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Why you’ll want to invest in ranches for sale in Central Texas

Why you’ll want to invest in ranches for sale in Central Texas

Also known as the Texas Hill Country, Central Texas is located in the southwestern part of the state in an area of the Edward Plateau. The said plateau borders four other state regions and covers 17 counties. People come from all over the country to live in this fascinating region for the relaxed way of life, friendly atmosphere, outdoor recreation, and affordable properties it promises.

The region’s two major cities, San Antonio and Austin, are at the center of its fast-growing and diverse economy. They also boast several of its high-ranking colleges and universities. But the beauty of the region lies in its landscape. Central Texas spans more than 10,000 square miles and it encompasses a rich landscape of lakes and rivers, oak and juniper forests, rolling hills, underground limestone caves, and rugged canyons — all of which make a strong case for staying.

Ranching culture in Central Texas

The roots of the state’s cowboy culture go back to a time when Texas was still a province of New Spain. During the early 18th century, the Spanish brought their missions and the vaquero (cowboy) tradition to the region. The first cattle ranchers in what is now Central Texas were Franciscan priests. They herded livestock throughout the region for nearly a century until the Spanish shifted their focus away from the missions and left.

Ranching culture, however, stayed and left a visible mark in Central Texas. Even today, the region is still predominantly made up of pastureland and has numerous cattle and dude ranches.

Texan ranching culture as a whole also owes much to those early ranchers. For instance, the Texas Longhorn traces its lineage back to the cattle that the Spanish first brought to the area. Rodeo terms like “lasso,” “maverick,” and “mustang” come from the Spanish language, and cattle ranching is still a vital part of the state’s economy. Even Bevo, the mascot of the University of Texas Austin campus, is a Texas Longhorn steer that pays tribute to this adopted culture.

Is buying a Texas ranch a good investment?

An investment into any property is considered good if what you get out of it in the future is more than what you put into it today. The higher the payoff will be, the better the investment.

Investment strategies

Buyers who invest in ranchland typically choose between two investment strategies to profit from the land: the long-term and short-term hold.

As the name suggests, a long-term hold describes the strategy of buying a ranch and holding on to it for an extended time, usually for two or more years. It’s the strategy of choice for investors who prefer keeping risks low. It extends the timeline on improvements and benefits from the natural appreciation of the property as time passes.

Buyers who plan to invest in a ranch for the long term enjoy the luxury of waiting for the right buyer to come around. There is one catch, though: You will have to put work into the property’s maintenance and management if you want your land to retain its value over time.

The second most commonly used strategy in buying land is a short-term hold. If you’ve heard of a term in real estate called flipping,” then this is what is being done here. The ideal progression for flipping land is to get it at a low price, make minor but attractive improvements, then sell for a higher price.

The timeline for a flip is tight. Most are done in a span of less than a year. For this reason, investors using this strategy seek raw land to keep costs down and limit improvements to preparing the property, rezoning, subdividing, or fixing the title. Flipping can be done on ranchland but it requires expertise and a willingness to take on a large risk.

What are the risks?

Investment risks come in many forms. For investing in a ranch, an investment risk can mean making a substantial down payment that you hope to recover in the future or taking a chance on a property that needs some work.

The expenses that come with buying a piece of land also add to the risk. Common expenses include maintenance, management (if you’re holding), utility bills, property taxes, permits, and improvements.

Where to invest for a Texas ranch

As one of the most diverse regions of the state, Central Texas gives you a variety of options that are bound to match the ranch of your dreams. Even though most Hill Country counties allot large swaths of land to pasture for cattle ranching, there are still pockets of land where crop cultivation and dude ranching prosper.

Below are a few counties in Hill Country where you may want to look for ranches and farmland:

Bandera County

The county is home to some of the most popular dude ranches in the state. The city of Bandera is even known as the state’s “dude ranch capital.” The county is also a popular summer destination for fruit picking since it has a number of apple orchards.

Gillespie County

Despite being primarily rangeland, the county’s terrain is varied enough to make parts of it ideal for crops like peaches, hay, and oats. Its sandy soil is also perfect for growing wine grapes. As proof of this, the county is home to over 50 wineries and vineyards.

Kerr County

Over 80% of the county’s area is made up of green pastureland that’s ideal for cattle ranching. There are also some hunting and fishing spots in the county that are ideal for recreational ranches, commercial ventures, or small-scale private retreats.

Medina County

Like most of Central Texas, the county’s economy and area are dominated by cattle ranching. But it also has a significant space allocated to agriculture. Nearly 30% of the land here grows crops like corn, grains, and peanuts. Fishing is especially popular at Medina Lake.

Pros and cons of investing in a ranch in Central Texas

Owning a ranch, especially in the beginning, won’t be all about making money. As with any venture, investing in one comes with its share of advantages and disadvantages. To make your investment as positive an experience as possible, prepare to encounter the cons, so the pros of the investment can easily outweigh them.

The pros and cons below are the most immediate ones you can expect and experience as you search for the right ranch to purchase.

Pros

  • No state income tax. Texas is one of only nine states that don’t have a state income tax. This complements the already affordable pricing of land and amenities in Central Texas. It also makes investing in a ranch here enticing and good for your portfolio.
  • Exemptions. The size, use, and location of the ranch you want to buy can qualify you for additional exemptions. Generally speaking, a ranch that sets at least 10 acres of land for agricultural production qualifies for a special tax exemption. Under this type of exemption, taxes are calculated based on the value of the land’s production, not its market value — which leads to huge savings. Other exemptions apply if any part of your ranch is on protected land.
  • Minimal development restrictions. When you buy land in the rural areas of Central Texas, you enjoy the freedom of developing your property in any way you want. Even when there are restrictions, many of them are easy to comply with and typically follow usual zoning regulations. The same can’t be said for properties in cities and suburbs, which are subject to several restrictions from all levels of government plus HOA rules.
  • Bucket list item. Owning a ranch in Central Texas is more than a business venture. Buyers come here to become more in tune with nature, enjoy the tranquil majesty of the Texan outdoors, and capture the frontier spirit they dreamed about as a kid.

Cons

  • Takes time. Land is a niche market that requires more time and know-how than the typical single-family home. A buyer purchasing acreage has to consider additional factors like water rights, easements, leases, utility hookups, and more.
  • Upfront cost and maintenance. Much of the expenses in this area depend on the kind of ranch you’re buying and its size. Larger parcels of land cost more to finance and manage; the addition of livestock and other animals only adds to the expenses. Don’t forget to factor in the future cost of upkeep when considering which ranch to invest in.
  • Smaller market. Because of parcel size and specialty, the market for ranchland is small compared to the one for residential properties. You’re working in a pool with a limited number of buyers and sellers. As a result, it might take some time to find a property on the market that’s right for you.

Steps for buying a ranch

Buying a ranch in Central Texas is a big step, and it can be greatly rewarding or disastrous depending on your experience and preparation. To make your venture into ranching as smooth as possible, read the breakdown of the process below.

1. Make your intentions clear.

Just like looking for a new home, the search for a ranch to invest in starts with yourself. Form the criteria for your property search by answering questions like:

  • What is the purpose or main activity of the ranch?
  • How big do I want it to be?
  • What utilities and features should already be there?
  • What’s the target timeline for the search?
  • How do I plan on financing it?
  • Which amenities can I compromise on?

With those questions (plus a few more) out of the way, you will have a better idea of what your ranch lifestyle will be. The information you’ll gather will be useful when it’s time to look at properties. It will keep you from wasting time on the wrong properties so you can home in on the ones that fit your criteria.

2. Get to know the general area.

The geography of the land will inform you what you can do with it, so take time to research what’s viable where. If you want your ranch to focus on agriculture, you need to find a location where the soil can support the crops you want to grow. If you’re interested in managing a dude ranch, land with existing utilities and proximity to several attractions and amenities will make your investment more profitable

Getting to know the area also means learning about the wildlife endemic to the area. Check out this list to discover the animals that you can occasionally expect to find on your Central Texas property.

3. Call in the pros.

Hire a local real estate agent with experience in buying and selling ranches and farmland. An agent with this special background can point you to the best areas and properties for your investment type, help you understand common land purchase concerns, and put you in touch with sellers who aren’t actively advertising their property for sale.

A land inspector is another professional you’ll want to recruit once you’ve narrowed down your selection. An inspector will check the property’s zoning, determine the ways it can be used, and test the soil. Moreover, they can evaluate the property’s size, amenities, location, and comparables to arrive at a final market value.

4. Plan your financing.

Most land parcels are still paid upfront in cash. If this is the route you’re taking, check your finances to make sure it can handle this significant reduction in your reserves.

It’s trickier to finance a ranch purchase with a loan but it’s possible. Choose a local lender since they know how the local land market is set and may already have special loan structures that match your financing requirements.

Aside from financing the purchase, don’t forget to include title insurance, appraisal and inspection fees, commissions, and property taxes to the overall cost of your ranch investment.

5. Start the search.

With your criteria defined and your financing options explored, it’s time to start looking. Go through photos and listing descriptions of properties to know each one’s size and amenities. For a better idea of the property’s location, look at a satellite map of the address. By doing so, you can determine the:

  • Land and water features near or on the property;
  • Distance from neighboring properties;
  • Elevation and terrain; and
  • Frontage and access to the highway.

6. Don’t let permits, restrictions, and covenants catch you off guard.

Investing in a ranch requires more due diligence than buying residential properties. It’s important to check the zoning and subdividing laws that apply to your property because these can limit how you can split your land and what you can build on it in the future.

Land use restrictions will also determine:

  • What kind of and how many animals you can keep on the property;
  • The size and location of a house on the plot;
  • The kind of septic tank systems to be installed; and
  • Utilities that can connect to the property.

If you plan on making improvements to the land, consult with your agent or real estate lawyer to get a full list of building and environmental permits to apply for. Take this time to ask about any restrictive covenants peculiar to the property. Some covenants will prohibit the use of certain building designs and materials, while others will prohibit certain commercial activities.

7. Draft an offer

Once you’re confident that this investment will be worth your effort, offer to buy the ranch from the seller. Create a purchase agreement with the help of your agent or a real estate lawyer with a background in land transactions. Tapping on the knowledge of these professionals will help you construct a legally binding document that protects your interests during negotiations and closing.

Why choosing the best real estate agent is important

Even if this isn’t your first rodeo, getting an experienced real estate agent will help you navigate through the complexities of buying a ranch. A real estate agent who has closed on numerous land transactions can tell if a piece of property is a promising investment, overvalued, or not right for you at all. They can also help you in fixing survey, title, and zoning issues.

Most importantly, a great land agent possesses an intimate knowledge of the local land market and can tap interested sellers through their network.

Whether you’re searching for a Central Texas ranch either to add to your portfolio or to fulfill a long-held dream, let me, Matthew Franek, help you in finding the perfect property. I help buyers discover parts of Texas Hill Country that match their lifestyle, whether it’s acreage, farmland, ranches, or vacation homes with breathtaking views.

Start exploring your options today and call me at 512.709.3424 or send an email to MFranek(at)TexasRanchSalesLLC(dotted)com. As a skilled negotiator and member of the Texas Alliance of Land Brokers (TALB), I will navigate you through search and negotiations to get you the best property and deal possible.

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