Listen to the Ranch Investor Podcast episode featuring Jim Howell here.
Investing in a ranch presents a unique and rewarding avenue for the Accredited Investors in the Unites States of America. As they move to seek financial prosperity and environmental impact, a ranch can give them the freedom to to do what they do best.
Jim Howell is a seasoned ranch investor and consultant who has syndicated substantial ranch investments for high-net-worth individuals. He brings a wealth of experience in this field. From his early days in Colorado to studying and touring ranches in New Zealand to managing ranches in South Dakota, Montana, and Florida, Howell has gleaned lessons that can benefit investors like you interested in this sector.
1. Identify Profitable Opportunities
Always look for opportunities to pivot or diversify the ranch operations for better profitability. While in New Zealand, Howell recognized the potential for converting rundown sheep and beef operations into the dairy industry. This pivot proved financially rewarding, better supply chains and led him to pitch investment opportunities.
“Even though you weren’t farming dairy cows, the economics of growing dairy heifers on the same grass that you could raise cattle and sheep on was significantly better,” Howell said.
2. Invest in Undervalued Assets
Investing in undervalued assets focusing on ROI can lead to significant financial gains. Howell discovered undervalued Western South Dakota ranches with high-quality grass and good stock ponds.
“It looked like these outfits in Argentina and Australia that were thriving with these massive open, relatively flat, really good grass ranches,” Howell said. “…We got them under contract, we closed. Two weeks later, we’re turning out 3,000 yearlings.”
Investing in these ranches yielded a cash return of 7% in good years and 2-3% even in drought years. It is a business decision that can leverage your standing in the real estate industry.
“It was definitely all built around return on investment and not based around any assumptions of ridiculous appreciation, but just on what kind of cash we could generate from this grass by custom grazing yearlings and a few cow calf pairs,” Howell said. “…We got in at what turned out to be an undervalued price.”
3. Capitalize on Recreational Revenue Streams
Reshape your business strategies. Look for recreational revenue streams that can be monetized with minimal effort.
In Florida, Howell’s ranches offer hunting leases, which generate much money without requiring much time or effort.
“We don’t go out and guide; it doesn’t take us any time,” Howell said. “But we have about a 30,000-acre ranch there that split up into six or seven hunting leases, so the guys that have the lease just come out and set a camp up…That generates an incredibly good amount of money for doing nothing. That’s a wildlife resource that exists on that ranch.”
4. Work With an Experienced Ranch Manager
It’s crucial to hire a ranch manager with experience. Ranch Investor ensures your syndicated investment in a ranch will be overseen by the best in the industry to ensure the most effective and profitable management.
When seeking a ranch manager, finding someone with a unique blend of practical experience, business acumen, passion for agriculture, and a forward-thinking mindset is essential.
Ranch managers should have:
- Education in agriculture and business: A solid educational background can provide foundational knowledge about conservative practices, grazing systems, animal science, and best techniques in agriculture and the business aspects of managing a ranch.
- Hands-on experience: First-hand experience in various aspects of ranching, from animal husbandry to crop cultivation, is crucial.
- Business and finance acumen: Ranching is not just about working the land; it’s also a business. A successful ranch manager should understand the financial and operational aspects of the ranch by providing a developed business acumen.
- Knowledge of modern and sustainable ranching practices: With the increasing importance of sustainable farming, a ranch manager should be familiar with holistic management and other innovative agricultural production systems.
- Leadership skills: A ranch manager will likely oversee a team of workers, so strong leadership and interpersonal skills are necessary.
- Networking abilities: Building relationships within the agricultural community can lead to opportunities, partnerships, and improved practices. It will be easier to connect with neighboring family farms as well.
- Analytical skills: Business leaders must be experts in analyzing market trends, soil test results, and other data can help make informed decisions about the ranch’s operations.
- Knowledge of the local area: Understanding the climate, soil, wildlife habitat, and community can benefit a ranch manager. This includes legal knowledge and business issues related to land and livestock.
Our General Partner, Principal Colter DeVries, AFM, ALC, is ideally qualified to manage your ranch with a team of seasoned experts and years of experience.
Colter earned degrees in Finance, Agricultural Business, and Entrepreneurship from Montana State University and has a deeply rooted understanding of the day-to-day operations of a ranch from his time working on his family’s homestead in Montana.
Colter also brings his experience as a Commercial and Agricultural Business Relationship Manager with Wells Fargo and his knowledge of sustainable practices and holistic management. As a licensed ranch broker in multiple states, Colter has built a team of experts and advisors through his connections in the agricultural community. Visit our website to learn more about working with Colter and our team at Ranch Investor.
5. Create a Capital Improvement and Management Plan
Plan for capital improvements, suitable business model, and look for ways to finance them through the ranch’s revenue streams. Howell integrates all capital improvement needs into the initial plan and makes a 3-5-year capital improvement plan into the investment analysis. Most of the improvements were financed by custom grazing revenue.
“Mostly, especially in Montana and South Dakota, all those improvements were financed by custom grazing revenue. They didn’t need to send us money to do that stuff.”
6. Capitalize on Returns on Sustainable Practices and Grazing
Sustainable grazing practices benefit the environment and maximize the land’s utility, leading to better returns.
Howell has been a proponent of sustainable practices, particularly in grazing, since his time touring ranches in New Zealand.
He mentioned, “It opens up all kinds of country that historically under continuous low-density grazing just is severely underutilized or unutilized at all.”
7. Align the Goals of Investors and Ranch Managers
Ensure that the ranch management’s ideas for profitability align with the investor’s financial and ethical goals.
Howell emphasizes the importance of aligning the ranch’s attributes, including its return, with the goals of the specific investor. Most of his investors are impact investors who want to impact the planet positively.
8. Remember Long-term Value
Investing in ranches is not just about short-term gains; it’s a long-term asset that will likely continue to appreciate.
Howell believes that ranch lands will remain valuable assets in the long run, especially those that can produce food profitably.
“If you can own land that can produce food profitably, that’s never going to go out of style,” Howell said. “That asset is always gonna be there as we move towards nine or 10 billion people on this planet…And suppose you can buy a place that can support commercially viable livestock enterprises. In that case, you can generate enough excess cash to make the reinvestments in the property that are needed to keep it up to a certain standard level.”
The bottom line is even if that return is in the single digits, a ranch is a hard asset that is rare and will always be highly valued.