One of the common avenues of purchasing hunting property is through partnership agreements where a group of individuals come together to own property.
A land-owning partnership is similar to leasing hunting land with your buddies, but owning the land offers benefits beyond leasing. You control access and what activities the land will be used for, and your hunting rights are controlled by you and the group, not the landowner you pay rent to.
There are financial benefits as well. The group receives any cash income the land provides, whether it’s through timber harvesting, farming or government CRP programs. If and when the time comes to sell, liquidation typically produces a profit. So it may be better in the long term to put the money you pay for a hunting lease on something that produces immediate enjoyment and also a long-term financial gain.
Let’s say it’s your dream to hunt a trophy whitetail property in Iowa. You can join a hunt club, lease land or buy a piece of property. Using this scenario, imagine the year is 2015 and there is a 218-acre tract of hunting land available at $2,554.58/acre. This per-acre cost was below the average market value in Iowa, but we'll run the numbers using a 6 percent interest rate which is above what we're seeing right now.
Should you buy or lease?
To get to the answer, we'll factor in a few more numbers to make a comparison between the costs of leasing and owning over a period of ten years. Let’s assume you are partnering with three other hunters, and let’s make a conservative assumption that the price per acre to lease the land is $25 and increases by 10 percent every three years. Conversely, if purchase property instead, we're going to say your group puts 20 percent down and you've locked in a 30-year loan at 6 percent interest rate. You've kept the property in CRP enrollment for all ten years, and rented the 20 acres of tillable land to a farmer at the average price for the region ($229/acre). We know the taxes are $400/year.
Does the cost of leasing hunting property compare to the cost of owning it? Of course not.
But there is a comparison that works in favor of ownership, and that's where your money goes once it leaves your bank account. Over the course of ten years, you will pay around $15,000 to lease a great hunting property. That money will never be seen again. But when you finance a hunting property to own, most of that money (outside of the interest rate to finance) goes toward building equity in the land. It’s an investment. Over the long term, real estate price appreciation can be significant.
Initial investors are often unable to purchase hunting land without taking on some type of partner. Combining assets and dividing the costs can make land ownership affordable. Food plot supplies, equipment and work can also be shared. But humans don’t always share well. You have to plan for disagreements, no matter how unlikely you think they are to arise.
Like any business deal, it comes down to picking the right partner(s) and establishing a plan for how you will operate as a group. The owners need to share the same vision for the land. It’s important to come to agreements on issues, such as guest hunters, how payments will be made, what happens if someone falls behind payments or passes away. Do this before any purchase is made. Then visit a real estate lawyer to put these agreements in writing.
Typically, in partnerships where individuals own equal shares of the land and new issues arise that are not in the legal agreements, decisions are made based on voting.
There are several ways hunting land partnerships can be set up legally. The most common are putting multiple names on the title and establishing an LLC.
The Whitetail Properties' Land Specialist team is well versed in partnership agreements and can offer guidance in seeing you and your friends turn your dream into a reality.
