Some people choose to own property because they want to create a peaceful rural retreat. Others seek to establish a family homestead, or to build a business such as a farm. Whatever the motivation, economics are a part of the picture.
Many landowners have a mix of activities happening on their property. Forests and wildlands may exist alongside agricultural features like pastures, orchards and cropland. Landowners’ economic goals may vary from simply preserving their current tax status, to covering the costs of maintaining roads, forests and fences. Perhaps the goal is to have a hobby farm that generates income to offset some costs. Other landowners want to have a farm or ranch business that will support their family and future. Some landowners are counting on a future timber harvest to help cover the cost of college for their kids or other expenses.
In this publication, we hope to get you thinking about the economics of land ownership and rural enterprise. We’ll cover:
Western lands have seen a great deal of development in rural areas. Often the best acreage for farming, forestry or wildlife is also desirable to developers and homeowners. States use zoning to protect these natural resources and to provide for conscientious development and growth. Local cities and counties adopt zoning and land-division ordinances that help to implement the statewide plan.
Learn more about Oregon’s land planning goals at the Oregon Department of Land Conservation.
What you do with your land can be affected by the zoning district it occupies. A zoning district is an area of land where certain land uses are permitted. Here are selected examples of zoning districts from Jackson County, Oregon:
Regardless of your zoning, your land could have a special assessment — a kind of tax deferral — that would put it into a different property type or class, potentially lowering its taxable value. This could mean a big savings in tax payments. Below are some examples of special assessment categories applied to rural land. If you have any of these special assessments, you will need to know what is required to maintain that designation. In some cases, a change in land use practices, such as a decision to stop farming, may trigger a higher tax rate.
Check with your local county government planning and assessor’s departments to make sure that you understand the possibilities and requirements for your land and how they affect your property taxes.
Even under the best circumstances, rural land requires a certain amount of maintenance. You may need to thin forests for fire safety. You may have a weed problem or a road that needs maintenance. You may need new equipment to modernize the way you grow crops. These projects require work and capital. Most landowners would like to find ways to help offset some of these costs and maybe some of the effort.
State and federal agencies sometimes provide funding to private owners to help with the cost of land management or production improvements. Money could be available for things such as forest fuels reduction, noncommercial thinning, manure management, farming efficiency, weed abatement, streamside tree planting and wildlife habitat projects, or to help homeowners create defensible space around their homes for wildfire safety. Some of these are cost-share programs, requiring the landowner to put up a percentage of the funding or complete some of the work. They can make a significant dent in the cost of needed work. Programs often target specific geographic areas based on agency priorities and the availability of federal funding. Contact the Oregon Department of Forestry, the Natural Resources Conservation Service, the Farm Service Agency or your local Soil and Water Conservation District and ask about current opportunities. ODF may also help offset the cost of a consultant to write a forest management plan.
Explore My Land Plan to discover some financial incentive programs for forested lands
There are other creative ways to reduce expenses, such as:
Most woodland owners are not in it to make a buck. However, most also would appreciate periodic revenues or other financial benefits to offset the costs of management, such as fuels reduction, cleanup, road maintenance and taxes. There are several potential ways to offset costs and generate revenue.
Farming or ranching can happen at many different scales. If you have decided that you want to have a farm or ranch business that generates all or a substantial part of your income, there are many factors to consider. Many of these topics will be more important for large operations than they would be for a small family homestead supported by an alternate source of income.
Here are a few reminders that are especially important for a farming enterprise.
Quality soil is one of the most critical resources for a farm. Get your soil tested and understand the results. Be sure your soils can support what your agricultural goals are and develop good management practices to maintain soil health. The Natural Resources Conservation Service defines soil health or soil quality as “the continued capacity of soil to function as a vital living ecosystem that sustains plants, animals and humans.” What soil health strategies you use depend on the soil type and your management goals.
OSU Extension offers several publications on soil:
Water is the other key natural resource critical for a farm. You need to have the water available, the rights to use it and the infrastructure in place to get it where you need it. Remember that a domestic well can water half an acre of noncommercial plants. Understand your water rights and contact your regional water master from the Oregon Water Resources Department if you have questions.
The local climate will play a role in what you choose to grow on your land. The USDA Plant Hardiness Zone Map of your area can help you choose your crops, but it’s also important to understand the unique microclimate of your property. What is your elevation? What is the aspect or direction your land faces? How do frosts affect different areas of your land? Are you in the rain shadow of a local mountain that affects your annual precipitation? Knowing your property’s local climate character is important for crop choice and placement.
Does your farm or ranch have the necessary buildings, irrigation, fencing and other systems in place and in good working condition, or will you need to upgrade? Do you have the capital to undertake improvements?
Some rural landowners have modest economic goals. You may want to enjoy your land, grow some of your food or maintain your land’s special assessment as farmland. This requires you to earn income from your land, but a large profit is not necessary. Even a small homestead can generate income. There are many ways you can make money on your land. Find out what other people in your region are doing. Here are a few ideas:
Before you choose your product, do your research! Know the biology, equipment needs, production cost and marketing possibilities. You may want to go with a tried and true product for your area, or search out a nontraditional product that could give you a marketing advantage. If you choose something nontraditional, be sure that the other pieces of the production chain are available to you. Talk with farmers and producers in your area. Learn what is working and what pitfalls to avoid.
Crops differ in terms of how long they take to establish, the kind of land and climate they require to produce, what kind of labor they need for maintenance and harvest. Here are some examples of crops grown in Oregon. They vary widely in production costs and techniques, time to harvest and returns per acre.
If you are a new farmer or rancher, choose a venture that you can grow gradually. This can reduce the financial risk while you are on a learning curve, working out your production, financing and labor needs, etc.
Many farm products have intensive and time-sensitive labor needs. Know how you will get the hands to help if and when you need them.
How you market your products will partly be shaped by the size and goals of your enterprise. Beyond wholesale and retail markets there are many alternative markets for farm goods. There are pros and cons with each of these. Here are a few ideas:
Like any business, agriculture involves financial risk. Farmers and ranchers are true entrepreneurs, and having a clear understanding of your financial resources will improve outcomes. Understand what you can invest, how long you can wait for returns, how you will assess whether your enterprise is working, and what you will do if you need to change course. A business plan is a good idea.
Several government programs will help support beginning farmers and ranchers in need of resources. Farm financing assistance can come in many forms, including:
Resources to help you navigate these and other financing options include:
There is a lot to consider when starting an agricultural enterprise. This is just an introduction to what will be an in-depth planning process. Here is a common timeline that the OSU Small Farms Programs sees with beginning farmers:
If your goal is to earn a living with your agricultural enterprise, dig deeper into all of these topics by reading:
A final economic consideration for your land is how you want to approach the stewardship of your land beyond your time.
For some owners, selling their land when they no longer want to work it is part of their financial retirement strategy. In this case, keeping the land’s resources in healthy condition will help to maintain a good market value. Other landowners would like to see their stewardship values continue, either with family members or regardless of ownership. Succession planning and conservation easements are two possible pathways for preparing for the future of your land. But there are other options, such as selling to a conservation-minded buyer, entering into a lease-to-buy agreement and donating the property, among others.
About 64% of Oregon farm and ranch property will change hands in the next two decades, according to the Oregon Department of Agriculture. Property owners who create a succession plan can save their heirs the expense and worries of an unplanned estate. Without a plan in place, heirs are sometimes forced to sell land and equipment to pay for attorney’s fees.
The Department of Agriculture says it can take years to plan for a smooth succession. By starting early, property owners can pass their estate to the next generation in the way they intend.
Explore succession planning resources:
Open land and land used for agriculture are vital resources for our country. From meadows and forests to ranches and farms, there is an ongoing pressure toward development.
It is common for prime agricultural land to be divided into smaller and smaller parcels, converted to housing developments or other uses of less rural character. Nationally, this has cumulative negative impacts on issues ranging from agricultural production to fire risk, habitat loss and wildlife conflicts.
Some landowners turn to conservation easements to ensure that their stewardship values will be preserved in the future. Stewardship easements are usually flexible, and the landowner is able to choose the scope of the agreement according to their values. Common forms allow sustainable farming, logging and ranching activities, but do not allow land division. These agreements also often make you eligible for a special assessment tax deferral. Reach out to your local land trust and find out if this alternative is for you.
It is important to know what you want economically for your land, and to establish goals that lead in that direction. How you approach economic enterprise on your land will come from an interaction between your goals, your land’s resources and your personal resources.
Here are some sample goals that can help kick-start the process of thinking about your own unique goals:
Where money, taxes, business and food are concerned, there are always regulations. We have referenced some of these, but rules may change or be applied differently in your case. None of this material should be construed as legal advice. Landowners should consult appropriate local governmental offices and be sure they know what rules and regulations apply in their area and to their land.