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Real Estate ArticlesLand Purchase is Key to NM Ranching
Buying a ranch in New Mexico is a smart move if it is approached as a "for profit" business. Most ranches are not profitable because the owners end up paying more for the land than the ranch can generate in profit. Do not make the mistake of purchasing a New Mexico ranch on a per acre basis or for more than 10 times the cash flow. Ranches generally sell for 20 times cash flow and that is the primary reason they never run in the black. The average New Mexico ranch buyer believes they can always do better than the previous owner. Most people purchasing an existing ranch--regardless of their experience level--have unrealistically high expectations in regard to production and profits. The mentality of buying a ranch is not unlike purchasing any other existing business to earn money. One good example of the business approach to ranching is the story of a venture capitalist that purchased ranchland in New Mexico. He knew nothing about the production side of ranching, so he partnered with people who had the knowledge to make his investment work. His success is directly attributed to keeping land ownership, farming and cattle production as separate entities. Proper management of the companies is another key to profitable ranching. His New Mexico land company legally owns all the acreage. The cattle company and farming company are run independently, but support one another. The cattle and farming divisions rent grazing pasture and growing land from the umbrella land company at current market rates. The ranch managers are responsible for outgoing expenses. Profit sharing and bonuses are distributed only after the rent payment has been made for the land. The venture capitalist said he found that ranching in New Mexico, when following other successful non-related business models, was as profitable as any other low-tech enterprise.
You can talk about... Land Purchase is Key to NM Ranching Tags: • investment • ranches • cash flow • land • earn money • market rates • new mexico • land purchase • land ownership • new mexico land • ranching • Related articles:
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