#155 Lessons Learned from 3 Purchases in 5 Years
NW Call to Action
Lessons Learned from 5 Years of Buying Ground
Renting ground in 2019, I started my eligibility timeline for FSA financing and was able to gain firsthand experience with pricing inputs, getting a line of credit, crop insurance timelines, and way better knowledge about farming, which has paid huge dividends in connecting with and coaching my lending customers. We can relate and get along better because I have this firsthand experience.
In renting this ground, I started to realize the high expense of farming and quickly agreed to have my field used as a seed plot for a free bag or two of seed to cut expenses. I thought this was a great idea, but realized that the time given up at critical points in the season, such as planting and harvest, did not necessarily justify the small savings that I experienced, and it held down my dad and what he was trying to do on the farm. A lesson learned.
Wetlands
As soon as I became eligible for FSA financing, I was able to win the bid for a farm we named ‘Shell Creek’. You can see below, it obviously has Shell Creek going through it, which can occasionally flood and bury a portion of the town my hometown.
My knowledge of this area, because my dad owned the farm across the road, was helpful in making this purchase a success. We’ve been staring at this field for decades because of the number of deer that would accumulate on this farm.
I have very fond memories growing up of watching the deer prance around this field, but also knew that while the creek wound directly through this field, the low spot where the worst of the flooding occurred was actually one field over. This field may go underwater, but the water quickly passes through and actually floods next door. This is where boots on the ground and knowing an area will come in handy.
The other issue I ran into was that I wanted to clean the field up to gain more farmable acres. It was going to be a lot of sweat equity into this farm, and in talking with FSA, I realized, obviously, that a chunk of this farm was wetlands. My discussion with the FSA officer regarding wetlands apparently didn’t go the best.
It was my understanding that I could do a wetland determination after buying the field, and if it was wetland, I could fight what areas were considered wetland and what areas were not considered wetland. Since we owned the farm across the road and farmed through the same ditch, I figured that I could fight to get these trees cleared out, turn this into a ditch we could farm through, and make the farm much easier to cover with big equipment.
What I did not understand was that the seller had a wetland determination done before listing the property. It was determined that this ditch was wetland, and the time to fight that determination (90 days) had already expired. There was, in fact, no going back, and I could not push the ditch in. Unfortunately, I didn’t realize this until after I bought the ground, which means that we have been stuck farming around this ditch and taking the extra time on this field because of my lack of understanding prior to the auction process.
This is an instance where my due diligence failed, creating a headache for years to come.
Easements
Shell Creek didn’t close until 2021, so I had a two-year holding period before I could 1031 exchange into another property. In 2023, I knew that interest rates were going to move higher very soon, and I was eager to get into a larger property that would appreciate much quicker, while also capturing a favorable interest rate before things got out of hand. I managed to snag a 5.75% rate before everything went to 7%.
The interesting and new thing about this property, named ‘Preister’, is that it is split by this farmstead sitting in the middle. There are irrigated farms in the area, but that is not a possibility with this nice farmhouse sitting in the middle. The driveway splits the farm that I bought.
The big issue here was understanding how easements work. You need to know this too. If you do not have direct access to your farm, an easement must be signed over before you can close on the property. A lender will not give you a loan or be able to use the property as collateral if there is no access to the property. It’s going to be a big holdup in your loan closing process, and you need to have a good relationship with the person that owns the access point for you so that it does not become a massive headache to own the property.
With the southeast 27 acres, we could easily make a driveway to the road, which we did to help get semis in and out of the field during harvest. We also could cut into the ditch and make an access point to the north of the driveway, so an easement was not necessarily needed for my closing because of our access.
Just know that when it comes to easements, if you do not have immediate road access, this is something that has to be addressed and handled in a timely manner. Otherwise, it could really jeopardize your purchase.
The big thing here too was forming a good relationship with neighbors. I reached out immediately to the owner of the house once I secured the ground via purchase agreement. I made an introduction and we came to some mutual understandings.
Because this farm isn’t close to our headquarters, she sends us weather and hail updates in case we need to make a crop insurance claim. I notify them when we are going to be working the field so that their massive dogs can be kept inside for the day. We also make sure that when we are spraying or putting fungicide down, we contact them to keep their livestock out of the way. These relationships do matter and make things way easier on you if you can start on the right foot.
Sodbuster
In 2025 my 1031 exchange window was open again.
There was a property for sale catty-corner from Preister, so I knew the production level was high, or at least the potential was. This quarter was 75 acres farmed dryland and 85 acres of pasture with a 1900s home. If properly cleaned up, this was a farm with irrigation potential that could be worth a small fortune after the work had been done.
There were a number of factors I had to look into before this purchase. There were power lines running right down the middle of the property to the home, so communication with the power company was necessary to determine what that would entail. I discovered the power company would take those down mostly free of charge.
There were also stock wells on the property. Fortunately, one side of my family is heavily involved in the well business, so a quick call with family found solutions for what to do with those wells on the property, which would not be a big issue.
The pasture had four dams running through it, and we checked for a wetland determination with FSA again. There was no wetland on this property, and the pasture had been farmed in the past. We fell under the sodbuster provision and should be able to farm the ground.
This led to a call to my insurance agent on how insurance would work on a sodbuster property. We were going to be without an APH on this farm. Our insurance protection was going to be drastically lower for the previously pastured land for at least a half decade as we rotated crops and tried to build an APH. It’d be a huge insurance liability in the conversion of this property.
Still, if bought at the right price, it could be worth it. After getting a quote to take down the trees and level the ground of roughly $80,000 to $100,000, I had my max bid price in place.
That max bid had to consider the demolition of the ground, lower yields for several years, and lack of insurance coverage for half of the property.
Factoring all of that in, I put a bid price as dryland ground since there’s no guarantee you can get irrigation until you fully go through an application and bid process after you own the property.
In the end, I went a bit over my hopeful top bid and came in second place on the property. I went to $7,200/a, and it sold at $7,250/a (if my memory serves me correct).
At that point, after all of the work was put in to convert this into a dryland farm, I figured there would be less than $200,000 of sweat equity earned on the property. With the insurance concerns, that became a breaking point, as I wanted more equity gain out of all of the work that was going to be required to convert the pasture.
When I drove past this farm in late June, not all of the dams had been ripped out yet, and the crop had not been planted yet. That first crop looked terrible. Maybe I really dodged a bullet.
Summary
I wanted to walk you through these purchases so you can see the number of things that can go wrong with any property being purchased.
Every single one of these purchases had a different issue that arose, and some of them I was able to solve beforehand, while other ones surprised me on the back end. More lessons I’ve learned in transactions include asbestos removal, negotiating for an acreage, pulling out cash on a 1031 exchange, early debt payoff errors, and the headaches of a Reverse 1031 (I made another purchase in 2026, but that is a story for another day).
This is why due diligence is so important. It can change the value of the ground or how you farm it for decades on end. It can make for miserable neighbors or a lot of extra expenses.
If there’s anything other than a straightforward property no easements, no breakup of dirt, no big ditches or outside leases, just straight crop ground, then there are potential issues at play. And even then, with mineral rights or other factors, make sure that you’re asking the questions before you get too deep and accidently win the bid at the wrong price.
Ask the realtor about anything on the property that they know about. Talk with the seller if possible. Talk with the tenant if possible. Talk with your crop insurance agent. Talk with FSA. Talk with attorneys to review the proposed purchase agreement to see if they see anything unusual with the property or the agreement.
All these little details can make a huge difference on your bid amount or how you are going to approach developing the property.
Take the time before the auction. Do your due diligence.
Have a great week!
Grant
