Investing In Montana Ranch Land

Interest in Montana ranch land as an investment has has been strong over the last several years. Throughout Montana, but particularly in Southwest Montana we have seen increased demand for ranches as a safe investment.

Making the decision to pursue investing in ranch land can be incredibly rewarding(both personally and financially) but there are a lot of factors that go into investing and owning ranch land.

“Ranch” is a general term that can describe a wide range or property from large income producing cattle ranches, smaller recreational properties, fly fishing properties, hunting ranches, or horse properties with just a few acres. All of these definitions of ranch property are in demand in Montana, and are appreciating in value over the long term. However, income producing ranch land is the most stable, and is in the highest demand by investors.

INCOME FROM A RANCH CAN BE EARNED IN THREE WAYS:

1. Leasing out or some of the land to an operator who runs their own livestock and hay operation on the ranch. This is usually the lowest risk method for generating a return on your investment. Leasing the land to a 3rd party may limit the investor’s personal use of the ranch.

2. Run other people’s cattle on the property, but retain control of the ranch and how the cattle are run. This reduces the return but allows for better personal use of the ranch.

3. Direct operation of the ranch. This requires significant investments in machinery, livestock, and time. The main benefit is that the investor completely controls the property and the ranching operation.

Owning a ranch can be rewarding, but do not overestimate what you might make as income from your property. Well run ranches can yield a 2 – 2.5% gross return. A common baseline value of a ranch’s agricultural component is roughly $10,000/Animal Unit (An animal unit is defined as enough land/forage to carry one cow for one year and support her calf at side through weaning).

The typical annual lease payment of $250/Animal Unit equates to a 2.5% gross return. It should be noted that these are gross returns and the owner will have to pay real estate taxes, insurance and maintenance.

Contact one of our agents if you have questions about Montana Ranches and Recreational Property. Our experienced agents will answer your questions.