This episode details agricultural exemption preservation strategies for a $400K+ Texas acquisition with expiring cattle grazing status, examining how flexible grazing leases with one-year minimums allow partial acreage releases as child parcels sell, why hay baling provides easier county compliance than livestock, and how existing exemptions transfer through simple applications versus complex new approval processes that risk denial.
Key Takeaways:
- Hay Baling Beats Cattle for Exemption Simplicity Facebook posts generate immediate hay cutting demand for compliance documentation, while flexible cattle leases require complex acreage adjustments as subdivided parcels sell to fenced buyers.
- Transfer Applications Face 90% Less Scrutiny Than New Ones Maintaining existing ag exemptions through simple transfer paperwork avoids county audits and approval uncertainty compared to proving qualification from scratch on previously non-exempt properties.
- Rollback Taxes Don’t Apply to Non-Development Holds Land investors avoiding property development sidestep rollback tax exposure even if exemptions lapse, though maintaining status improves buyer appeal and reduces holding costs during marketing.
Listen for the complete framework on county-specific exemption requirements, audit probability assessment, and coordination with local realtors to structure compliant ag usage documentation.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Today wanted to go over some notes on ad exemptions. It’s that has recently come up for a larger deal and I think trying to understand some of the intricacies on how to preserve ad exemptions is
just helpful for the community overall here. It can vary area by area on how to handle these. But to take a step back, I I remarked last week regarding that much larger 400K purchase parcel that seems on paper to be one of the best deals that we’ve ever seen. Just a right place, the right time type situation.
We rushed our process where normally we would say no for that amount of funds going out, but you know, sometimes you have to know when to strike. But this particular parcel had an ag exemption on it, obviously reduces taxes significantly. But
As we were talking with our broker, he was really ensuring, hey, what’s the status on that? Are you going to make sure that you can maintain it for future end buyers? Because it obviously makes it much more attractive. And so to relay over some of the learnings here, first, if you lose your ag exemption,
It certainly is a negative here just because you’re going to attract more focused attention from the county or the city who might be approving or maintaining egg exemptions in the first place. know, if a certain property already has an egg exemption, you know, you’re usually not going to be.
attracting that much notice or checkups regarding that and you know the county if they see that they can get more tax dollars from you by you know missing out on an ag exemption you know to get it reapproved again is always going to be another hurdle and there’s no guarantees so bottom line it’s always easier to maintain versus getting a new one in regard to the
process here. So for the parcel that we’re looking at, we were aware that the current egg exemption runs out on April 30th. And you know, it’s possible that we might be able to sell all the acreage off within three months. It’s, you know, I’m never going to bet on that. know, tight turnaround, especially for higher dollar value parcels, really any type of parcel on your white lands.
Um, there’s too much variance involved to really, uh, guarantee, uh, 90 day total turnaround time, um, for property. And so I was trying to figure out, okay, what, what, are the effects of potentially, um, not having that ag exemption on, uh, for possible future buyers or just for us. Um,
And the key thing is, it’s not really going to affect a tax perspective, at least while you hold the property, because, you know, us as land investors and then, you know, trying to sell, we’re not trying to develop the property. So we’re not going to be subject to potential rollback taxes as the use of the land is not going to be changing, but, you know, the exemption could wean off. So.
You wouldn’t get that ongoing tax benefit, but not necessarily having to pay more. So in this particular case, we knew that the land currently and previously had an exemption for cattle grazing. That was from the brother-in-law of the seller for this property in this instance.
And so we were considering based on discussions with the ag office that we could have a flexible grazing lease with the existing seller’s brother-in-law just to continue his usage of the land. And per the ag office, those leases need to be at least one year in length. But apparently.
you can introduce some flexibility, hence the name, know, flex grazing lease where, you know, if we were planning to subdivide the property into various child parcels, which, was our plan, is that as some of those child parcels were sold off and then potentially the end buyers put up fencing for their, to, to enclose their specific parcel. And in this case, we actually have fencing along the front.
I think it actually surrounds the whole property, not, you know, not dividing up between it since, you know, it’s all one parent parcel at the moment. But if that end buyer was to put up some additional fencing, then, you you could remove the acreage being grazed upon by the cattle in this instance to the areas that haven’t been sold off.
So that allows some flexibility there. You know, you’d have to be a little creative with the terms of the lease, you know, that maybe have like a 30 day notice to remove all cattle from the property and, know, not reliant unnecessarily seasonality and so forth of leases. can go into a whole nother discussion about farming leases, which I think are even a bit trickier.
to deal with. So, you you want to preserve the rights of termination while you’re the owner. But, you you might have to adjust what you might be getting in terms of payment from that rancher with the cattle if the acreage is reduced.
to the flexibility of selling up the child parcels. So that was an avenue we were exploring. but then when, yeah, cause that just adds complications. You have a relation of the current seller that might be continuing on. And then it turns out, you know, he was planning on just moving to his cattle to a different property that they own. So we couldn’t really rely on that. So talking with our broker in the area.
Um, he seemed to indicate first off, you know, the County is quite lax here in that, know, immediately upon closing, just contact the tax office and, um, get them to, uh, uh, issue a, um, transfer and continuation of the existing ag exemption. Uh, and it would just be a new application you have to fill out, you know.
few brief answers, but the easiest way reliably to go about it first, know, again, the property’s already exempt. So you’re not really in the crosshairs of the county is just to note hay baling. So that usually is always going to be in consistent demand here. You know, we’re in the middle of winter at the moment. Grass isn’t really growing high.
But you can just indicate, hey, it’s open field, flat, can easily be cut for hay. And if the county ever needed to come check on it, grass is growing higher, the realtor is like, hey, we can post on Facebook. We have hay available to come cut. within a few hours, you’re going to get a multitude of responses.
then that’s just an easy pathway to maintain that ag exemption. So you’re saying, that in terms of like proof and so forth, going back to the county, that’s usually the easiest one to do. And, you know, really no major concern there because it’s basically carrying on same type of usage as it was before, you know, cattle were grazing on it before, but you know, now with no cattle, okay, people can just cut the grass for hay instead.
or he was saying, yeah, if you really needed cattle to come out here and know some farmers, you know, even within a day could get cattle out there if really needed check up from the County, what have you. But he was saying, yeah, it’s locally County’s not routinely checking up. He’s managed other Ag and Sceptre properties and never had a site visit or anything from the County. you you want to, be able to cover yourself from.
you know, if there was, you know, truly an audit on your property. But, you know, generally not, not as much of a concern, especially again, if you have that existing ad exemption and the surrounding area kind of supports that usage. So those were some extra learnings today here. Obviously everybody wants to keep taxes as low as possible, keep your holding costs low as possible, makes it more attractive for future.
buyers. So just make sure you familiarize yourself with those processes beforehand. If you’re not locally area, you have find a realtor assuming you’re going to use one for a dispo and figure out what they might suggest as far as maintaining that ad exemption. Just make sure you have all that straightened out before closing on a property. So hope that helps. Again, if you’re looking for any funding, we’ve got ton more deals have been coming in recently that to wire out.
alone this week. SiriusLand.Capital, check out Land Daily Diligence, Facebook group, we’ve been growing a lot more even over the past few weeks here, nearly 800 members. So excited to see that continued growth there and how much is being recommended, not even from ourselves but other members of the community within LAND and LANDPricer.AI for the most simple and accurate way to price.
Landeals. Engineers should be finished with the initial version this Wednesday. With that, take care. See you next time. Bye.
