How To Buy A Farm: A Beginner’s Guide

Many people fantasize about owning a farm. Getting away from the noise of the city and living off the land has its appeal. But, there’s a lot to consider when buying a farm. Farming is hard work, and it takes planning, resources and knowledge to be successful. Before you put in an offer, it’s wise to learn as much as you can about buying a farm to ensure you’re prepared for the journey ahead.

How To Buy A Farm In 8 Steps

Now let’s dive into the eight necessary steps to take to buy a farm.

1. Start By Working On A Farm

If you don’t already have experience, getting a job or volunteering at a local farm is a great place to start. You may not be aware of many aspects of farming until you start working on one.

For instance, what’s your mechanical ability? You may need to repair machinery on the spot to finish a task. Are you interested in the business side of farming? You’ll need to understand how commodities are priced and sold.

Working on a farm can help you build valuable experiences and connections. You can network with vendors and other farmers to see how the food is made, harvested, stored and sold. Once you have some experience and connections, you’ll have more knowledge when you start looking at farms for sale.

2. Consider Buying A Small Farm With Room To Grow

Not all farms sprawl for thousands of acres in all directions. It’s possible for a beginning farmer to start off smaller to develop their farming skills with a hobby farm or point farm, which are two smaller types of farms. It’s worth noting that the Internal Revenue Service (IRS) uses nine factors to determine the status of a farming operation. If audited, the farmer/taxpayer is responsible for showing proof they meet the guidelines.

Even if you have higher aspirations, these smaller farm types can be a good place to start. Here are the differences between hobby and point farms:

• Hobby farm: Typically, a hobby farm is smaller than 50 acres and isn’t intended to be a primary source of income. It’s usually more recreational, with hobby farm owners using their yield for personal use or selling a small amount at local farmers markets. According to the IRS, a hobby farm differs from a commercial farm because profit isn’t its main motive.
• Point farm: A point farm is an operation that doesn’t meet the required minimum of $1,000 in annual sales to qualify as a farm but has sufficient crops and livestock to potentially generate that amount. Point farms typically have higher sales than hobby farms but can dip below the sales threshold because of bad weather, disease or other factors.

3. Find A Mentor

When you’re ready to buy a farm, it helps to have someone come with you who knows what to look for. An experienced farmer understands the practical aspects of farming and what a property will need for the type of farming you’ll be doing. They’ll know about irrigation systems or necessary outbuildings, for example.

A mentor is an incredible resource. They can help you buy a farm and guide you in the process of running the farm. If you know farmers through your family or work experience, establish a relationship and nurture it. Find ways you can help them, and they’ll be more likely to return the favor.

4. Consider Focusing On One Kind Of Farming

Focusing on one aspect of farming is key to making your farm successful. While you may be able to homestead for your own personal needs, if you want to make a living off farming, you need to specialize.

Equipment and resources needed for a dairy farm are very different from those needed for a vineyard. Whatever crop, livestock or goods you decide to focus on, you’ll need to buy a farm and the equipment suited for it.

Keep in mind, you don’t always want to focus on one type of farming. If you’re a dairy farmer and the price of milk plummets, you need to have a backup plan. Work with your mentor to determine what you’ll specialize in and what you’ll do if that isn’t working out.

5. Create A Business Plan

If you’re aiming above the level of a hobby farm or point farm, remember farms are businesses. Creating a business plan can help you set goals and create a realistic timeline for when to expect profits. A lot of farming is seasonal, so planning accordingly is essential.

A good business plan can organize your numbers so you know how much to budget for different expenses. You’ll need to adapt to the shifting realities of farming once you’re running the farm.

6. Learn Where To Look For Properties

Word of mouth and local area knowledge are helpful to finding farmland for sale. You can gain some of this from working on a farm in the area. If you have a relationship with a farmer, they may come to you if they want to sell or know someone who wants to.

Working with an experienced real estate agent who knows the area is helpful, especially if you don’t have many connections. An experienced agent that specializes in rural properties will have connections and background knowledge.

One way to look for the right farm is to search online. A quick Rocket Homes℠ search will help you find the appropriate property type right away. You can also use the USDA Property Eligibility Map to figure out whether a home you’re interested in is in a USDA-eligible area.

7. Understand Your Financing Options

One of the most common ways to purchase a farm is through a loan from the United States Department of Agriculture (USDA loan). This type of loan aims to help buyers purchase property in rural areas, has favorable interest rates and requires no down payment.

There are two types of USDA loans: The Single Family Housing Direct Home Loan offered by the USDA and the Single Family Housing Guaranteed Loan Program offered by some private lenders. You can also look into specific USDA farm loan programs that help make buying a farm possible for beginning farmers, ranchers and other eligible borrowers.

If you don’t qualify for a USDA loan, or the property isn’t in a USDA-eligible area, you’ll have to explore other lenders who specialize in issuing farm loans.

Rocket Mortgage^® doesn’t offer USDA loans at this time.

8. Start Shopping With A Preapproval Letter In Hand

When you’re ready to buy a property, getting preapproved is the first step to getting your mortgage. Mortgage preapproval is a sign to the seller that you’re serious about buying. With a preapproval letter, you have proof that your finances are in order and know how much you can spend.

Questions To Ask When Buying A Farm

Not all rural land for sale will be suited for farming. Begin your farm-buying research with a list of key questions for each property. We have some example questions for you below, but this is just a starting point. You should frame your questions around the type of farming you’ll be doing and consult with your mentor for other key questions to ask.

Will Connecting Utilities Be Possible?

One of the challenges of rural property is ensuring it’s connected to water and electrical utilities. Depending on the property, you need to know if utilities are already connected and if not, whether they can be. You’ll need to be able to have water pumped out to fields and/or pastures. Outbuildings will need electricity and may need to be heated through the winter. Also, find out whether the property’s connected to a sewer system or uses a septic system.

What Infrastructure Is Currently In Place?

Are you starting with a bare piece of land or a fleshed-out farm with roads, fencing, water systems and outbuildings? You need to take stock of what exists and what needs to be improved so you can budget for it.

Are There Too Many Trees On This Farm?

Unless you’re starting an orchard or a Christmas tree farm, trees can be a hindrance to large-scale farming, especially for crops. While trees are great, too many can take up space and be difficult to maneuver large machines around, making growing and harvesting crops hard. They also suck up moisture and nutrients from the ground, so whatever your tree is getting, your crops aren’t.

If one property is free of trees and the other is forested, the forested one will take much more work to convert into a farm.

Is The Land Zoned For Farming And What Are The Water Rights?

If you’re starting a farm from scratch, you need to be sure the area is zoned for farming. You also need to understand the property’s water rights. The property may only have a right to a certain acreage. These rights determine how much water you’ll be able to use, which has a huge impact on your farm’s success.

Is This More Land Than You Can Handle?

How much land you can handle depends on your money and your experience. If you’re starting with lower amounts of each, it’s sometimes better to err on the side of caution. Depending on your goals, you need to be able to sell enough product to make the farm profitable. This is where a mentor and good plan will help you strike the right balance.

What Is The Biggest Downside Of This Property?

While you may not ask a seller the following questions, you need to be able to answer them yourself: Are the outbuildings in disrepair? Was the land previously fallow? Does it have enough frontage? Does it have enough tillable area? Is there a barn full of garbage? You need to weigh the pros and cons and determine what’s a compromise or a deal breaker.

FAQs About Buying A Farmland

Here are some frequently asked questions around buying a farm.

Can I buy a farm with no money down?

Yes, you can. The Farm Service Agency (FSA) Direct Farm Ownership Loan through the USDA makes this possible. A loan like this allows you to start a farm and keep your savings for other needs as they arise.

How much money do I need to buy a farm?

According to the National Agricultural Statistics Service, the average value of farmland per acre in the U.S. in 2023 was $4,080. Total cost per acreage depends on the location and quality of the land. Once you factor in the costs of the farmhouse itself, equipment, outbuildings, livestock, seed/fertilizer and/or storage, the expenses can really add up. The type of farming and the scale of your operation have a big impact on how much money you need.

Buying a working farm vs. building on rural land: What should I consider?

Buying a working farm might seem easier because it’s already an established business that’s closer to making a profit, and it’s properly zoned for farming. However, it might be difficult to find a profit-earning farm for sale, and it might cost more upfront than starting from scratch. The benefit of starting a farm from scratch is the ability to grow your business as you grow your skill set.

What skills should I develop before I buy a farm?

Farming is a multifaceted career. People attend universities for degrees in agriculture to learn how to successfully run a farm. That doesn’t mean you must have a degree, but know-how, determination and experience are essential.

Bottom Line: Owning A Farm Requires Firsthand Experience

Remember that farming is a business. If you plan to make it your livelihood, consider gaining experience before buying a farm. Network with other farmers and see if there’s a way you can apprentice. You could also audit classes at a local university or volunteer with a local specialty farm.

When you decide to buy a farm, having someone who knows the property is important. Work with a real estate agent who’s both knowledgeable and experienced to make sure you buy the right farm for you.