Second in a four part series.
Green acres is the place to be, as long as you can get financing. Financing often is a deal killer when it comes to agriculture purchases.
Amador, who has brokered and bred cattle for the past 35 years, said a single, large transaction in 2009 pushed him to a great year in ag sales.
“I did $37 million in real estate. It was good year,” he said. “I project to hopefully do $20 million this year, and hopefully I can duplicate what I did last year.”
While ag land values did not drop as much as residential properties in this latest slump, financing farm and ranch lands can be much more difficult, according to Larry Matos, president of Century 21 M&M.
“Banks are not as confident as they once were,” said Matos. “They’re requiring more and more documentation.”
In addition to a buyer’s financials, Matos said banks also want to examine a property’s past production figures and documentation showing all state regulations are met.
“It’s been very challenging right now,” said Will Amador about the lending environment. “The banks really scrutinize the buyer as far as loan to value, particularly with the dairy industry.”
Banks are requiring buyers to make down payments ranging from 30 to 50 percent when purchasing agricultural properties. Many farmers can negotiate better terms with local banks and ag lenders they have worked with in the past.
Ag specialists Nick Von Flue and Derrick Upton, both based at the Century 21 M&M office in Madera, have been working with Nebraska State Bank. The pair said Nebraska State Bank would loan up to $6,000 an acre, with 30 percent down.
To make a make a deal work, Amador said at times some creative financing is needed. “You may have to get the seller to carry back a second (mortgage),” he said.
The second mortgage, said Amador, typically is amortized over 20 years with the loan due in five years.
Another financing tactic to lower monthly payment is to work with the lender. “You might need to speak to the bank and go interest only for one year,” said Amador.
Getting the right financing package is the key to purchasing agricultural property.
“The main thing about financing is the buyer really has to do his homework before he tries to acquire a new property,” said Amador. “It’s no different than getting pre-qualified for a house.”
NEXT FRIDAY: The challenges of dairies
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