Demo in Iowa: Due Diligence Process for Off-Market Opportunity

Learn how to conduct fast land diligence to make informed decisions when considering a property.

What You'll Learn

In this article, we delve into a fascinating off-market opportunity presented by a farmer in Pocahontas County, Iowa. You'll gain insight into recalculating costs per tillable acre, examining comparable sales in the region, conducting land diligence on soil quality and elevation, and analyzing flood risks and vegetation patterns using advanced layers of data. With a comprehensive understanding of the property's history and potential challenges, this demo shares the valuation findings and the ultimate decision made regarding the opportunity.

Please note the evaluation of the property discussed is subjective and does not constitute a definitive judgment on its value or suitability for investment. The decision to consider or pursue an opportunity should be based on individual circumstances, preferences, and the advice of qualified professionals.

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Demo Hosted by Rob Moore

Rob is a farm operations professional, specializing in row crop farm sourcing and acquisition. With a background in forensic accounting, research and development, and program management in the waste and recycling industry, he brings a unique perspective to his role. Rob's prior experience in livestock operations and real estate management adds to his expertise. Holding a degree in Philosophy from Rollins College, Rob has a diverse skill set that enables him to effectively navigate the intricacies of the farming industry.

Transcript:

0:00 - A farmer reached out to us with an off-market opportunity in Pocahontas County, Iowa. The offer was about one and a half million dollars, or just under ten thousand dollars per gross acre.

0:08 - Since this is farmland, the first step is to recalculate the cost on a per tillable acre basis. Using the CLU view, I can verify that there are 130 tillable acres, adjusting my price assumption to around eleven and a half thousand dollars per farmable acre.

0:22 - To quickly find comparable sales, I accessed the sold land layer where I can scroll out and sort by sale date, type, and acreage. This helps me get a general understanding of rates in the region. Looking through auction results alone, I have a wealth of information from the past six months, confirming that this parcel passes initial muster for price range.

0:40 - Moving on to land diligence, I begin with the soil analysis. The property has an 83.3 CSR2, and I notice that the dominant soils are heavier clay soils. There is also a significant slope and moderate erosion in the southeast corner.

0:53 - When I toggle to elevation, I see a high point in the south and a general northeasterly slope. The soil type and elevation raise potential flooding concerns.

1:03 - To investigate further, I turn on the flood layer, which confirms the risk specifically in the northeast portion of the property.

1:08 - To dig even deeper, I utilize the NDVI (Normalized Difference Vegetation Index) layer, which shows the relationship between red and infrared light as a proxy for general vegetation. Once again, this confirms potential issues with the southeast section and an overall reduction in vegetation across the eastern section compared to the darker green on the west. However, the primary satellite image still shows a fairly clean property.

1:30 - Finally, I utilize one of our most informative layers, the satellite history. This gives me a much clearer picture of potential problems on this property. By scrolling back through over 10 years of historical images, I can identify problem areas showing crop loss, including multiple years with standing water.

1:46 - To accurately assess cap rates, I reference the property tax layer, which provides data available back to 2010. Along with on-site diligence and reviews of crop history and county yield information, our valuation came in below what was acceptable to the seller. As a result, we decided to pass on the opportunity.

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