Rural farm property surrounded by mountains

Buying Rural Property: A Complete Guide Before You Buy

Hanna Kielar9-Minute Read
June 21, 2022

Buying a piece of rural property is a dream for many people. For some, it’s the prospect of starting a hobby farm or growing one into a full-fledged working farm. Others envision owning a cabin on the lake where they can bring their family on the weekends.

But there’s a lot to know about buying rural property. Before you start the search for your dream piece of land, it’s important you understand exactly what to expect and what hurdles you might encounter.

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Decide What Type Of Rural Property You Want To Own

When it comes to buying a rural property, you have many options. Some properties serve as your primary home, while others are a business. It’s important to know ahead of time what you’ll use your rural property for since different types of financing are required for different uses.

Hobby Farm

A hobby farm is a small-scale farm that’s run as an interest or source of entertainment rather than for profit. While you might make some money from a hobby farm, it’s likely not going to be your primary source of income. And for many people, their hobby farm costs more than it brings in. According to the IRS, activities that you do as a hobby — including farming — can’t be counted as a business activity for purposes of tax deductions.

In general, a hobby farm is considered anything on 50 or fewer acres but is often closer to just a few acres. But it’s really not about the acreage. You could have a hobby farm on far more than 50 acres, and you could have a profitable farming business on fewer. The important distinction is whether it’s profitable.

Weekender Property

A weekender property is typically a home bought as a vacation home and used for weekend getaways and extended family retreats. If you live in the city, you might purchase a weekender property to have a space for outdoor activities you can’t do at home, such as hiking, swimming or gardening.

Weekender properties can cost anywhere from just a modest amount for a small cottage to millions of dollars for a beach vacation home.

Working Farm

A hobby farm isn’t the only type of rural property you might consider. Many people finance and purchase working farms and ranches. Whether your farm or ranch is used for growing produce or raising livestock, working farms are considerably larger than hobby farms. According to USDA data, the average working farm size in 2019 was 444 acres.

A more important distinction between a hobby farm and a working farm is profit. While hobby farms might bring in some income, they aren’t profitable revenue sources and certainly wouldn’t suffice as your full-time job. But a working farm is profitable and is classified as a business by the IRS.

Keep in mind that given the business status, a special kind of financing might be required to purchase a working farm.

Self-Sufficient Property

A self-sufficient property is one that isn’t reliant on any outside sources to operate. Self-sufficient properties can generate green energy – often through off grid solar or wind – to power their homes.

Many self-sufficient property owners take it one step further, raising their own animals and growing their own vegetables to sustain themselves rather than grocery shopping as others would. This type of living is often called homesteading.

It’s important to know that running a self-sufficient property isn’t easy. A lot of work and expense are required both to get started and to maintain the rural property’s self-sufficiency.

Affordable Rural Home

When people picture rural life, they often picture a hobby farm or homestead, but that’s not always the case. In fact, most rural homeowners have normal homes – such as a Cape Cod, ranch or other popular house style – that just happen to be in a rural area.

The government makes it easier for low-to-moderate-income families to buy rural homes with USDA loans. These loans can come directly from the USDA or from a USDA-approved lender. To be eligible for this type of financing, a home must be used as a primary residence, be located in an approved area and meet certain structural requirements.

Raw Land

Rather than buying an existing home, some buyers look for raw land that they can use as they wish. Common reasons to buy land would be to build a home to live in, to build a home to sell, or to simply keep the property empty. For example, you might buy a piece of land to use for hunting during certain times of the year.

You might also buy raw land as an investment, especially in an up-and-coming area. This type of real estate investment – known as buy-and-hold flipping – is when you buy a property and then hold on to it until the value increases and you can sell for a profit.

Rental/Investment Property

The final type of rural property you might buy is a rental or investment property. The two most common examples of this are short-term and long-term rentals.

A short-term rental – such as an Airbnb – is a home that you rent out for short-term and vacation visitors. A beach house, country home or cabin in the woods – or even a unique style of alternative housing – might be a popular destination spot, and the owner might rent it out to tourists and visitors.

A long-term rental is one the owner rents out to a particular tenant for longer periods of time. These rental properties typically require a lease of about 1 year, though it could be slightly shorter or longer.

In the case of both short-term and long-term rental properties, they serve as a source of recurring income for the owner.

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Best Ways To Buy A House Or Land In A Rural Area

Once you’ve decided on what type of rural property you’re in the market for, it’s time to start searching listings of land for sale in your desired area. Let’s look at some strategies to help you find your perfect square mile of off-grid or comfortable country living while avoiding some of the pitfalls of buying rural land.

Learn How To Find Rural Properties

One of the most challenging parts of buying a rural property is finding the right one. Especially if you’re new to the area or new to real-estate buying, you might have no idea of the best way to find rural real estate properties for sale.

One of the best strategies is to start by talking with a local expert. For example, local real estate agents are likely to have some good insight on finding the perfect property. You can also search for land online using the Rocket Homes® home search.

Scope Out Land Options And Consider Locations

When you start shopping around for the perfect rural property, it’s important to explore your options. Just as it isn’t wise to buy the first home you look at without learning more about the particular house and the market in general, you shouldn’t buy the first piece of rural land you find without doing your homework.

First, shopping around can give you an idea of locations and features you especially like. You can also find out if certain areas fit within your lifestyle more, or if there are neighborhoods you should avoid.

It’s also important to consider what you plan to do with the land. For example, if you’re buying land to build a house, it’s best to make sure the lot is actually well-suited for a home and won’t be too expensive to clear and grade. If you’re buying land to farm on, it’s wise to ensure the soil is actually suitable for farming.

Research Lenders And Loan Options

Most people can’t afford to buy a piece of property in cash. As a result, you’ll have to shop around for a loan.

First, it’s important to know ahead of time what you’ll use the land for. Financing a primary residence, rental property and business property might be three entirely different processes. It’s important to consult a lender to find out what type of loan you’ll need and the requirements to get it.

The federal government has loan programs available for individuals who want to buy a rural property to use both as a primary residence and as a farm. Research your options to find out which loan program, if any, you may qualify for.

Be Aware Of Codes And Restrictions

Before buying a piece of property, it’s important to understand local codes and zoning and any restrictions or encumbrances you may encounter.

In some areas, rural zoning limits how much you can develop a piece of land. These laws are intended to preserve open land but could be a nasty surprise if you bought the land intending to build on it.

Categories of zoning that restrict what you can do with a plot of land include:

  • Residential
  • Commercial
  • Industrial
  • Agricultural
  • Historic

Even one zoning category can have more specific restrictions. For example, residential zones could be classified as either single-family, suburban or multifamily, and you could be prohibited from using the property for other purposes.

Another factor to look out for is the set of local codes for a particular type of building. Whether you’re buying or building a residential, multifamily or commercial building, you’ll need to meet certain code requirements. Check with your local government to learn more.

Finally, make sure you understand the land boundaries. In rural areas especially, it’s difficult to know where one property ends and another begins. Before you close on any property, request the property boundaries from the county assessor’s office. You may learn that a piece of land isn’t as large as you thought. Similarly, you might learn that some of what you thought would be your property is actually a part of a local park or right of way (land that is maintained by a homeowner but technically owned by the city).

Know Which Grants And Specialized Loans You May Be Eligible For

Many types of grants and financing are specifically designed for people purchasing rural land. Before you buy rural property, be sure to research your options.

The USDA has grants for certain types of land. For example, grants are available for people who plan to grow a particular specialty crop, including fruits, vegetables and tree nuts. Grants are also available for those building community facilities or growing rural small businesses.

Other financing assistance includes farm loans to family-size farmers not eligible for a commercial loan, as well as loans for beginning farmers and ranchers just getting started. For more information, see the USDA’s full list of grants and loans.

Know What Tax Breaks To Expect

Depending on where you live and what you use your rural property for, you might be eligible for some tax breaks.

First, the IRS allows business owners to deduct expenses associated with running their business. According to IRS guidelines, you can deduct expenses that are both ordinary and necessary for your business.

Some property tax exemptions can even help reduce your tax bill. These agricultural property tax breaks are usually available to farmers. But depending on your state, you may also be eligible for exemptions for having green energy equipment or agreeing not to develop the land.

Set A Purchase And Maintenance Budget

Whether you’re saving for your next home or starting a business, real estate can no doubt be expensive. Unfortunately, many people underestimate the cost. Here are a few expenses to budget for when you’re planning your purchase:

  • Down payment
  • Closing costs
  • Moving costs
  • Taxes
  • Insurance
  • Maintenance

If you’re buying rural land to use as a business, you’ll have even more expenses, including equipment, marketing and more. Before you make such a big investment, make sure you have plenty of room in your budget.

Reflect On Your Goals

One of the best steps you can take before buying a rural property is to set really clear goals. Make sure you know upfront what you plan to do with your new property so you can plan your budget and financing ahead of time.

Buying real estate can be a stressful process, and you’re sure to encounter bumps in the road. The better you’ve planned ahead, the more prepared you’ll be to address them.

Look For An Experienced REALTOR®

Having an experienced and knowledgeable real estate agent can make or break your property purchase. Rocket HomesSM can connect you with Verified Partner Agents who have been fully vetted and specialize in a particular area, such as the rural real estate market where you’re shopping. By connecting with an agent who’s an expert in buying rural property, you’ll already have a head start.

The Bottom Line

A good plan is essential to making sure that your experience in buying a rural property is the adventure you want it to be. Start by deciding what type of property you’re looking for, and be sure to set a budget for buying and maintaining the property.

Shop around for lenders, loan options and grants. Be aware of local codes, zoning and other restrictions that could turn your adventure into a disaster, or at least a costly financial misstep.

To budget for and find a rural property in your price range, it helps to know how much property or house you can afford. Start your approval process with Rocket Mortgage® today.

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Hanna Kielar

Hanna Kielar is a Section Editor for Rocket Auto℠, RocketHQ℠, and Rocket Loans® with a focus on personal finance, automotive, and personal loans. She has a B.A. in Professional Writing from Michigan State University.