85 Better Farming | November 2024 Ontario Ag Real Estate Harvesting Opportunity: A Guide to Purchasing Agricultural Real Estate As 2024 comes to a close, it is time to prepare for the upcoming planning phase in agriculture. Whether you are buying your first farm or expanding an existing farm operation, effective preparation is crucial to avoid the common pitfalls of “March Madness.” Here is a guide to help you navigate the process confidently. Breaking Down Finances Know Your Budget Establishing your budget is the foundation of your purchasing plan. Start discussions with your lender early to secure pre-approval. Many banks, credit unions, and specialized lenders offer resources for farm financing. Deposit vs. Down Payment A deposit, typically required within 24 hours of signing an agreement, acts as a security measure to demonstrate commitment. The down payment, which varies by buyer and lender, generally ranges from 20% to 50% of the purchase price. Account for Closing Costs Do not overlook closing costs, which can include legal fees, appraisals, and property tax adjustments. The largest expense is often the land transfer tax, calculated based on the purchase price. Try an online calculator. Consider Future Expenses Plan for future costs, such as increasing property taxes, necessary improvements, and municipal drain maintenance. Consult your accountant for further details. Determine Your Needs Evaluate Location and Size The location of the farmland significantly impacts efficiency and costs, especially when managing multiple farms. Size is crucial, particularly if you are replacing land after a sale. Discuss your long-term plans with your accountant to ensure compliance with replacement land requirements and estate planning considerations. Zoning Understand Zoning Regulations Each parcel of land has specific zoning regulations that dictate permissible uses. Some municipalities have minimum land sizes for livestock, and not all properties allow for residential construction, especially after a severance. Always check zoning bylaws with your realtor or the municipality. Zoning bylaws are available to the public, either online or at the municipal office. Environmentally Protected Areas Some farms will fall within the local conservation authorities jurisdiction. This may impact your ability to build structures or augment water courses on the property. Additional permits and approvals may be required, contact the local conservation authority to verify information. The clearing of bush lands to create agricultural lands is regulated at a municipal level. Servicing Assess Available Services Consider the servicing capacity based on your farming type. If you plan to build structures, ensure the availability of essential services like municipal water, natural gas, and electricity. Extending servicing to properties is an additional expense to be considered when evaluating farmland for purchase. HARVESTING OPPORTUNITY A guide to purchasing agricultural real estate. Submitted by Paige Handsor, Jackie Pepper, & Rachel Powell, Match Realty REAL ESTATE
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