Rural living and hobby farming hold great appeal as alternative lifestyles. Growing your own food and raising livestock in a rural area can provide a much-needed escape from city living and the suburban sprawl.
Is a hobby farm right for you? Here are some things you’ll want to consider before making a decision:
1. Are you really a farmer?
The classic image of a farmer is one of the rugged individualist. Hardworking and stoic in the face of adversity, the farmer’s life can be richly rewarding and devastatingly disappointing. And, while your farm may be just a hobby, your investments of time, effort, and money are subject to the whims of Mother Nature. Weather, disease, and predators can destroy the crops and livestock you’ve worked so hard to grow and nourish. Farming, even on a small scale, is not for the faint of heart.
2. Do you have a primary source of income?
Hobby farming, by definition, is more for pleasure than for generating income. Do you have the financial resources of a full-time job, trust fund, pension, or retirement income to fall back on?
3. How much land will you need?
Hobby farms aren’t usually more than a few acres. Full-scale farming in the US requires several hundred acres or more, while subsistence farming can be accomplished on as little as one acre of land. The amount of land you purchase depends on the crops you choose to grow or the animals you need to accommodate.
4. How will your hobby farm impact your taxes?
According to the IRS, “you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit.” Because hobby farms are for pleasure, yours will likely not count as a “real” farm when tax time rolls around. If you make any money off your farm, the IRS will probably consider it to be hobby income. There are possible hobby deductions, though, so just be sure to speak with your accountant or another tax professional before you make any decisions. (Spoiler alert: We aren’t tax professionals!)
5. How will you finance your hobby farm?
The US Department of Agriculture (USDA) backs financing for properties located in eligible designated rural areas. USDA loans are not limited to first-time homebuyers, require no down payment, have flexible credit guidelines, low annual mortgage insurance premiums, and more.
But, if you’re looking for a loan program specifically designed for hobby farmers, our RuraLiving® Home Mortgage program offers competitive pricing and products for rural homes and hobby farm properties that typically fall outside of traditional guidelines. RuraLiving® was developed by Embrace Home Loans for non-conventional properties and allows the borrower to lock in long-term financing at a fixed rate for the entire acreage and home.
Property highlights include:
- Five to 160+ acres
- Pasture and tillable acreage, horse ranches, livestock, vineyards, organic farms, and other acreages
- Outbuildings, barns, stables, silos, and sheds
- Multiple non-contiguous parcels
- Schedule F income accepted
- Land rent
- Primary residence and owner-occupied
Additional questions to consider before starting a hobby farm
Hobby farming is on the rise and, provided you know what you’re getting into, starting your own hobby farm can be a rewarding and enjoyable experience. This isn’t a decision to make lightly, though.
Do you have the money and time necessary to make this a successful and sustainable investment? Will you be raising livestock or just crops? Do you have adequate shelter for livestock? Does the property you’re considering have a reliable water source? Are there municipal requirements that must be met to convert an existing property into a hobby farm?
Before you make your move be sure to do your research. If you decide you’re ready to purchase a hobby farm property, contact Embrace Home Loans to learn more and discover whether or not our RuraLiving® Home Mortgage program may be right for you.