I'm in the beginning stages of looking to buy land. My goal is 40-50 acres within 1.5 hr of DFW. Key to me is access to power, ponds/surface water, mix of trees and prairie and an ag exemption in place. Hunting or fishing isn't important.

My goal is to establish a long term family plot with bardominium down the road.

For those of you who have gone through the land buying process in the past, what surprises, lessons learned or tips would you share that are valuable?

Thanks!

Almost zero land brokers and sellers actually know what they are selling. To really know what you're buying, you need a survey, a mineral report, and a title report. Other than that, you're just guessing.

I had a client from TexAgs one time who put a large ranch property under contract that was being sold by a member of the Texas House of Representatives, who is also an attorney. This was a multimillion dollar, several hundred acre property. Minerals were very important to my client.

Us: "Does this property convey with 100% mineral rights?"

Them: "Oh yes, it does."

So we put it under contract. After a few thousand dollars of inspections and legal spend, we realized that it did not in fact convey even 50% minerals.

If you're looking for 50 acres, you're probably not going to get much in the way of minerals, but your surface rates might be important to you.

We do land brokerage all over Texas and rebate half of our commission mission back to our Buyer clients. If you're interested in discussing further, my contact information is in my profile. Feel free to shoot me a text or an email or both.

Do as much sleuthing as you can regarding utilities, minerals, and access. We got a call from a local agent, asking if we were interested in purchasing a pasture that was adjacent to other land we owned. We had made an offer the previous year when the owner put it up for sale with another broker. He turned it down at the time.

The new agent made claims about having water, city sewer and electricity to the property, as well as easy access. The only thing it had was electricity. Water on the property was being pirated from an adjacent house that was previously sold separately. City sewer was actually an outdated septic system. Access was a 30 foot easement that wasn't wide enough for city emergency vehicles to get down so multiple future structures were not eligible to be built. Before closing, we proved all of that and were able to reduce the final price by $50K. Minerals were never mentioned and I really didn't care. When we closed, they conveyed 100% of minerals with it.

Understand your frustration here but are you sure they weren't just saying they were conveying 100% of whatever they own/not reserving any minerals, and not making claims about their mineral ownership back to sovereignty.

1. Get a good real estate agent that is a sponsor on TexAgs
2. Open title early to see what may be out there
3. Get a good survey
4. Make sure of the county's requirements to keep an ag exemption
5. Rural water authority, well water in place, or will a well need to be drilled? Water quality and cost.
6. Know if access is a public road that is kept up by the county. Some rural roads are privately maintained.
7. Engage a lender that specializes in rural properties.

I would highly recommend talking to a mineral rights attorney to help you understand how that works. If you don't get 100% of the mineral estate or a surface waiver from 100% of the mineral owners, you have little control over your surface. If it's under an active mineral lease, the lease they signed controls what can happen.

I would never buy a property without at least some portion of the mineral rights. Even a small percentage gives you a seat at the table and you may be able to negotiate damages or have some say in drill site location (or you may not).

Realtors will say it's nearly impossible to get minerals in Texas these days, and that might be true for high production areas. But, it's not true everywhere.

I embarked on a similar journey about 7 years ago, looking for roughly 100 acres in east Texas about 1.5 hours from Houston. I spent over a year getting educated on the market in the area where I was looking, as well as understanding the variety of financing options.

Getting out to a variety of tracts for sale and just sizing them up was very helpful. You contrast and compare and learn what seems high, low, and fair. Along the way, I also explored how to finance it. I was willing to put significant capital into it but didn't want to fund the entire thing from my existing resources.

What I learned at the time was I could take a home equity loan about 200 basis points cheaper than a land loan. So I did that. And about six months later, the right tract surfaced, and I jumped on it with a fair offer and landed a fair deal. You can't deduct a home equity loan that you use for things outside the home, but because of the generous standard federal tax deduction then, which still exists today, I didn't lose anything because I was better off with the standard deduction than itemizing. Furthermore, I was able to refinance it a year later for another 100 basis points lower.

That ended up being a great purchase, both for personal recreation fulfillment and an alternative financial investment. Look for properties where you get an ag or timber exemption. While I'm paying almost 2% of appraised value in property taxes on my home annually, I'm only paying 0.25% on my rural property due to a timber exemption. My land value has escalated 15% annually over 7 years according to the county appraiser, and market comps support that. Essentially, I'm beating inflation handily without having to pay hardly any taxes. When I eventually sell it 10 years down the road, I'll be looking at 15% to 20% cap gain taxes on that appreciation, which is a good deal.

Hope that helps, and good luck with your search.

Edit to add that I bought raw land with great access directly on a county road and then invested about $40k out of my pocket to install power, water well, and sewage. Also built a small cabin and equipment garage. That ability to develop and improve the property is what has helped accelerate the financial appreciation.

Plus 3.8% to fund Obamacare.

oklaunion said:

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Plus 3.8% to fund Obamacare.

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But not if it's a " Business Asset". Like farm, ranch, or timber properties and you are engaged in that business.
20 percent max long term capital gain tax currently on business assets.