8 questions to ask when buying or selling farmland

Those seeking hobby farms for sale in BC or their counterparts who are selling these properties face a variety of complexities typically not found in more basic real estate transactions. Following are eight questions those seeking to buy or sell these properties need to consider.

If You’re Buying

Here’s what you need to ask yourself if you’re considering buying.

Is it the right property for your intended use?

Whether your primary interest is in hobby farms for sale in BC or you’re planning on making a commercial investment, the property must be right for your intended use. Considering all relevant long-term implications is an excellent way to avoid a bad case of buyer’s remorse.

What are your financing options?

Although traditional wisdom may say that purchasing agricultural property in cash is the best option for those able to do so, there are times and circumstances when obtaining financing is the better way to go. For instance, properties that are owned in full, whether the buyer paid cash or paid off a mortgage, are considered fixed assets rather than liquid assets. This means that you won’t be able to deduct your interest payments from your tax bill.

Does the property have a reliable water source?

Unstable and/or dwindling water sources can render farmland unusable, so be sure to check this out prior to making a purchase. If an on-site water source such as a well is part of the picture, it’s important to have it independently evaluated to see if it’s still viable for long-term water needs.

Is the seller offering a fair deal?

Getting less than a fair deal is a recipe for all kinds of future disasters, including ending up underwater on the property with no way out that won’t hurt you financially. When farmland is part of the picture, a fair deal includes factors such as whether there are any restrictive easements and whether local governments have explored annexing the property in the past.

If You’re Selling

Following are four things that everyone who is considering selling their agricultural property needs to think about.

Would renting make more sense?

Farms are often put up for sale when the owners want to retire and are no heirs in the picture who want to carry on the family tradition. However, there are circumstances where it may be more advantageous to rent the property out instead.

Have you thought about tax consequences?

Potential tax consequences to consider include whether the property qualifies for the capital gains exemption and whether the Old Age clawback will be triggered by the sale.

Who will be responsible for the tax bill?

Farm property titles are held by either individuals, partnerships, or corporations, and the tax consequences are different for each one.

Are there ways to diminish tax consequences?

It may be possible to mitigate the tax consequences involved in selling your agricultural property, such as taking the capital gains over a period of time or spreading the payment out over a period of several years to reduce the annual capital gains exclusion.

Contact Us for More Information on Hobby Farms for Sale in BC

As you can see, buying and selling farm property involves complexities and considerations not found in simpler real estate transactions such as buying a single-family home. Please feel free to contact Cascadia Realty for more information on buying or selling agricultural property in British Columbia.