So you want to own a horse farm? Whether it’s a longtime dream or a recent business pursuit, there are many factors to consider before you start looking at equestrian properties or comparing horse farm loans.
Should you build or buy your horse farm?
In short, buying an existing horse farm will be cheaper than building one, provided that the structures are mostly in good condition. When it comes to equestrian property financing, you’ll generally find yourself qualifying for a commercial real estate loan. Horse farm mortgages may fall in the residential category if the property is zoned that way.
Mortgage Types and Costs
Financing the purchase of an existing horse farm can be tricky. Most horse farms include a home on the property, but since the property overall is typically used for commercial activities such as boarding, breeding, and lessons, it’s likely to be zoned for agricultural and/or commercial use. If this is the case, many horse farm mortgage lenders will disqualify you from taking out a residential mortgage loan like you would if you were only buying a house.
Furthermore, even if the turn key horse farm you’re interested in is zoned for residential use, or you don’t plan to use it as an income-generating property, most banks and mortgage lenders will shy away from approving you for a home loan. This is definitely something to bring up as you shop around for the right bank or horse farm lender.
On the other hand, if you plan to build your horse farm, you may still find yourself in a gray area between residential mortgages and commercial real estate loans. Pay attention to how properties are zoned as you browse listings, and consult with your real estate agent and your lender about the best type of financing for your desired property. The type of loan you choose will also determine how much of a down payment you need to make.
- Lot and Land Loans: This type of financing allows you to purchase raw or improved land. If you plan to build your own horse farm, this may be the type of financing you need to start with.
- Commercial Real Estate Loans: If your property is zoned for commercial use and/or you plan to operate a business on it, a commercial real estate loan can provide financing for every step of the process, from buying an existing horse farm to purchasing raw land and constructing your own horse farm.
- Residential Mortgages: These loans are used by homebuyers to purchase residential property. You may be able to find a horse farm that qualifies for a residential mortgage depending on local zoning and the lender’s discretion.
Here again you’ll confront the unique combination of owning a home and business on the same property. There are two categories of taxes to consider with horse farm ownership:
- Property Taxes: According to Tax-Rates.org, North Central Florida’s average property tax rates range from 82 percent of assessed fair market value in Sumter County to 0.86 percent in Marion County and 1.05 percent in Alachua County. Ask about the property tax history when you go on horse farm showings. However, the tax history on raw land won’t be as helpful since the assessed value will change after you build on it.
- Business Taxes: If your horse farm is an income-generating commercial property, you’ll have to pay local, state, and federal taxes on your earnings as well as any employees you hire. Consult with an accountant for more information on business taxes.
This can be a big expense, especially for a large property. If you’re looking at existing horse farms, examine the condition of the fencing. If it’s in good shape, you can avoid spending money on repairs or replacements for at least the near future.
For those who are planning to build a horse farm, The University of Florida has a helpful guide to “Estimated Livestock Fencing Costs for the Small-Farm Owner.” Costs are broken down by the items needed to build field wire, barbed wire, and electrified polywire fences in a range of pasture sizes. And prices have been averaged out according to figures provided by retailers in North Central Florida.
Horse Farm Structures
As with fencing, the amount you spend on horse farm structures such as barns and outdoor arenas will depend on whether you’re planning to buy or build your horse farm, and the condition of existing structures. When you look at turn key horse farms, check out the state of the barn, the owners’ residence, arenas, breeding sheds, and feed storage buildings. Some repairs are more expensive than others. For example, repairing a roof might not be a big deal in the scheme of things but a foundation or structural issue will be more labor intensive and costly.
If you are going to build your own horse farm, you can reduce the cost of structures by starting small and only building what you absolutely need. For example, is it necessary to build both an outdoor and indoor arena? If you’re located in a popular horse community such as Ocala, you may be able to use a nearby arena until you can afford to build your own.
There are two essential types of insurance policies for horse farms, which you can purchase separately or as a package.
- Property Insurance covers your home and what’s inside it as well as the other structures, machinery, equipment and animals on your horse farm.
- Liability Insurance covers your residence and any business activities that take place on and off the horse farm. So if someone gets injured during a riding lesson, or a fire leads to the loss of boarded horses owned by others, you are protected from liability.
The Last Local Bank in “The Horse Capital of the World”
As a community bank serving North Central Florida, CBTFL is proud to be located in the heart of horse country. In fact, Ocala is often referred to as the horse capital of the world. We love horses as much as you do, and we understand that financing a horse farm is as much a labor of love as a business proposition.