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Does Your Rural Property have Agricultural Income Potential?

Becky Kurschner
Educational Opportunities: 
Home > Education & Events > August 2019 > Does Your Rural Property have Agricultural Income Potential?

If you’ve been considering residential property in the country, one characteristic to consider is whether or not it has agricultural income producing potential. An income producing property generates income for the investor/owner. When mortgage lenders review rural, single family residences they look to see if income is being generated from the property.

Why is that important? Some conventional loan programs disqualify the property due its ability to earn agricultural income. The good news is these income producing properties can be mortgaged by a lender specializing in agriculture, not merely homes. This means, as a buyer, you may still qualify for a long-term, fixed rate mortgage, rather than an adjustable rate loan or a short-term loan with a balloon payment.

Agricultural income could include and is not limited to;
  • Tillable acreage (hay, soybeans, corn, wheat, etc.)
  • Orchards
  • Logging
  • Pasture rental
  • Livestock
Hobby farms and farm real estate properties may fall into the category of agricultural income producing. If you find yourself looking for such a property, find a lender whose programs allow for loans secured by income producing properties. The size and scale of your property's income potential will dictate which loan product fits your individual needs.

Another tip is to seek out a lender with in-house financing for large, part-time operations and partner programs for small hobby farms. Even if you have a few tillable acres you rent to the neighbor, the right lender will have loan that fits your rural needs.

Doing a bit of research to see if the property you’re dreaming of may qualify for a rural mortgage with an agricultural lender can pay off in peace of mind, long-term, fixed rates and a team who understands all the ins and outs that come with buying a rural home.

This article is for informational purposes only.  Compeer Financial does not provide financial, tax or legal advice.
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