Recreation profitable use of land

Rising production costs on farm and ranchland are motivating U.S. landowners to reduce expenses through recreational leasing of their properties. The American Society of Farm Managers and Rural Appraisers, based in Denver, says leasing land for recreational uses such as hunting, fishing and wildlife exploration is one of the fastest growing supplemental income categories for agricultural landowners.

Under ASFMRA's definition, a recreational lease is an agreement between a person who owns or controls access to a property and a person or group of persons who desires use of the property for recreational purposes. The lease grants the right to participate in a recreational activity on a specific tract or property for a defined time and fee.

Mike Ming, ASFMRA candidate member and real estate appraiser with Alliance Appraisal in Bakersfield, Calif., says the amount of income that can be realized from recreational leasing is based on many factors. These include the size of acreage available, the type and population of wildlife species on the property, location and aesthetics, and the required management for providing such services.

“Rapid urbanization has eliminated much of the nation's wildlife habitats and rural areas surrounding cities,” he says. “With surging growth in outdoor recreational sports like hunting, fishing and outfitting, sportsman organizations consider certain locations and types of U.S. farmland perfect resources for this specific need.”

According to Ming, farmland leasing to outdoor enthusiasts has become the best of both worlds — allowing hunters and fishermen new locations in pursuing their interests… and allowing landowners to benefit financially by opening up their land to accommodate the new paying audience.

Income potential

To date, recreational service fees on farms and ranchland are predominantly market-driven. To determine the recreational value of land, Ming advises landowners to calculate potential rates using comparative figures of land similar in size and wildlife populations.

“Hunting leases are among the most common types of recreation enterprises,” he says. “Leasing operations for this category are highly variable, ranging from minimal landowner participation to vast landowner offerings of services and facilities.”

Ming says payments for hunting lease are generally made on a per-acre basis for the privilege of gaining access to the land for a specified period. “The average price of hunting leases falls between $3.50 to $10 per acre,” he says. “Superior hunting may bring even higher prices if the experience is rewarding.”

Hunting leases are often compared to time-share leases for a vacation condominium. In that sense, leases can be sold to separate groups or individuals at different times or seasons to hunt specific species of game. The time-sharing concept affords more flexibility for landowners and can maximize fees. Plus one tract of land may be leased to an individual or hunt club several times during the same year for turkey, deer, pheasant or other seasonal game hunts.

Another popular concept is a shooting preserve which offers hunters an opportunity for shooting pen-raised game such as quail. According to Ming, most hunting preserves offer guides, bird dogs, meals and lodging, and game cleaning and packaging.

Shooting preserve hunts are generally sold as one-day, half-day or weekend packages. Fees range from $100 to $700 per day, depending upon the services.

According to Ming, developing a lease rate usually begins with some trial and error. “Pick a rental rate which you believe the recreational rights to your property to be worth and then begin advertising,” he says. “You'll quickly discover if the price is too high or not enough… and don't be afraid to ask experienced outdoor enthusiasts for their opinions of what they believe the lease is worth.”

For many who are offering recreational leases on their land, the “beginners” benchmark for fees is to accrue enough supplemental income to cover annual real estate taxes. “This theory seems to be a good starting point,” says Ming. “Under this premise, the landowner gleans enough additional income to pay the annual tax expense while slowly learning about recreational leasing.

“Over time, property owners can adjust leasing rates based on market value. They can build on what they have to offer or base the rates on short- and long-term financial objectives for the property.”

Ming notes, however, that landowners should resist the temptation to base a lease rate upon what a neighbor or acquaintance might be charging. No two properties are alike, and, therefore, different leases will command different prices.

Liability, self protection

Landowners considering leasing land should be aware of risks and costs. One critical cost consideration is liability. To reduce liability, landowners need to take several steps, which include:

  • Proper postings throughout property.
  • Eliminating and preventing hazardous conditions.
  • Obtaining adequate liability insurance.
  • Knowing exactly who is leasing the land.
  • Obtaining legal services.
  • Require proper licensing, permits from users.
  • Require users to follow local and state regulations for hunting, fishing.

Known as the “general obligations law,” all U.S. property owners receive basic protection under federal law which protects them against liability claims made by people who use their property. However, generalized protection such as this is not always good enough, says Terry Argotsinger, AFM, ARA, a partner with Stalcup Agricultural Service, Inc., in Storm Lake, Iowa.

“If you're considering recreational activities on your land, it's a good idea to get liability insurance coverage for yourself. It's also wise to require people or parties utilizing the property to have their own liability coverage as a way to further protect yourself from possible lawsuits.”

According to Argotsinger, an insurance coverage clause should always be written into the lease requiring the lessee to prove liability and property damage insurance.

Industry standards are for limits of $1 million in personal liability and $100,000 for property damage or loss.

“The reality is that anyone can be sued, no matter what steps they take to protect themselves,” says Argotsinger. “You have to think it through carefully and give yourself peace of mind in knowing that unforeseen accidents and mistakes can happen, especially when you're dealing with the general public.”

As for hunting and fishing licenses, permits and regulations, Argotsinger says, landowners should know what is required and allowed on their property for each type of planned venture. “Under most hunting and fishing leases, it is the hunters' responsibility to comply with state wildlife licensing requirement,” he says. “However, landowners still need to be informed and should contact their local departments of natural resources office or the U.S. Fish and Wildlife Services to find out everything they can to insure that users are following all required standards.”

He adds that leasing private ground under a contractual format reduces the level of liability for all parties while increasing safety. “The end result is a more satisfying and higher quality recreational experience,” he says.

Lease provisions

The two most important aspects in recreational leasing are having a trustworthy tenant who will be a good steward of the land and having a well-written lease agreement which sufficiently protects the landowner, says Argotsinger. Critical to success is a solid relationship between persons who are ethically and financially responsible.

“Certain provisions should be included in the lease and committed in writing,” he says. “Failure to document is where problems arise. The risk is too high not to have the terms on paper. It's your best protection and best guarantee that the process will go smoothly.”

Argotsinger outlines provisions most common in recreational lease agreements.

  • Names of lessor (landowner) and lessee (renter) — Lessee may be an individual, a group of individuals, a hunting club, sportsmen association, fish club, bird watchers group or any other recreation group.
  • Description of lease purpose — Definition of services and activities allowed on property. Description of services and activities not allowed may also be included.
  • Property description — Description of areas allowed for access and a description of areas off limits, including safety zones around homesteads, barns, pastures, livestock, adjoining properties, waterways, etc. Inclusion of a map is recommended.
  • Terms and timelines — Defined by days, weeks, months or season.
  • Rental rate — Amount that lessee will pay to lessor with specifications on payment dates, all payment received by beginning of lease period. Deposits and penalties to be included.
  • Cancellation provisions — Terms for contract termination or cancellation should lessee violate provision of lease, i.e. littering, use of alcohol, entering non-allowed areas, harvesting off-limit species, etc.
  • Lessee duties — Things required by lessee as directed by landowner — such as closing gates, repairing broken fences, proof of insurance, licenses, and permits.
  • Lessor duties — Environment maintenance, supervising tactics.
  • Wildlife harvesting — Particular species that may be killed in accordance with local wildlife management codes. Compliance with all state and federal game laws should also be stated in the contract.
  • Posting responsibility — Defining which party will post property and patrol to prevent trespassers.
  • Occupancy — Number of guests allowed onto property at any one time. Considerations are based on size of property, access roads, parking, and wildlife populations.

Marketing, promotion

Understanding your land's realistic potential under a recreational lease is critical for success. With this is also the necessity for an effective marketing plan, says James Welles, ARA, chief appraisal officer with Farm Credit in Albuquerque, N.M.

“To achieve your financial objectives for supplemental income, marketing and promotion of your land for recreational activities need to be accurately aligned to the demands and needs of your target audience to create interest,” he says. “Most U.S. landowners are farmers. And while most are good managers of crop production and livestock, few have experience in marketing recreational services on their land.

“Marketing a recreational lease is a continuous, year-round process. And it is important to understand that the primary reason that a sportsman or hunting club will lease your land rather than another property is because they believe a better quality recreational experience will be realized.”

Welles, an avid hunting enthusiast himself, says sportsmen are most attracted to land with the following characteristics:

  • Privacy with less competition from other hunters.
  • Abundant game densities.
  • Accessible location and convenience.
  • Minimal restrictions.
  • Aesthetics.
  • Comfortable camping or lodging features.

“You are not just selling a product but actually managing the outdoor experience for your clients,” he says. “To stay in business for the long term, make sure you're providing an experience that the outdoor enthusiast will want to repeat.”

As for advertising your property, Welles says the message and description about the property must present a strong and favorable impression to the audience. He also emphasizes that landowners should never attempt to sell something they can't provide.

“Nothing travels faster than bad information about hunting or fishing experiences,” he says. “Word of mouth is only as good as the services and land provided for the outdoor experience. A dissatisfied client is the worst kind of advertising. That's why it's important to give an honest portrayal of what the outdoor sportsman can expect when renting your land.”

When considering what types of advertising to implement, Welles suggests the following communications vehicles:

  • Newspapers, magazine, brochures or direct mail.

  • Trade journals.

  • Sports shows, local regional and national referral.

  • Yellow pages.

Another option for proper marketing of land for recreational purposes is the use of consulting firms. According to Welles, these types of professional services specialize in the marketing and promotion, management and booking phases of the recreational lease process. For a fee, the consultant takes on all management roles while securing the property owner with his or her required income for the service.

“The advantages in utilizing consulting services are vast and highly effective especially for big game hunts,” he says. “As experts in the field, these organizations have the ability to match the right audience with your property while taking on responsibilities of advertising, coordination, contract negotiation and liability insurance coverage.”

The American Society of Farm Managers and Rural Appraisers, headquartered in Denver, Colorado, is a non-profit organization for professionals who provide management, consultation and valuation services for rural and agricultural assets throughout the United States, Mexico and Canada. ASFMRA members manage more than 25 million acres of farm and ranch land for absentee owners, banks and trusts. Members complete more than 175,000 appraisals a year on more than 30 million acres of land and offer appraisal review services as a double check on their work.

For more information on the ASFMRA and/or recreational leasing, contact Cheryl Cooley at 307-758-3513 or go to the American Society of Farm Managers and Rural Appraisers Web site at Cooley is communications manager for ASFMRA.

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