Owning a piece of American wilderness: A dream come true—unless you buy without knowing what you’re getting into. Here’s what to know before going country.

In 2002, Washington State investment manager Thomas Hanly, a native of Montana, decided he was ready to fulfill his childhood dream of owning a ranch. He wanted rolling grasslands, live water and mountain views, and searched the big-sky state until in 2002, 2003 and 2004, he bought three adjacent ranches totaling 1,300 acres and bordering national forest on two sides.

Then the real work began. With the help of his wife and his brother, Hanly set about restoring streams, fixing fences and building two houses, one for his family and one for a ranch manager. It was a major undertaking, especially with a demanding job two states away, but Hanly says the investment has already yielded profound returns. “My kids spend every summer in Montana,” says the father of four. “They’ve competed in the rodeo and learned to fly-fish.”

Owning a ranch can provide intangible benefits such as uninterrupted family time and the enjoyment of nature. Choose your property wisely and manage the land carefully, and ranches can provide tangible benefits as well. Well-run working ranches can yield 1 percent to 3 percent of income annually, says Alex Maher, owner of Live Water Properties, a Jackson Hole, Wyo.-based real estate firm that specializes in ranches. “They can more than pay for their expenses and provide returns better than a CD.”

Class-A ranches—those in the best locations, with profitable cattle operations and wildlife habitat—weathered the financial crisis and recovered quickly, says James H. Taylor, managing partner at Hall and Hall, a national ranch and farmland broker. The reasons: rising commodity prices, a limited supply of properties and deep-pocketed owners. “There’s nothing that drives them to sell in a down market,” Taylor says.

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Smaller, recreational ranches didn’t fare as well. Prices plunged roughly 40 percent during the crisis and have been slow to recover, according to Carl Palmer, cofounder of Beartooth Capital, a private equity firm that buys and restores ranches. If you’re thinking about buying now, however, that’s good news. “There’s tremendous value in owning land, particularly on streams and rivers,” says Paul Slivon, a San Francisco investment advisor who owns a roughly 200- acre ranch near Steamboat, Colo. “There are some places where you can’t get access to that water unless you own it. That’s a big deal. They can build new golf courses, but they can’t build new rivers.”

Of course, if you don’t know what you’re getting into, ranch ownership can turn into a tedious, time-consuming and costly responsibility. So follow these rules before you heed the call of the wild.

So is the notion of laying your claim and letting nature take its course. “Sometimes people buy recreational ranches and think they don’t have to do anything, but grazing and running livestock is an important part of maintaining the land,” says Palmer. These working components are also necessary for maintaining agricultural tax status and grazing rights on nearby public land. “If you come at it thinking that it’s just recreational, you’re missing the boat.”

Water rights are another key consideration. “There are all kinds of nuances with water,” says Maher. Buyers not only need to understand the extent of their water rights but also get a handle on historic flows at their portion of the stream or river. Public access, which varies from state to state and often catches landowners unaware, is also a concern. “If you’re a serious angler, you want to understand access laws and what rights the public has to fish your property,” he adds.

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Mineral rights can be even more complicated. Because land rights and mineral rights often don’t go hand-in-hand, it’s important to understand what lies beneath. If another owner has a claim, there is the possibility that they’ll mine or drill on your property at some future time, and you won’t earn a penny.

Another twist is the conservation easement, which protects land from development. You can sell such an easement to an organization with an environmental interest in protecting a portion of your land or donate it for a deduction equal to the difference in the appraised value of the land before and after restrictrictions. Whether conservation easements detract from the value of the land depends; in some areas, restricting use of the land will have a dollar-for-dollar impact. In other places, it may actually improve the value over time, says Palmer, because future buyers may pay a premium to be near land that can’t be developed.

Get your ranch hands
The acquisition and maintenance of your property may entail hiring a team of experts, from geologists and aqua biologists to irrigation and rangeland specialists. In many cases, owners will hire ranch managers or management firms to handle all the details. A well-run ranch should generate enough income to more than cover the cost of management, says U.S. Trust’s Taylor. A typical management fee is 50 basis points of market value plus 7 percent of income.

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Get a lay of the land
A ranch means many different things to many different people. For some, it’s a 25-acre retreat with sweeping views, a couple of horses and easy access to civilization. For others, a ranch is a full-time operation encompassing thousands of acres and multiple sources of income, from cattle and hay production to mineral rights and hunting leases. In states such as Colorado, Idaho and Montana, working ranches typically start around 10,000 acres at a minimum of about $1,000 an acre, says Ben Pierce, a buyer’s broker with Sweetwater Ranches based in Livingston, Mont.

Other buyers are focused on trout fishing and elk hunting out the back door. Good trout-fishing property, says Pierce, can cost anywhere from $3,000 to $12,000 an acre. But if you’re willing to share, fishing and hunting leases can provide additional ranch income. “People will pay $10,000 to $15,000 a head to hunt a bull elk on a unique ranch,” says Pierce.

Most buyers fall somewhere in the middle: They’re not interested in being full-time cowboys but want a recreational ranch with enough income to cover its costs. “You can have a working ranch that’s more passive,” says John Taylor, a managing director who oversees the farm and ranch division at U.S. Trust in Dallas. “In that case you’re leasing out the grazing and hunting rights.”

Buyers who view the transaction in part as a redeployment of cash—and in some cases an opportunity for a tax-advantaged 1031 exchange—tend to pay cash, says Bill Fandel, a broker with Sotheby’s International Realty in Telluride, Colo. Low-interest financing is, however, available via agricultural credit unions and specialized lending groups.

As with any real estate purchase, location is a huge factor, not just for property values but ease of access and amenities. “People often think they want to be in the middle of nowhere and then realize they don’t,” adds Fandel. Convenience typically comes with a price tag. Property within two hours of a prime location tends to command a higher price. It also tends to hold its value.

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Wrangle the details
Ranches can be profitable, but there are far easier ways to make money. “I’m a Texas guy and love ranches,” says U.S. Trust’s Taylor. Even so, when clients express interest in buying a ranch, Taylor starts the conversation by trying to talk them out of it. “I want them to understand that in a lot of years they may not make money, and it actually may cost money,” he says.

With the exception of some parts of the country—such as in Texas, where there are five large cities and generally strong demand for ranches—the market is illiquid and inefficient. “It’s a pretty slim market to begin with and to even suggest using a comparable sale is laughable,” says Hall and Hall’s Taylor.

Where ranch owners go wrong, says Sweetwater’s Pierce, is spending on areas that don’t improve the value and may even detract from it. The biggest mistake: spending too much on the main house or superfluous outbuildings and landscaping. “We call these white elephants,” Pierce says: One man’s castle might be another’s $5 million teardown.

“We always tell the clients, own the ranch for a while and start small,” says John Taylor. “If you over-improve the ranch, the only way you get the value out is if someone likes the exact same thing that you like.”