What Every Farmland Seller Should Know

farm landSelling your farmland is a tough decision to make. You want to get a fair deal for the property you’ve worked hard on. You also need to make sure that it gets enough exposure to receive the right offers. Overall, you just want to maximize the profits you could make out of this transaction. And to do so would require knowing critical information, like a tax strategy.

For instance, doing a 1031 land exchange would allow you to skip paying tax on the sale, and use the proceeds toward a property you want, according to 1031 Exchange Place.

What is the 1031 Exchange?

When you set up a 1031 exchange before you sell your farm, you may not have to pay the 20 percent to 30 percent federal and state taxes. This would be the difference between the cost of your property and the sale price. So instead of losing much of the sale from your land, 1031 exchange allows you to keep the money and put it to better use.

This option, however, requires a set of criteria. One is that owner-occupied properties don’t count; you should only sell investment properties, like farmlands or offices and not personal residences. Two is that you must exchange your property with the same kind.

In addition, you can’t exchange stock that’s currently in a trade or other properties held for resale. Others include:

  • Interests in a partnership
  • Stocks, notes, or bonds
  • Certificates of trusts or beneficial interests
  • Other securities or evidence of indebtedness or interest

This process comes with deadlines and time frames that you need to follow. It’s best to work with professionals to assist you.

Sell to an Investor

Another factor you may consider when selling your property is your target investor. Selling your farm to an investor could be lucrative, and there is a demand for such a transaction.  Institutional investors coming from various sectors are putting money in farmlands across the US. Investors are looking to own hard assets, and farms offer this opportunity.

You must work closely with your potential investor to make sure that your deal is favorable for both of you.

The process of selling your farmland is crucial. You can seek help from professionals to make an informed decision, and make sure that you get the best deal.