When you buy a ranch, one of the biggest decisions you’ll make is how to utilize the property. One of the ways to utilize the property is by raising livestock on the property and configuring the ranch accordingly. When raising livestock, you can either follow the do it yourself approach or lease out grazing rights to another rancher.
While many dream of running their own cattle operation, the reality is that managing livestock is a full-time operation. Fortunately, there are alternatives that allow you to keep the land in production while benefiting from agricultural tax exemptions.
Running Your Own Livestock Operation
If you want to raise cattle, sheep, or goats, be prepared for hands-on work. Livestock ownership means daily responsibilities like feeding, veterinary care, fencing maintenance, and dealing with unpredictable weather. It also requires infrastructure—fencing, water sources, and shelter—all of which add upfront costs.
Pros of owning livestock:
✅ Full control over herd size and management
✅ Potential for direct profits from cattle sales
✅ Hands-on experience with ranching lifestyle
Cons of owning livestock:
❌ High startup and operational costs
❌ Requires daily management and expertise
❌ Risk of market fluctuations affecting cattle prices
Leasing Grazing Rights to Another Rancher
If you don’t want the day-to-day responsibilities of livestock, leasing grazing rights is a solid alternative. Many established ranchers are looking for additional pasture to rent, and a well-structured lease agreement can generate passive income while maintaining agricultural use.
Real-world example: A landowner with 150 acres in Navarro County decided to lease his grazing rights instead of running cattle himself. He found a local rancher who needed more land, and they signed a multi-year agreement. The multi-year agreement allows the rancher to invest in the property and reap the benefits of the investment. The landowner still receives the benefits of an agricultural tax valuation and can focus on the activities that allowed them to purchase a ranch.
Pros of leasing grazing rights:
✅ Generates passive income without hands-on management
✅ Keeps agricultural valuation for lower property taxes
✅ Allows flexibility in how the land is used over time
Cons of leasing grazing rights:
❌ Less direct control over how the land is used
❌ Requires a good lease agreement to protect both parties
Other Land Use Alternatives
If livestock isn’t your thing, there are other ways to keep your land productive and maintain an agricultural tax valuation. Some ranch owners choose to:
Lease land for hay production
Enroll in wildlife management programs to keep their tax benefits without livestock
Each of these options provides similar tax savings and reduce the workload compared to running livestock.
Tax Benefits of Agricultural Valuation
One of the biggest financial advantages of keeping land in agricultural use is the reduced property tax burden. In Texas, land that qualifies for agricultural or wildlife valuation is taxed at a different valuation than market value and standard rates, often resulting in thousands of dollars in savings annually.
Real-world example: Imagine a 100-acre property near Hillsboro with a market value of $1 million ($10,000/acre), but with an agricultural valuation, the taxable value was reduced to less than $50,000 and the total taxes were less than $500 for year —saving the owner thousands of dollars in property taxes each year.
To qualify, landowners must show a history of agricultural use (typically 5 of the last 7 years) and maintain production through livestock, hay, or other approved methods. That’s why securing a grazing lease or exploring alternative uses before closing on the ranch is crucial.
Unless you plan to develop the property immediately after closing, having a strategy in place before buying a ranch is important for improving the profitability and returns of the property. If you’re unsure which path is best for your land, we can help walk you through the options, connect you with trusted local ranchers, and ensure you’re set up for success—without unnecessary tax burdens or headaches.
Thinking about buying a ranch? Let’s talk about the best way to make it work for you.
Jacob Story
DFW Story Group
📞 817-201-8352
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