The Land Up Dirt to Dollars Series

“Buy land, they’re not making anymore of it.” - Mark Twain

You have likely heard this quote before, said a dozen different ways. Land continues to be a sound purchase, especially in Texas where we have a lot of it. Other than the rolling hills, bluebonnets, and green fields, there are many reasons why Texas land in particular is the right call.

With any potential big purchase, you may be curious of how much of a dent it’ll put in your wallet. If buying real estate and being financially savvy is your goal, then Central Texas land should be in your game plan.

3 Ways to Save Money On Your Texas Land

1. Property Tax Exemptions

In a nutshell, a property tax exemption is granted by state or local governments to reduce taxes for certain types of properties. These exemptions lessen the “taxable value” of your property - often the market or appraised value - shrinking the number used to calculate your taxes and leading to significant savings over time.

Some property tax exemptions include:

• Agricultural exemption: for landowners who use their land for agricultural purposes, such as farming, ranching, orchards, and timber. It uses the land’s potential for income, rather than its market value, to determine property taxes.

• Wildlife exemption: for landowners who use their property for wildlife and habitat conservation, from deer to bees and beyond. It provides tax relief on qualifying acreage and/or specific land requirements.

• Residential homestead exemption: for homeowners who use the property as their primary residence. It reduces the property’s “appraised value”, which lowers costs associated with school, county, and sometimes city taxes.

In order to qualify for a property tax exemption, check with your local government authority on rules and regulations. From acres to animals, qualifications vary. An agricultural exemption in Caldwell County, for instance, requires at least 12 acres of land - either owned fully by yourself, or in total between yourself and your next door neighbor.

Let’s Do Some Math

Let’s say you own 15 acres in Central Texas that you use to raise cattle, and your property is eligible for an agricultural exemption. You bought the land for $200K (the market value), but your “agricultural value” from cattle raising is $100K. Property taxes are currently 2%.

Without the exemption, your property taxes would be $200,000 (market value) x 2% = $4,000 per year

With the exemption, your property taxes would be $100,000 (agricultural value) x 2% = $2,000 per year

While this is just an example with simple numbers, $2,000 is nothing to shake a stick at!

Keep in mind that there are specific requirements to qualify for and keep your property tax exemption (like age, time living in a property, or even veteran status). It varies by state, county, and city - so be sure to work with your local appraisal district or tax assessor’s office.

2. Writing Off Expenses With a Schedule F

Do you use your land for farming? Well, then completing a Schedule F tax form may be for you (exciting, we know)!

A Schedule F - also known as Form 1040 - is used to report income and expenses for your farming operations. So if you’re making money from and spending money on your farm, keep reading.

Key aspects of a Schedule F include:

• Income: reporting income made from farm operations, such as proceeds from sales of crops, livestock, products, government programs, insurance reimbursements, and rental/leasing of the property.

• Expenses: deducting eligible expenses such as costs for supplies, livestock, feed, maintenance, equipment, labor wages, insurance, utilities, etc. By reporting expenses, this offsets the income, overall reducing the taxable income.

• Depreciation: reporting depreciation of equipment, buildings, and machinery. By reducing the value of your assets, this reduces the taxable income as well.

• Net Profit or Loss: if the farm overall makes or loses money in a given year, these activities either increase or decrease the taxable income for the property.

It’s Math Time

Let’s say you own a 15 acre farm where you grow crops. From selling your crops and renting out your land, you make $75,000 that year (your total income). Throughout the year, though, you spend $20,000 on supplies and making repairs (your deductible expenses).

To determine net profit or loss, simply subtract your deductible expenses from your income: $75,000 - $20,000 = $55,000 net profit

That $55,000 will be used to calculate your taxable income.

Now you may be saying “but Texas doesn’t have income taxes.” That’s true, and just another reason to love Texas! However, there are still federal income taxes - which is where this number will be used. While this another simple example, it shines a light on how a Schedule F helps farm owners save money over time.

3. Long-Term Appreciation

For many landowners, their property gains value over time. For a variety of reasons - like economic growth, nearby developments, and supply and demand to name a few - land ends up being worth more than the original purchase price.

While appreciation is directly related to making money, it can also help save money. How, you ask? The short answer: equity.

With appreciation comes increased equity. As your land gains value, your equity in the property also increases - bridging the gap between your property’s value and any outstanding loans. With better equity, you have access to greater borrowing options, favorable loan terms, and future investments - all saving you money on borrowing costs.

Other than appreciation, now we’ll share a handful of ideas to make money on your Central Texas land…

Ways to Make Money By Owning Land in Texas

If you currently own a property or are considering buying one, there are many ways you can generate income! Below are some ideas to get your wheels turning.

It’s important to note that many of these options will require local approval. Before taking action, check with your government agencies for required steps. You may also want to do some research on the area, potential nearby competitors, and the property itself to determine if an option is right for you.

Ideas to Make Money With a Farm or Land

• Rent your land as pasture or with other farmers

• Rent your land for mobile homes

• Host billboards

• Host cell towers, solar panel fields, and wind towers

• Harvest timber for lumber companies

• Provide storage space

• Open a campground

• List your land on sites like hipcamp.com

• Buy and hold for appreciation or future investment opportunities

• Fix it up and resell it

• Create an airbnb with tiny homes

• Raise livestock

• Create a rural photo venue

• Host horse stables

• Lease to hunters

• Explore subdividing

Finding Land That Checks the Boxes

Finding a property that meets your financial goals can be a process. Luckily at Land Up, we’re a team of Central Texas land experts who know the area better than anybody - and we’ve got the numbers to prove it.

We can work with your budget to help you discover the right property, get the best deal, and even help run the numbers. We’ll be your #1 resource along your real estate journey, so get in touch with us to get started!

Contact Land Up Realty + Investments