Texas has around 250,000 ranches and ranges where the average land size is over 400 acres. It is both vast and productive to land and ranch, which is why owning Texas land as an investment is a popular choice for land buyers who love the outdoors and those looking to diversify their real estate portfolio.
The best way to get started is to find the perfect pieces of land, and there is plenty of land to choose from. More than 130 million acres of Texas land is already used for ranching, and undeveloped stretches are still waiting for the first tractor to give it purpose. How do you choose among such a vast landscape of fertile soil and sunny landscapes? With the help of a ranch and land specialist, such as Gaines Slade. Gaines has the ideal background and expertise to help you identify land you will love and a plan that will offer valuable ROI.
Land appreciation of land in Texas
If you buy a plot of land in the U.S., it will usually appreciate over time. However, Texas agricultural land is not just any investment. The appreciation arc is determined by the growing demand for land and the value of active land acres. Land that is currently being used to grow crops or graze profitable livestock is more valuable than an empty lot simply waiting for a house.
Over the last 20 years, Texas agricultural land has appreciated by about 4.8% each year. This is evidenced by comparative average acreage costs over time. In 2009, the average price for an acre of land in Texas was $2,640 per acre. In 2022, that price had risen to $5,050. This is a promising trend for anyone looking to buy land as an investment, whether you plan to work the land yourself or rent it to collect agricultural rental income.
Average annual returns of Texas land
Active land that produces a crop or a steady business of ranched livestock can also provide a source of income. Texas is home to many different cash crops that can generate quite the income per acre per year.
Rising demand for rural ranch homes
Many privately owned ranches in Texas sport a house somewhere on the property — often closer to the road. A ranch house is a place for ranchers to live while working the fields. If you already have a home, the ranch house itself can become an additional source of income.
As remote work becomes more predominant, it becomes possible for people to move out of city centers and live in more relaxing rural areas. This has increased the demand for rural homes, such as ranch houses located on or directly next to the Texas agricultural blend.
Tax benefits of agricultural use property
In Texas, there is a special property tax exemption for active farmland, as defined in the Texas Constitution. Agricultural land that has been active for five of the last seven years in agriculture activities may be given a special tax classification that reduces the property tax burden on the land owner. It is not quite a tax exception but rather a way of calculating the tax burden based on the land's productive agricultural value instead of the fair market value for each acre.
Owning active agricultural land can result in lower property taxes and, therefore, an overall greater ROI per year from investing in farmland in Texas.
Texas agricultural rental income
Agricultural rental is another option that goes beyond renting out the farmhouse on your acreage. When a land owner offers leased acres to an agricultural tenant, they are participating in the land-lease program. Through this program, farmers can rent land from an investment owner, providing both parties with an opportunity for additional revenue while creating a system by which farmers can use each other's land as needed.
The average lease per acre per year for irrigated farmland in Texas is $112, where the reported range is between $50 and $232 per acre per year. But there are other numbers to consider. Pasture land averages $7.70 per acre per year, with a range of $0.90 to $23 per acre per year. Non-irrigated farmland may be leased at an average of $31 per acre per year with a range of $8.60 to $69 annual agricultural rental income.
Calculating ROI for owning Texas farmland
How do you calculate the ROI of investing in Texas farmland? First, the land will likely appreciate by about 4.8% year on year. Next, active agricultural practices lower the tax burden, increasing that year-on-year value. Lastly, if you are not farming for yourself, you can lease the land for farmland or grazing land in a range of profitability depending on what the land has been prepared to do.
Overall, farmland in Texas is quite valuable whether you plan to raise animals, rent cash crops, lease the property, or lease any structures on the property.
Finding the perfect piece of land to call your own
The first step is finding your ideal piece of land. Demand for Texas farmland is on the rise, so finding land that suits your requirements and transport convenience can be challenging, especially if you have specific agricultural uses in mind. This is why a land specialist such as Gaines Slade can help you refine your search and find a piece of land that will inspire you whenever you walk its sunny vistas or visit your contented grazing herd.
Texas farmland can be a rewarding long-term investment. Gaines Slade can help you define what you want from a farmland investment in Texas, calculate the potential ROI, and choose the perfect spot for your rural land purchase.