buy well. Oil fundamentals look strong for the long term right now as well. Steady Eddy.

Odessa is definitely more O&G centric while Midland is somewhat less oriented towards blue collar (field workers, oilfield supply, and services), and more toward "white-ish collar" (engineers, geologists, high skill trades, finance, etc) than is Odessa. Both have areas which tend toward one side or the other however.

Lots of homes on market right now in Midland where I live, many still asking crazy or somewhat high prices and sitting for extended times. Maybe still catching up to realistic buyer demand/prices? I have a feeling we will maintain values OK in a RE crash this go around as oil fundamentals look to be steady-ish long term regardless of broader US financials because of externalities beyond the USA. 

Well, guess I picked the right field combining #1 and #3 huh? Haha, we shall see. 

I'm sure a good portfolio of different real estate and healthcare/staples businesses will fare relatively well.

Very common in our area. Many are handshake deals and many are on paper. Usually done on "quarters" or "thirds" IE tenant and owner split seed, fertilizer and chemical costs 75/25 or 66/33 and the tenant farmer pays the owner 1/4 or 1/3 of revenue generated as rent. This allows the owner of the land to take "active participation" in the farming activities and claim the tax exemptions and allocable losses that come with being active in the enterprise. Usually it is very, very, very low margins in our areas unless you own the land outright. In great years you do great, in other years it can be rough, it is still annual row crop farming!

The alternative is cash rents, which don't give the owner as many tax advantages. Much less common here unless it is land being leased for grazing rights or hunting rights, in which case it is the norm.

I have never heard of being able to depreciate land in any jurisdiction for any reason, but could totally be wrong. Typically you can only depreciate improvements like drip irrigation, pivot irrigators, wells and pumps, the groundwater supply itself, buildings, etc.

My background: we syndicate, operate, and own outright large winegrape vineyards in Texas. We often interact with tenant farmers and their landowners and sometimes farm row crops ourselves.

Nice work!

Good responses all around. Your strategy will change depending on if you are planning to sell fruit to wineries (you would be called a "grower") or if you are wanting to make your own wine. 

Existing will obviously be faster, but you will be pigeonholed into whatever you get (varietals, trellising, size, etc). Don't count on grafting to be a solution to changing varieties long term. Fully pulling an replanting plants tends to have better success.

New planting is great, but realistically count on it taking 5 years to get to full production. There are a lot more opportunities for things to be done incorrectly during the training and install process than if it is already installed.

My experience: I focus on large, fully-mechanized, production vineyards in Texas (CA central valley style stuff with a TX twist). We have about 900 acres spread across production, construction, and design phases. We have our own vineyard and also syndicate new vineyard developments. We also have a custom crush winery business that provides winemaking and grape processing services to other wineries.

Having partnered on farm ground to develop it (granted, into vineyard, which is still ag!):

Partnerships on developments where one partner brings land capital and one brings cash capital can be extremely lucrative or extremely damaging. Lucky that we have fallen into the former category. You need to be 100% sure you are OK being "in bed" with whomever you partner with. Not just same objectives, but same moral compass, decision making abilities, etc. Skills and types of capital brought to the table can be different of course, but if the other things aren't in alignment it will implode and cause way more stress than good. If they are aligned though, look out! It's a deadly combo to make a good deal great.

I would lean towards partnering for equity by bringing land capital to the table IF I knew the development partner very well and aligned with them well. If not, I would lean towards selling on the open market for market price. Your gut feeling on if you align with this person/group is almost certainly right, this is a time to listen to your gut.

This situation can be very attractive for a development partner if it is contributed as equity into a partnership. It reduces the amount of cash capital needed greatly and if you own the land outright, adds quite a bit to the project. Don't short yourself on what it is worth if contributing into a partnership!