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Range Rovers
Constance Gustke
05/03/2004
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His clients typically begin by tearing down the old
ranch house and building a log lodge—often 10,000 square feet or more. They add
guesthouses, an airstrip and assorted vehicles. Some import exotic livestock
such as buffalo, black buck antelope, miniature horses or even sika deer from
India.
TOP VIEW
Owning a ranch is a goal that beguiles many of us seeking beautiful
surroundings that encourage strong values such as the importance of hard work,
individualism and conservancy. But these properties are not for dilettantes:
Before purchasing a ranch, we need to weigh whether the benefits we expect will
outweigh the large investments in capital, time and effort that ranching
requires. |
Unfortunately, the land values rise more slowly than the costs of
improvements. “You’re not going to get your capital cost out of it,” Kanaly
says. If the buyer wants to actually run even a limited cattle operation, the
costs will climb still higher. Gene Dunbar, a senior vice president at Bank of
America’s Farming and Ranch Division, estimates that annual operating expenses
on a $3-million ranch without cattle can easily total $100,000; add
livestock, and it can run as high as $500,000. “Meanwhile, the average rancher
makes only a 1 percent annual profit from his ranch,” Dunbar says. “Owning a
ranch is very unprofitable.”
To understand the financial implications of
owning a ranch, Kanaly advises assembling a team of advisors, including a
lawyer, tax advisor, investment advisor and environmental expert. “If you do
your [financial] due diligence, you can make a better assessment,” he says. We
can allocate cash flow from our other businesses, and review the purchase in the
context of our other assets.
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