So, You Want To Buy A Horse Farm! Part 1

... efficient watering systems, and acres of grass pasture. The dream often gets put ahead of the reality, i.e. we put the proverbial cart before the horse! Here are some things you need to consider before you even start designing that new barn in your head.

The ABC's of Equine Real Estate
Although boarding and breeding farms are businesses by their very nature, they usually all have something in common — a residence on the property. The very existence of this residence categorizes the property as real estate, yet most residential mortgage brokers won't lend money for them. That's because they're often classified as commercial. If a property is zoned agricultural, agricultural/commercial, or is filed under certain land laws of some states, it's no longer qualified for a typical residential mortgage.

If the property is comprised of too many acres of land (usually over 5) or the barn has too many stalls (usually over 6), it may be disqualified by mortgage lenders even if it's zoned residential. The reason for this is because the appraiser views too much land or too many stalls as "added value". This means there is additional value in the property to you as the prospective buyer beyond that of just a residence to live in.

Banks believe that anything with additional value is not conventional for residential mortgages. They consider these types of properties to be commercial because they have the potential to earn income from that added value. Whether or not you plan to utilize the land or stall space for income is irrelevant to the bank. The earning potential is there and that's all that matters to them. When looking at any property, you should educate yourself as to local zoning requirements and how the property will be appraised so you know what type of loan you'll need to apply for.

What matters most to you?
Like any horse owner, we all have personal priorities as to what matters most to us and that usually depends on the needs of the horses we already own. Are your horses more for pleasure or for showing? Your pleasure horses are no less important than expensive show animals, but be realistic. If you've never given your horse a bath in all the time you've owned him, then how important is a wash stall going to be to you?

Start by making a list of YOUR horse priorities. Then, make a list of the amenities you think a prospective boarder will look for in your facility. If you have pleasure horses and want to attract other pleasure horse owners, it's possible the two lists will look much the same. But, maybe you're a trainer who used to be a high profile rider and miss the excitement and energy of a show barn atmosphere. In this case, you may list additional items you want your farm to have to attract the same type of boarder. Compare the lists in either case and note where they overlap. The items listed on both lists are "must-haves" for your new farm. Don't waste your time even viewing properties that don't have those "must haves"! If a turn out is the number one must-have on both lists, don't waste your time looking at properties with insufficient usable acreage to support the number of stalls that are housed there.

Now you've had a chance to review some of the key steps you should follow when embarking on the journey to fulfill your dream. And, it is a journey! You can expect the entire process to take about a year or more. Searching for the "right" property takes time; you may not be able to find such a property when you first begin searching. The, commercial loans can take 90-120 days minimum to close from date of application. This is much longer than a residential mortgage which often only takes about 30 days to complete. Even the process of applying for a commercial loan can be several weeks or months while you wait for approval. But don't be disheartened by the process. The more research, "what ifs" and planning you do up front, the better you'll understand your cash flow needs and the better prepared..