Your Ranch as Income Property

Multi-Tenant Grazing Land – Antelope Creek Ranch

Think of your ranch as you would an investment property that is leased to tenant(s). Depending on the property and the availability of space, it will have one or more tenants. In some cases, the owner of the property is also a tenant, who operates as a different entity than the owner.

The purpose for owning the property is to profit from it by generating as much rental income as possible from the various tenants (potential rental income) and keeping expenses at a level that will maximize your net operating income (NOI). The more NOI, the more cashflow you will have to service debt, reinvest, buy equipment, pay dividends, etc.

Big Game Hunting on Farm Land

So how can you maximize net operating income on your ranch? As with conventional income producing property, the best way is to make sure it is fully leased; using all of its enterprise capabilities and getting paid for each of them according to what the lease rate for each of them is. For example, single species grazing or multiple species grazing, farming opportunities, hunting, fishing and other forms of recreation.

As the ranch owner, are you running your own livestock and charging yourself a fair market lease rate? The same would apply to any farming and hunting operations you might have. The money made from each of the enterprises, should be above and beyond any lease payment made to the property. As with the commercial property, the sum of lease payments, less any costs related directly to them, including vacancy rates, minus your overall operating costs (taxes, insurance, labor, utilities), will give you your net operating income (NOI) figure.

Bird Hunting on Grazing Land

At Chase Brothers Land and Ranch, we recognize that this approach to ranch management is not the traditional one, but in our experience as Wyoming and Montana ranch brokers, we have found that it can make a property more marketable. Whatever the reason, we encourage you to explore some of these ideas in the hopes that your operation will become more economically viable and a justifiably more valuable property if and when the time ever comes to sell.

We also understand that part of land ownership includes an enjoyment component to it that is more difficult to value monetarily. Tradeoffs for lifestyle and profit are not uncommon in agriculture and one of the main reasons to be in the business. Still, many owners depend on their land for their livelihood and we want them to be successful at it; so hopefully, this information provides food for thought and is ultimately helpful.

Galen Chase
Owner · Broker
Chase Brothers, LLC