Valuing an Equestrian property

[KYLECODY]

Alexi,

From your question I am reading that you are asking "Am I paying a fair price for this equestrian property"?

I am a retired commercial appraiser in Texas who has appraised many equestrian properties. Like you I am in the market right now to buy an equestrian property. I may have a different prospective than other commenters in this forum. For me I am looking for a commercial use of boarding horses and for training purposes.

What is your goal/purpose? For example, if you are buying this property for private breeding you most likely will pay too high a price. One doesn't need 64 acres to do that. It can be done with a 5 - 10 ac parcel of land. If the purpose is a boarding/training facility that is another value question. The answer will depend on location, what type of training you plan on doing, the condition of the land as well as nearby community amenities such as feed & seed stores, vets and major nearby municipalities.

First, I would start looking for equestrian properties in data sources such as Horseproperties.net & HorseClicks.com. Most MLSs don't have a category for equestrian properties. For example Realtor.com has limited capability in selecting specific land sizes for properties and realtors call a cheap metal covered area a barn.

Second, I would only look at properties that have no land use restrictions and 2 water wells - one for the pastures and one for the improvements/outbuildings.

Third, I would make sure the property is fully fenced. Cross fencing would be an extra benefit.

Fourth, have a nearby retail store (within 10 miles) that sells equestrian feed such as coastal hay or a neighbor that can provide you a steady supply.

Some things to consider when boarding/training horses - solid walls in stalls; swivel feeders/hay/water compartments; a tack room with space for saddle racks a bridle hooks; cross tied wash/grooming areas; space for a washer & dryer; a pest control system and space for RV/Trailers (35 or 50 amp electrical service) for customers who come to your facility; ceiling fans in the barn.

Other considerations:

What type of horse training will you do? This may determine the equipment you need. For example, are you training riders for Western or England style? In Western style will you train on roping, barrel racing, etc. On English will you do jumping or riding? Will you train youngsters in your area proper 4H handling of animals or handle group riding tours, etc.

If it rains in your area consider a cover for the arena. If the area is your training area make sure you have it lit and a raised enclosed room with a loud speaker system for riders to hear instructions from an instructor.

Make sure 3/4 of your land mass is devoted to letting horses pasture. This will lower your feed costs. Multiple pastures allow for adequate pasture rotation.

Make sure you can have "hot fences" and keep control of the monthly electrical costs from local co-op or electrical company.

Finally, in my many years of experience I would seek the help of a knowledgeable realtor/appraiser prior to making a purchase. The realtor/appraiser I would look for would be a prior rancher, team roper or competition rider. I would not select one that lives in a home on less than 5 ac.

Question for you Alamo. As a prospective buyer with vast horse sense and experience let me pick your brain real fast.

So if you had two identical houses side by side on 25 acres, one unfenced and one with an extensive horse setup how much more would you consider paying for the horse setup?

I realize there are many variables but I recently appraised one in the outlying desert in the 300-400k price range with the following: All 25 acres had no climb, pipe rail fencing, there were three seperate "arenas" fenced in with 1.25 ac in each. Each had water and electric. There was also a very nice, 5 year old premanufactured modular barn with 6 fully enclosed stalls, wood paneling, wood slide doors, water, electric along with a large storage/tack room area. The barn was roughly 50X60'.

Care to share what you believe that would add to a prospective buyer such as yourself or what you would be willing to pay in that price range versus the same house sitting alone on 25 acres?

 

[Alamo Cowboy]

Question for you Alamo. As a prospective buyer with vast horse sense and experience let me pick your brain real fast.

So if you had two identical houses side by side on 25 acres, one unfenced and one with an extensive horse setup how much more would you consider paying for the horse setup?

I realize there are many variables but I recently appraised one in the outlying desert in the 300-400k price range with the following: All 25 acres had no climb, pipe rail fencing, there were three seperate "arenas" fenced in with 1.25 ac in each. Each had water and electric. There was also a very nice, 5 year old premanufactured modular barn with 6 fully enclosed stalls, wood paneling, wood slide doors, water, electric along with a large storage/tack room area. The barn was roughly 50X60'.

Care to share what you believe that would add to a prospective buyer such as yourself or what you would be willing to pay in that price range versus the same house sitting alone on 25 acres?

Kyle,

It depends.

Texas desert lands lands range in value from $250/ac to $5,000/ac +/- depending if they have electricity and/or water. So to answer your question the value of the improvements may be the majority of the value of the property. To me as an appraiser and potential buyer the house may not be important. I may use it as a home for the foreman and his family. I may not live on the property. To me the equestrian amenities are more important than the house. Things like good round pens, hot walkers, kitchen in barns for the workers and ample sheds & running pens are things I look for.

Barns in Texas are a major outbuildings and can contribute significantly to the property's value. They can come with electricity, concrete flooring, water, AC and apartments to them as well as the typical stalls, tack rooms, wash & grooming areas, and storage areas. Many have runs off the stalls and/or covered area for parking a tractor or horse trailer. Building materials vary. Most barns in Texas are metal followed by wood. Arenas in Texas vary in value due to amenities like fencing materials around them, the type of sand used, horse holding areas and things like automatic one touch air chutes that allow riders to focus on roping a calf as well as lighting, coverings, viewing areas and raised instructor platforms. An irrigation system for an arena adds additional value.

I would pay for what is offered on a property by utilizing the cost approach minus depreciation. I would heavily depreciate for rust and paint peeling on any surface. The useful life span of many or the equestrian amenities is only 15 - 20 yrs without proper maintenance.

 

[Elliott]

Kyle asked, So if you had two identical houses side by side on 25 acres, one unfenced and one with an extensive horse setup how much more would you consider paying for the horse setup?

I have been fond of saying, "If there is a horse on the property, it increases the value of the property 25%. If you have a hobby barn with split dutch doors and white fencing, add 25%. Add 25% more for a horse wash station, and another 50% for an arena with over 6 stalls and a tact room. Horse people, at least in Oregon, love their horsies and pay way too much for the features. I suspect, vineyards are similarly priced.

 

[Michigan CG]

There is some very good advice here so I have little to add. Russ, Greg and the Alamo guy give some great ideas, advice and insight.

I am a CG appraiser and do this type of property a few times a year. These are not easy sometimes and you need to understand that if you want to buy this you need to very careful on the LENDER you choose for this.

You do NOT want to use a lender that uses an AMC as some will consider this to be a residential assignment and will pick an appraiser based on fee only. I have seen some awful horse farm property reports put on what is known as a 1004 form. Form reports are not always bad and some appraisers will put these on the UAAR (Agware) form that is used mostly by people who have taken classes from the ASFMRA and might have the ARA designation which is for rural and farm appraisers.

My horse farm reports are mostly narrative reports as I do not have the UAAR (Universal Agriculture Appraisal Report) program and I do not have the ARA designation.

If you want to buy this property I would suggest you call your local Farm Credit lender or a small local lender and do not use ANY lender that uses an AMC; this property is special and needs someone who knows how to do this.

I would also suggest that you want a lender that will hire a CG appraiser. The vast majority of appraisers who have a residential certification have no idea how to appraise this type of property because it is cost approach intensive.

 

[Terrel L. Shields]

want to buy this you need to very careful on the LENDER you choose for this.

Good point. Farm Credit or an ag lender of some sort is best suited for valuing and financing an ag property in many cases. Attempting to shoehorn a horse property into a Fannie or FHA loan can be problematic both from the terms of the loan and the experience of the typical appraiser. An AMC would be totally clueless who to choose.

 

[Alamo Cowboy]

There is some very good advice here so I have little to add. Russ, Greg and the Alamo guy give some great ideas, advice and insight.

I am a CG appraiser and do this type of property a few times a year. These are not easy sometimes and you need to understand that if you want to buy this you need to very careful on the LENDER you choose for this.

You do NOT want to use a lender that uses an AMC as some will consider this to be a residential assignment and will pick an appraiser based on fee only. I have seen some awful horse farm property reports put on what is known as a 1004 form. Form reports are not always bad and some appraisers will put these on the UAAR (Agware) form that is used mostly by people who have taken classes from the ASFMRA and might have the ARA designation which is for rural and farm appraisers.

My horse farm reports are mostly narrative reports as I do not have the UAAR (Universal Agriculture Appraisal Report) program and I do not have the ARA designation.

If you want to buy this property I would suggest you call your local Farm Credit lender or a small local lender and do not use ANY lender that uses an AMC; this property is special and needs someone who knows how to do this.

I would also suggest that you want a lender that will hire a CG appraiser. The vast majority of appraisers who have a residential certification have no idea how to appraise this type of property because it is cost approach intensive.

Michigan,

You're right on.

When I did these reports I only did narratives. On commercial equestrian ranches my comp selection was in a 300 mile circle; on hobby equestrian ranch assignments my comp selection went out 50 miles. The Farm Credit lender paid $2,500+ for a report back 5 yrs ago. This fee was based upon acreage, # of houses, horse amenities & outbuildings. Most of my assignments were referrals by the lender. Only had 1 AMC order for an equestrian ranch in 30+ yrs. They paid me in the marketplace of $3-4K.

FWIW, ASFMRA had some of the best rural appraisal classes. They are in the same high category as IRWA for instruction on topics such as right of way.

 

[Michael S]

I appraised a large equestrian facility (tens of acres, tens of thousands of square feet of improvements) several years ago. I ended up performing a nationwide search for comparable sales but was able to find 3-4 sales in neighboring states within about 500 miles that I ultimately relied upon for the sales comparison approach. I ended up comparing them on the basis of overall acreage as the actual improvements varied so much that measuring per square foot of improvements was meaningless when you lump together sheds that cost $40/SF with an enclosed arena or stable that costs $100/SF+.

However, I ultimately placed most weight on the cost approach. I was able to get a lot more granular detail with the depreciated cost of the various buildings, fences, footing (amazing how much horse people will pay for the right dirt), etc.

 

[George Hatch]

Those engineered arenas with all the foundation, fill and drainage are no joke. then when they add a roof or canopy and the additional lighting those costs add up quickly.

 

[Terrel L. Shields]

neighboring states within about 500 miles that I ultimately relied upon for the sales comparison approach.

The problem with all horse facilities is the enormous range of improvement quality, style, and purpose. The roping/cutting horse indoor arena vs the operation designed for say dressage or trail rides are so disparate that the cost approach is a necessity, in my opinion. Most are unprofitable, breaking even at best, or the income is based upon the expertise of the owner (training horses, showing them, etc.) I have 2 within 2 miles of me, both as indoor arenas, but one with an apartment and on 100 acres and the other has apartments for both owners and horses to spend time there, and small individual pens for the horses outside.

 

[George Hatch]

In our region most of the buyers are engaged in the business as a lifestyle, not to actually make a living at it.