Tag Archives: loan for farm

The 2017 Land Market

While declining somewhat from 2016, market activity in 2017 remained strong with the number of transactions exceeding our previous ten-year average. The sales transactions in 2016 resulted in many of the more desirable, competitively priced properties clearing the market. As a result, the supply of quality properties was somewhat limited, with many 2017 transactions involving properties never exposed to the open market. Even though interest rates remained low, cash remained king as individuals and institutions continued to add real estate to their portfolios.

Thanks to existing and new clients, Hall and Hall saw good growth in all our business segments in 2017. The addition of new real estate partners continued our expansion broadening our geographic presence. Our auction services had continued success providing alternative marketing opportunities to sellers with a broad spectrum of properties. Our management and appraisal departments continued to grow, providing assistance and consultation to landowners across the country. Historically low interest rates and lenders eager to add new business resulted in exponential growth in our loan business.

Market activity

Many established producers took a cautionary approach putting expansion plans on hold through 2017. Conversely, high-income individuals and institutional buyers were generally more active as they looked to real estate to further diversify their portfolios.

While roughly fifteen-percent below 2016, Hall and Hall market activity exceeded our previous ten-year average by sixty-five percent (Figure 1). Dry smoky conditions in much of the west hampered sales activity in the late summer months. However, demand for quality properties having a combination of good production and recreational amenities was generally strong.

With 2016 seeing a spike in the number of deeded acres trading, the acreage sold in 2017 normalized and aligned more with historic numbers (Figure 2).

The reduction in the number of transactions and deeded acres outlined above did not significantly impact dollar per acre price. With sales occurring over a broad geographic area, average dollar per acre sales price in 2017 exhibited more variation and had a moderately higher average dollar per acre sales price.

Farmland

Farmland values have remained surprisingly resilient despite persistently low commodity prices. Nationally, average farmland values as reported by the USDA increased moderately in 2017 once again reaching historic highs (Figure 4). It is important to note regional variation in agricultural real estate can be significant. This is the case with the USDA data ranging from an increase of over eight-percent in the Pacific Region and a decrease of nearly two-percent in the Mountain Region.

Persistently low interest rates and stable farm incomes in 2017 helped create resilience in farmland values. However, a larger factor is influence of the institutional investor whose presence has steadily increased over the past decade. Once focused in areas like the mid-west and California, the institutional investor has begun to move into areas once thought to be impervious to their influence due to seemingly lower returns.

Ranches

Activity for ranch properties was generally mixed. With herd expansion slowing, demand for ranch properties driven exclusively by production factors softened as producers remained cautious. Investor interest remained strong as they continued to look toward land as a safe-haven investment. Larger ranches, 2,000 acres and greater, made up 30-percent of the market in 2017, down six-percent from 2016. This was likely due to the fact that many of the more desirable larger properties sold in 2016. Regardless of the limited supply, buyers continued to drive hard bargains with successful negotiations hard fought.

 Recreational retreat/sporting properties

With broader economic conditions continuing to improve, demand for recreational properties remained steady to increasing through 2017.  Recreation ranches in accessible locations with quality live water resources and/or premier hunting opportunities remain in demand and continue to draw the most attention from buyers. In some cases, remote properties in unique ecosystems with limited private ownership commanded premiums. Many of these transactions occurred in the range of $5-million or less. The higher priced properties in this category continue to have somewhat limited demand.

Outlook

Barring unforeseen climatic and/or political shocks, the outlook for commodity markets is forecasted to remain steady in 2018. Like 2017, the Federal Reserve is expected to raise rates again in the coming year. If similar to the 2017 rate increases, actions taken by the Fed will have little impact on the cost of borrowing. The combination of these factors and the anticipation of continued demand from investors points to overall stability in the farmland market.

The cattle herd expansion that began in 2014 is expected to continue in the coming year as feed prices will remain relatively low and beef consumption increases as the economy improves. Demand from established producers is expected to stabilize in 2018. The continued strengthening of the U.S. and the global economy is anticipated. Investors with cash are expected to continue to look to real estate for portfolio diversification.

With steady demand expected, supply of quality properties is likely to be a critical factor in how land markets fare in 2018.

By Mike McDonnell – ARA 

Bozeman, MT 

Hall and Hall

 www.hallandhall.com

 

2018 Outlook for Farm Loans

As we wrap up 2017 and turn our focus to a new year, many of us begin to wonder what the economy will do and what will interest rates will look like in 2018. Many experts are scratching their heads at this question, with most of us having expected rates to be higher today than they are. In fact, today’s 10 Year Treasury note is actually two basis points lower than rates from January 2017. The Fed is forecasting three, and possibly even four, rate hikes in 2018. It is hard to say for certain at this point though, as Janet Yellen finishes her term and Jerome Powell prepares for his new role as Fed Chairman.

Land Loan Specialists has once again seen positive growth in our loan portfolio as demand for capital continued through 2017.  The demand for borrowers with a strong financial position and adequate cashflow is back.  Not that it ever really left for these types of borrowers, but it has once again become competitive in the marketplace for these types of credits.

Certain traditional ag producers are feeling the pinch of cashflow struggles as their inputs have remained fairly constant while the value of their commodities has retraced.  Those with nonfarm income continue to subsidize their operations both for capital debt requirements as well as other operating expenses.  We continue to see those operations that are profitable find ways to add value to their product.  Should rates increase .75% to 1% over the next year these operations that are struggling will see themselves in a situation they may not be able to overcome. Their liquidity is already tight and debt servicing requirements will be impacted by these increases.

  • Federal Reserve is forecasting 3 rates hikes in 2018.
  • Inflation in the low 2’s will continue to slow these hikes.
  • Profitable operations find ways to add value.
  • Build liquidity as opportunity will present itself.

When is the Best Time to Buy Land?

When is the Best Time to Buy Land, Farms, or Ranches?

Is now a good time to purchase that piece of property you have always wanted? When is the best time for you to apply for a farm loan? When is the best time to buy land? As the leading property mortgage lender in Oklahoma Land Loan Specialists provides land loans, farm loans, ranch loans, recreational land loans, hobby farm loans and raw land loans. With LandLoanSpecialists.com, you will receive free pre-approval, low long term rates and experts with answers to all of your land loan questions.

Best Time To Buy Land?

Before you come to us to purchase your dream property, here are a few things to consider while you are looking:

The Beginning Farmer and Rancher Act of 2013 may be a perfect fit for you. If you are thinking about applying for a farm loan or ranch loan, you may qualify for assistance under the program.

What about running your own equestrian facility or peach orchard? Those qualify for an agricultural mortgage. For more information about it, you can contact us at landloanspecialists.com. We are here to help you fulfill your dream.

Intrested to learn more about land loans? Check out our information on Land Loans 101!

If you already own a farm or ranch and want to expand or improve your business, a ranch loan may be perfect for you. Unlike most lenders, we don’t run through a lengthy and expensive refinancing process. landloanspecialists.com can help you organize your finances and paperwork to get your loan quickly and easily. Whether you are buying a farm or ranch, expanding your existing operation or making long-term improvements to your property you’ll find a wide variety of mortgages with the most competitive rates in the state. We have competitive rates on our refinancing programs, too.

Farm loans and agriculture loans can be a little harder to obtain simply because there are not as many agriculture mortgage companies as there are residential mortgage companies. Also, the risk of default is statistically higher than residential loans. Finding a good agriculture mortgage company is key and landloanspecialists.com is the first company you should call to get all of your questions answered when seeking out your land loan. Becoming a farm or ranch owner is both exciting and rewarding. It can also be a great investment for you and your family to enjoy for many years to come. A land loan does not have to be a hassle or difficult as long as you find the right agriculture mortgage company. In Oklahoma landloanspecialists.com has helped many people succeed in obtaining ag loans and they are here to help you too. Give us a call today!

If you wish to get started now, check out our land loan calculator!

What Does LTV Stand for?

Loan to Value | What Does LTV Stand for?

Land Loans

What does LTV stand for? What does it mean and what priority does it hold to my land loan?

The term LTV stands for Loan To Value, it is very important in determining if you can qualify for a land loan. LTV represents the amount of loan against the property versus the appraisal value or purchase price. It is represented in percentage form.

For example, land is purchased for $1,000,000. The actual land loan amount is $700,000. To find the LTV , simply divide $700,000 by $1,000,000. This puts the loan to value at 70%.

 

However, some land purchases could be higher than what the appraisal will represent as a value. In that case, the L.T.V. will be determined on the appraisal value. For example, land is purchased at $500,000. The appraisal valued the land at $450,000. A down payment of $100,000 was put down leaving a $350,000 land loan. The L.T.V. is then determined by dividing the $350,000 by the $450,000 appraisal value instead of the purchase price of $500,000. This L.T.V. is then at 77%

 

A standard loan to value accepted by most land loan lenders is between 60% to 80% for land loans. This is extremely important to land loan lenders. This provides the lender with a guarantee of value to the money being loaned for that land. There are definitely other very important factors other than L.T.V. that determine qualification for a land loan, but knowing and understanding L.T.V. will make your land loan process much easier.

 

This explanation answers the question of what does ltv stand for and much more. LandLoanSpecialists.com provides land loans, farm loans, ranch loans, recreational land loans, hobby farm loans and raw land loans. With LandLoanSpecialists.com, you will receive free pre-approval, low long term rates and experts with answers to all of your land loan questions. Please visit our website at LandLoanSpecialists.com and contact us by calling 1-888-744-4524

Want to get started on a land loan? Check out the land loan calculator to get a better idea on where to start!

Land Loan Interest Rates | Understanding The Rates

Understanding Land Loan Interest Rates

Land loan interest rates are charged to a borrower and can be described as the cost of borrowing money.  It is the farm or land loan lender’s compensation for servicing a land, farm, or ranch loan and bearing the risk of lending.  The land loan interest rate is the borrower’s cost for the ability to spend now, rather than save the money and make a purchase later.  If a borrower had to wait until they saved the money for the purchase, they would often have to defer opportunities that could possibly generate future cash flow.  The ability to borrow money and have it now also allows borrowers to take advantage of opportunities that are currently available that may not be available in the future.  Many times, the interest a borrower pays to obtain the money now is less than the cost of forgoing a missed opportunity.

Many factors affect the land loan interest rates on a real estate loan: length of the note, type of loan product, collateral offered as security, repayment ability, supply and demand of credit, and the government’s monetary policy. While we have very little control over government and economic activity, there are a few factors that a borrower should understand.

Land Loan Interest Rate Factors

1)      Maturity Date  The longer period of time between the origination and the maturity of the farm or land loan will cause the loan interest rate to increase.  This is partly due to the time value of money and inflation.  The dollar will presumably buy less in 20 years than it will today.

2)      Loan Product  Interest rates vary with the type of farm loan product a borrower obtains.  Loan products can have a fixed, adjustable, or variable interest rate.  A fixed rate carries the same interest rate throughout the life of the land loan.  It offers a borrower some stability in knowing that the payment requirements will not change.  An adjustable rate sets intervals in which the interest rate changes, such as every 3, 5, or 10 years.  A variable rate also sets intervals in which the interest rate may change but it can be at the discretion of the lender.  An adjustable or variable rate farm loan product usually offers lower interest rates.

3)      Collateral is what the farm lender uses as security for a land loan.  If a borrower is obtaining a loan for farm real estate, the lender will usually put a mortgage on that farm property to serve as security.  However, collateral offered as security does not have to be restricted to only property that is being purchased.  The farm lender can take a mortgage on land the borrower already owns, in addition to the property being purchased, to serve as additional collateral.

4)      Credit Score  A borrower’s credit score tells the farm lender how the borrower has handled money in the past.  It also tells the farm lender what other financial obligations the borrower currently has and if that might impact the borrower’s repayment ability in the future.

The above factors are just pieces to the overall puzzle when it comes to land loan interest rates.  Each factor alone does not constitute what a land loan interest rate might be set as.  Farm lenders consider all the pieces and how they interrelate to determine the interest rate on a loan product.  The borrower who understands the factors that affect the land loan interest rates will be in a better position to gain the biggest advantage with their borrowing needs.

Want to get started on a land loan? Check out the land loan calculator to get a better idea on where to start!