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#70198 - 05/22/06 11:11 AM Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
For the fellow weekend warriors out there; IE - I live and work in the city and own property in the country.

Have you found a reliable way to produce income from your property? Options I am considering;

1. Small cattle operation, but seems a little risky not being there full time.

2. Lease property to grazing.

3. Run a grass/hay operation.

??? Other options

- Hunting/fishing rights lease are OFF the table.

I am not trying to make a profit, but it would be nice to have a business so that I can get the tax breaks from the $ I am spending on improvements. Break even would be a huge benefit.

Gator
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#70199 - 05/22/06 12:27 PM Re: Does your weekend property provide income?
poland_jack Offline
Lunker

Registered: 02/03/05
Posts: 145
Loc: Gonzales, Texas
I lease my land for grazing. It provides some income, and allows me to claim a significant loss each year on my expenses. The downside is that my pasture is currently suffering from the drought which is exacerbated by the cattle. And there is cow shooze everywhere. So now, I'm considering fencing off my pond.
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#70200 - 05/22/06 12:29 PM Re: Does your weekend property provide income?
Sunil Offline
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Lunker

Registered: 09/03/03
Posts: 11521
Loc: Somerset, PA
Gator, No, my property does not generate any income.

It is only about 75 acres in total which includes the 6-7 acre pond.

Farming is not an option. As far as hunting leases, etc., I already have some illegally hunting there, so I don't think I could get them to pay.

The only other obvious option I have is from timber, but I don't want to denude any of the land.
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#70201 - 05/22/06 12:42 PM Re: Does your weekend property provide income?
KGP Offline
Lunker

Registered: 01/01/05
Posts: 29
Loc: St. Louis
I have a vending machine filled with beer that sells for $.50 each. Does that count? \:D

I all seriousness, I have a guy who hays the field, but I let him keep all the money. In return I get an eye watching my property and favors when I need them. Just last week I forgot to lock something up, and it only took a phone call to get it taken care of asap. Favors like that are far more valuable to me than a few bucks from 40 acres of pasture income.

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#70202 - 05/22/06 12:43 PM Re: Does your weekend property provide income?
Sandbox Offline
Member

Registered: 12/30/05
Posts: 39
Loc: N.E.Texas
Gator -

Have you looked into the wildlife management option? Once you have the plan approved, all improvements needed to meet the plan should be deductable expenses (at least that is what I am banking on).

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#70203 - 05/22/06 12:55 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
Sandbox - my property is not currently wildlife exempt. I have WLM Plan from my local game biologist and my long term goal is to roll the property into the WLM Program, however, according to the local tax office - it has to have an Ag for 5 years prior. I am working on my 5 years of Ag exemption...currently in year 2.

Would I need to have a wildlife exemption to claim tax credits?

Would expenses like fencing, land clearing, building a cabin and barn qualify for tax credits?

Gator
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#70204 - 05/22/06 12:56 PM Re: Does your weekend property provide income?
trialsguy Offline
Lunker

Registered: 05/03/06
Posts: 794
Loc: Mo.
option on the hunting lease could be that the guys you let hunt on it would be a good poacher control or police there interest. I have leased hunting land before and have caught poachers and called the law on them
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#70205 - 05/22/06 01:49 PM Re: Does your weekend property provide income?
rockytopper Offline
Lunker

Registered: 01/20/05
Posts: 1239
Loc: texas
Alligator I currently do items 1 & 3 of your options. Not much in terms of cash flow but generates many benfits.

1. Property tax reduced for Ag use.
2. Reduces land maintance i.e.. mowing of pastures.
3. Feeds the family, grass fed beef quaility is umatched by USDA standards. I raise half longhorn/half brangus calfs and the meat is so lean you have to add fat to cook it. Incase any of you didn't know that grain fed cattle ain't healthy for you. Many places sell grass fed cattle in our area much better for your ticker.
4. Income tax deductions.
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#70206 - 05/22/06 02:24 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
rt,

Do you have a local person check on the cattle for you + how often do you go out to your place? Do you break even? How many head do you have/size of your property?

Gator
_________________________
- Smoke 'em if you got 'em




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#70207 - 05/22/06 02:38 PM Re: Does your weekend property provide income?
Sandbox Offline
Member

Registered: 12/30/05
Posts: 39
Loc: N.E.Texas
You just went outside my comfort zone. The fencing and clearing would definitely apply as they would be rolled into your plan. The cabin would not. The barn would be a toss up but, I would expect that it would just be treated as a capital asset. Check with your accountant but, I would expect that worst case, you could go back and claim the expenses after you achieve your exemption.

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#70208 - 05/22/06 02:41 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
Thanks Sandbox.
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#70209 - 05/22/06 03:05 PM Re: Does your weekend property provide income?
Meadowlark Offline
Lunker

Registered: 03/09/04
Posts: 3075
Loc: East Texas
Gator,

I echo Rockytopper's comments above. Do not underestimate the value of #4.

Cows, especially those that are cross breeds with some Brahma in the bloodline require very little care during the growing season. Some folks in my area that are weekenders buy commercial cows in the spring, run them on pastures during the growing season and then sell everything in the fall. This approach works pretty well assuming you buy the spring stock "right"...i.e. healthy stock and not overpriced.

Myself, I have year around cattle operation which requires feeding once a week in the winter months (sometimes can get by with every 2 weeks). I use the large round bales of hay which is grown and baled on my place and simply set out enough until the next visit(trip expenses are tax deductible). With the right equipment (all tax deductible) one person can handle the feeding for 30 cows for a week in about two hours. I've done it for many years.

I've never had any rustling, never lost a cow to predators, but have had a cow with occasional health problems(any meds and/or vet bills are tax deductible)...on Meadowlark ranch only the strong survive. My vet bills are virtually non-existant. I have my calves for sale transported by someone else (at a tax deductible fee) which frees me up from having to own a big trailor and spend all that time hauling cattle...I'd rather be fishing. \:\)

In short, the only problem I have with them (cows) is that the fencing needs to be maintained in good shape(all guess what...tax deductible). Ocassionally you can run across a cow that figures out that a fence can be easily compromised by a 1000 pound plus animal...that cow goes out on the next run to the sale barn at my place.

As I said, I've done this for many years and although sometimes in the winter months it can be a pain, the gains over a multiyear period are not insignificant.

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#70210 - 05/22/06 03:16 PM Re: Does your weekend property provide income?
rockytopper Offline
Lunker

Registered: 01/20/05
Posts: 1239
Loc: texas
Gator I run 5 mother cows and one bull on 21 acres. I Currently have 10 calfs from 2 years of breeding for a total of 16 head. I live on the property. I commute 60 miles to the city everyday to work. I would say on my small operation I break even to making a little, depends on the rain, cattle market prices, and how much feed I have to buy to support them. The draught in Texas has played havic on the price of hay. I have another 36 acre place that I just completed a 5 acre +/- pond that I use for hay production. I plan to move cattle and expand the operation as soon as I get the fences repaired.

As for how often you need to tend to cattle, I'd say it depends on the quality of your fences, do your neighbors have cattle?

If you are putting cattle on good grazing land with plenty of grass and water with good fences once a week is plenty, or if your futher away and have a neighbor who looks out for your place is also good. Most issues with cows getting out is usally the bull is wanting to get with the honey's next door or the bulls start fighting over territory and tear down the fence or the cows are hungey and head for greener pastures.

The hay operation also depends on the weather. If you get plenty of rain then everyone has hay and the market is flooded. If your in a draught and you have hay from past years you'll make out like a bandit. I sold round 100 bails to my neighbor last summer for the price of bailing 15$ a roll. This was the first cutting of the year and has weeds. I had planned on getting at least 2 more cuttings. Didn't happen. 3 month's latter after the draught was in full swing the same hay could have been sold for 100$ a bail. You just never know.
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The road goes on forever and the party nevers end...............................................

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#70211 - 05/22/06 03:27 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
ML and rt,

Thanks for the input. Do either of you have a Pro Forma on the cattle operation that I could look at?

Gator
_________________________
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#70212 - 05/22/06 03:36 PM Re: Does your weekend property provide income?
Meadowlark Offline
Lunker

Registered: 03/09/04
Posts: 3075
Loc: East Texas
RT,

If hay ever hits $100 per bale, my cows will be headed to the sale barn. That would be the first time I have ever lost money on cows in about 30 years.

Gator, sorry I'm from Missouri and you have to show me: "Pro Forma" on cattle operation? \:\)

Not sure what is in a pro forma for cows.

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#70213 - 05/22/06 03:47 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
Business Plan or Annual Budget?

Gator
_________________________
- Smoke 'em if you got 'em




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#70214 - 05/22/06 04:03 PM Re: Does your weekend property provide income?
poland_jack Offline
Lunker

Registered: 02/03/05
Posts: 145
Loc: Gonzales, Texas
Here's what I'm struggling with. I'd like to have a lot fewer cows on my place to reduce the impact (read cow manure). I've got 150 acres leased at $10/acre. Can I reasonably expect to make a profit on many fewer cows? Is there a Texas rule of thumb on how many calves per cow you can expect? And what is the average sales price? And what is the cost?

What I'm thinking is that if I could run 20 head of my own and make just as much money or more (after costs) I might do that.
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#70215 - 05/22/06 04:47 PM Re: Does your weekend property provide income?
Sandbox Offline
Member

Registered: 12/30/05
Posts: 39
Loc: N.E.Texas
You mentioned that you are working toward putting a Wildlife exemption. If that is the case, you may not want to deal with the longterm headache of cattle. Not knowing your situation, is there a chance you would have to buy hay in the winter? If so, that could introduce grasses you don't want on the property. The single biggest contributer to the decline of the quail population in East Texas is Bermuda grass.

As part of your WLP, you could convert you pasture to native grasses. In turn, you could sell the hay. Long term, you have better wildlife habitat that will generate a little income with very little expense. Not as high of a revenue stream but is a lower draw on your time.

I don't know your situation but, I have two young boys that have there own demands on my time. I have to keep my weekends more flexible and cannot commit to a weekly or bi-weekly trip. On average it is every other week or more but there are times during baseball season that it may be four weeks.

If you think cattle would be fun or interesting, go for it. I have a brother that knew nothing about the business and started with a few head of longhorns for a tax exemption. Five years later they bought a place further out in the country and now have over 100 head. He lives two hours from the ranch and it is working for him. Mostly because he produces an excess of hay.

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#70216 - 05/22/06 05:29 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
Sandbox,

Those are exactly the types of issues I am working through to come to a decision...thanks for your input.

One problem I am faced with is the wildlife exemption - If I go with hay production - I can only roll about 50% of my land into wildlife exepmtion (since 50% of my property is wooded). If I go with the cattle option the entire tract would qualify for the wildlife exemption.

Gator
_________________________
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#70217 - 05/22/06 05:44 PM Re: Does your weekend property provide income?
Meadowlark Offline
Lunker

Registered: 03/09/04
Posts: 3075
Loc: East Texas
PJ,

Here's my take on it. The how many per acre is much like stocking ponds...it all depends. How much rainfall, the chemistry of your pastures (you really are growing grass not cows), and what level of risk you are willing to take, among other things.

Let's take your example... 20 cows will reasonably produce 16 to 18 calves per year, more if you have top genetics and manage closely less, if not. A calf raised from spring till fall can reach 500 pounds, again more under good conditions and less if not. 500 pounds at $1.20 per pound times 17 = about $10k.

How much hay do you need? I figure about 4 round bales per head (depending on severity of winter, first frost date, etc.) and for 20 cows that would be minimum of 80 bales. Minimum cost is probably about $2000 maybe more, maybe less. Add to that about 5 tons of meal for another $1000. Then you have the other costs...fencing, equipment, fertilizers, lime, and the cost of the cows themselves and the herd bull depreciated against the revenue. Throw in the tax deductions, including ag. exemptions to offset costs.

Bottom line, yes you can probably make more by running 20 yourself, but what is your time and freedom from the obligation worth? In the end, if you enjoy having cows and working with them, then it's worth it, but if not, it isn't. You are not going to get rich on 20 cows...but then again, the lifestyle may offer much more than just money.

Looking at it longer term, over a period of several years, say 20 or 30 years, and including tax benefits, which can be very significant, you can add up to some substantial money vs just letting the land go idle. The cows can help pay for the land, the improvements (e.g. ponds), and generate some cash flow...all the while the property is appreciating in value.

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#70218 - 05/22/06 05:52 PM Re: Does your weekend property provide income?
Sandbox Offline
Member

Registered: 12/30/05
Posts: 39
Loc: N.E.Texas
There is definitely an advantage to having a pre-existing exemption. Mine was designated improved pasture. Out of 200 acres, I would be shocked if you could find 2 acres of grass. My nightmare has been trying to clear enough land for food plots. If anyone ever finds a market for sweetgum trees, I will be rich.

I'm not sure I follow you on the 50/50 problem. You can still sell hay (or raise cattle) and have a Wildlife exemption. As long as the crop is a secondary use for the land. I may have read your response wrong and your are worried about getting the ag exemption on the wooded area. In that case, you probably do need to go with cattle. I have not had to deal with trying to get a 1st time ag exemption so there is probably someone else out there more qualified to speak to that.

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#70219 - 05/22/06 05:57 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
Sandbox,

In order to qualify for the wildlife expemtion - you must have an existing Ag exemption, which I do not. So in order to get an Ag exepmtion I must either 1. raise cattle (for which my entire property would qualify or 2. raise hay for which only 1/2 of my property would qualify since it is 50% wooded.

Hey on the sweetgums - they are fairly valuable in the timber market (i think)...but not everyone wants to deal with that mess.

Gator
_________________________
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#70220 - 05/22/06 06:06 PM Re: Does your weekend property provide income?
Meadowlark Offline
Lunker

Registered: 03/09/04
Posts: 3075
Loc: East Texas
Gator,

You can get a timber exemption on that other 50%...much easier than the wildlife exemption. I have a small amount of land in a timber exemption.

My local county guy told me to never go after the wildlife exemption because of the difficulties involved....instead get a timber exemption, which I did.

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#70221 - 05/22/06 06:30 PM Re: Does your weekend property provide income?
Sandbox Offline
Member

Registered: 12/30/05
Posts: 39
Loc: N.E.Texas
ML,

Did he explain what the difficulties were? My exemption was extremely easy to get. I did my own plan. The process seems fairly loose. I suspect it varies greatly depending on what county you are in. I sat down with my tax assessor beforehand and again when I turned in the plan. It took a couple evenings to write the plan and all of about 15 mins in the sitdown meetings. Apparently, having trees does not preclude getting a pasture exemption either. My place was converted from timber to pasture about seven years prior to our purchase. Even then, I would guess that 70% was still wooded (pre-sweetgum explosion).

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#70222 - 05/22/06 06:35 PM Re: Does your weekend property provide income?
Alligator Offline
Lunker

Registered: 03/30/05
Posts: 821
Loc: East Texas
ML, thanks.

I currently have a Timber Exemption on the wooded area; In addition I am shooting for the higher tax advantage with the Ag or Wildlife Exemption.

Do you have any more details on the difficulties of obtaining a Wildlife Exemption?

My local tax office told me there are three activities you must maintain related to wildlife management each year + have a wildlife Plan - which my local Game Biologist did for free. I qualify with pond management, deer feeders and food plots basically stuff Im going to do anyway.

A Wildlife Exemption would give me the same tax advantage as an Ag Exemption but allow me the flexibility to choose if I wanted to have cattle (which I am undecided for the long term).

Gator
_________________________
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