For many years, ranch ownership has represented a popular vehicle for the storing of wealth. However, rural agricultural land (and particularly ranch land) has not typically been classified as a commercial investment-class asset for several reasons.

Undeveloped land has historically been viewed as a “lumpy” and illiquid investment, meaning that an investor could only buy and sell in large quantities, and often times with a high degree of price uncertainty. The purchase of raw land also typically involves high transaction costs, technical operational challenges and on-going ownership costs. As a result, there is a significant barrier to entry and more limited participation than might otherwise occur. Nevertheless, many private individuals have recognized the positive long-term investment attributes of farm and ranch land and have optimistically participated in the sector.

New ranch owners soon discover that operating a ranch profitably can be unexpectedly difficult. Finding hiring and retaining highly qualified employees who understand the business of ranching is a serious challenge for even the most seasoned owners. Even very smart, hard-working ranch hands may utilize old-fashioned methodologies that unintentionally contribute to financial losses. As a result, absentee ranch owners often en up with chronic negative cash flows as they subsidize ranching operations that are structured improperly or managed inefficiently.

Agricultural land investment has become increasingly fashionable in recent years as both mutual funds and private equity firms have begun to acquire farmland. Nevertheless, ranch land largely remains the province of wealthy individuals or active producers because it tends to be more difficult to manage sustainably than farmland and does not offer attractive leasing rates. As a result, the price of ranch land has escalated to a point where conventional ranchers are being priced out of their own market and are unable to maintain an economically viable property.