Jason Spaeth broke the first commandment of ranch-buying when he came across a 7,000-acre cattle ranch with miles of flowing streams and deer habitat in western Wyoming.
“The number one rule is don’t get emotional, but I did,” says the retired financial services executive, who paid about $10.5m for the property in June. “I really fell in love with the place.”
Spaeth, who lives in Minneapolis, plans to operate the property as a cattle ranch and spend summers there with his wife and three sons. But he realises it will be difficult to make money in the cow business.
“The family has a real passion for the outdoors,” he says. The goal is not only to create an economically viable ranch, he says, but also to preserve the land.
The dream of owning an iconic western ranch often doesn’t make financial sense. Ranches are expensive, require constant attention and maintenance, and rarely make money.
“Often it is [a decision] more emotionally based than financially based,” says Joel Leadbetter, managing director of Hall and Hall, a broker specialising in ranch properties.
The image of the Wild West remains a form of catnip, luring buyers willing to toss aside logic and sound judgment to live the cowboy life. Images of celebrity ranch owners, such as actor Harrison Ford, CNN founder Ted Turner and former talk show host David Letterman, riding the range have only increased the appeal to a modern generation.
Yet even in a good year, a working ranch is a hard way to make a buck. Any property with more than a few cows usually requires a ranch manager and at least two or three full-time cowboys to run the day-to-day operation. Keeping those cows — and cowboys — fed and happy is expensive. Equipment such as tractors and trailers adds more expense.
In addition, cows are a commodity and prices can fluctuate dramatically. Cattle prices have fallen about 30 per cent in the past year alone. On top of that, disease and drought can devastate a herd.
“It’s a very complicated business,” says Robert Burch, a Philadelphia-based venture capitalist who bought a 9,000-acre ranch in Big Timber, Montana, in 1998. “It’s really a tough way to make money.”
Burch views his ranch as a hedge against inflation but, like Spaeth, he didn’t buy the property as an investment. He worked on a ranch as a teenager and caught the bug.
“I definitely wanted to be a cowboy,” he says. “I bought it as a passion.”
For wannabe cowboys, now might be a good time to buy. With cattle prices down, prices for ranches have dropped in recent months. Spaeth paid about 30 per cent less than the asking price for his property, which had been for sale for four years.
Mason & Morse is advertising a 4,000-acre ranch in Wyoming with a cattle operation, trout fishing and good hunting opportunity, which it describes as the embodiment of “all the qualities that today’s trophy ranch investor is seeking”, for $14.5m.
“There’s a lot of money out there, but a lot of buyers can’t find what they want,” says John Stratman, a principal of Mason & Morse.
If you are looking for a recreational ranch — maybe for fishing or hunting — there are plenty of options. A recent Hall and Hall report claims there is an “excess inventory across the board” for recreational ranches. “There hasn’t been a lot of motivation to buy recreational property,” Stratman says. “They’re just sitting there.”
In Steamboat Springs, Colorado, a 1,145-acre recreational ranch with stream-fed ponds was originally listed for $27.95m in 2010. It is now priced at $16.9m, according to Realtor.com. This year a 490-acre ranch was listed in the same town for $13.2m through Sotheby’s International Realty.
Putting an accurate price tag on any kind of ranch property is “more art than science”, says Jim Taylor, a partner at Hall and Hall. Appraising the market value of a trout-filled stream or proximity to elk habitat can be difficult. Irrigated land, proximity to protected national forest and a nearby airport can all affect the price.
Hall and Hall is selling Miller Lake, a 10,000-acre ranch in Anaconda, Montana, for $22m. The same agent is selling 15,000-acre Kessler Canyon ranch in Colorado for $32.5m. In Bozeman, Montana, Big Sky Sotheby’s International Realty is selling 640-acre North Ridge Ranch with nine miles of hiking trails and mountain views for $5.99m.
“It’s hard to find comparable sales,” says Ken Mirr, owner of the Mirr Ranch Group, a Denver-based broker.
With a working ranch, experts say, making the numbers add up requires a big spread with a big herd.
“What you realise over time is that it takes a certain scale [to be profitable],” says Burch, who has now put his own extended property up for sale. Hobble Diamond Ranch, which today totals more than 30,000 acres, has a price tag of $35m. It includes six miles of frontage on the Yellowstone river and 1,250 acres of irrigated cropland.
Yet Burch is not getting out of the ranch business. In fact, he is looking to buy something bigger. “From a lifestyle standpoint, it’s terrific,” he says.
The Hobble Diamond has been on the market since the spring and Burch is in no rush to sell. He expects it might take time to find a buyer.
“It’s very subjective, when buying these properties,” he says. “Everybody has their own idea of perfect.”
Buying guide
● Many properties are sold with hunting or fishing licences, which can be valuable assets
● Cattle ranches are often priced by “carrying capacity”, which represents the number of cows the land can sustain
● Groundwater contamination, floods and zoning restrictions are among the issues that can affect the value of a property
● Public land leases for grazing or recreation can help expand the size of a property
● Wyoming, Texas and Nevada are among the states with no state income tax
● A young, bred cow costs about $1,500. An experienced ranch hand earns about $30,000 a year, plus costs for housing, utilities, health insurance and, typically, one cow per year for meat
What you can buy for …
$2m A 35-acre undeveloped “ranchette” next to a golf course
$10m A 500-acre cattle ranch
$25m A 45,000-acre working cattle ranch with private hunting and fishing rights
More listings at propertylistings.ft.com
Photographs: Tom Reid; Ray King; Getty Images; Ryan Day Thompson