What to Do After Inheriting Land in Iowa

Inheriting land in Iowa can be a significant event, as the state boasts some of the most fertile and valuable agricultural land in the United States. According to the Iowa State University Extension and Outreach, the average value of Iowa farmland reached $7,559 per acre in 2021, a 29% increase from the previous year. Furthermore, Iowa is home to approximately 30.6 million acres of farmland, with 97% of the state's land area dedicated to agriculture. As an heir to land in Iowa, it is essential to understand the steps to take after inheriting the property to ensure proper management and decision-making.

Understanding Your Iowa Land Inheritance

Before deciding what to do after inheriting land in Iowa, you’ll want to understand exactly what you have received. Here are some key things to look into:

• Type of land: Is it farmland, timberland, recreational land, commercial real estate, or residential? This will impact how the land is valued and possible uses. Farmland makes up over 90% of Iowa’s landscape.
• Size and location: How big is the plot and where is it located in Iowa? The state has distinct regional land markets, so location will matter for pricing and demand.
• Revenue potential: What is the land currently generating in rental income or crop/timber revenue, if anything? Any buildings or other assets on it?
• Appraised value: What are estimates on the market value of the land and any income potential from it? Get professional appraisals.
• Mineral rights: Do the mineral rights transfer as part of the inheritance or are they reserved by someone else? This includes access to oil, gas, precious metals or other underground resources.

Review all historical property records, sales data for similar land plots, and current title commitments to educate yourself before deciding what to do next. Consider consulting Iowa real estate attorneys and land management specialists to assist as well.

Weighing Your Options for the Inherited Land

Once you understand what Iowa land you have inherited and its financial implications, you can explore the possible options on what to do with it. Primary options can include:

Sell for Cash

Selling the inherited property outright converts your new land asset into immediate cash value. You give up long term price appreciation and income potential, but can use the lump payment for other priorities.

• Pros: Maximize short term financial gain and get cash quickly without land ownership responsibilities
• Cons: Involves fees/commissions to facilitate sale, lose future land value upside in the area

Rent Out the Land

Rather than selling right away, renting the Iowa land to farmers, builders, hunters or others can provide rental income over time while you retain ownership.

• Pros: Generate ongoing passive income from the property without selling, maintain long term price appreciation
• Cons: Need to manage rentals and property taxes yourself or pay for a land management service

Develop/Improve the Land

If you inherit vacant land or farmland that could be rezoned, you may explore having infrastructure added to develop residential or commercial real estate ongoing rental potential.

• Pros: Maximize potential future rental income and property valuation over time after investing capital into improvements
• Cons: High upfront costs to add infrastructure before rents start coming in, risks in getting tenants/buyers later

Keep the Land as an Investment

Even undeveloped, Iowa farmland and timberland has a track record of steady long term price appreciation averaging 3-5% annually statewide due to strong agricultural demand.

• Pros: Benefit from ongoing equity growth in Iowa land over future decades with little effort required
• Cons: Still need to pay annual property taxes and manage the landownership administratively

Key Factors When Making Your Land Inheritance Decision

As you analyze options on whether to sell, rent or hold inherited land in Iowa, key factors to weigh for your situation include:

Personal Financial Needs

What is your current cash flow and income requirement? Do you need liquid funds in the near term for a purchase, debt paydown or other priorities? How is the inherited land valued on your balance sheet?

Energy for Administration

How much time and effort do you reasonably have to vet renters/buyers, manage lease agreements, oversee taxes and facilitate transactions for the Iowa land if not selling?

Future Plans

Can you utilize the land yourself long term? Do you intend to live in Iowa indefinitely to enjoy it? What are the area growth and land demand trends?

Market Conditions

Real estate markets like farmland fluctuate over time - is now a buyer friendly time? How do sale prices currently compare historically? Could pricing improve if you wait?

With inherited land in Iowa specifically, it’s also key to factor in the latest corn/soybean market outlooks and forecasts from the USDA as this will impact local agricultural land values. Utilize all data at your disposal to determine the ideal next step for your situation.

Selling Iowa Land You Inherited

If weighing your options leads you to decide to sell the inherited Iowa property, here is an overview of what to expect with the sales process:

1. Gather Documentation

Ensure you have all records in order related to the land title transfer, parcel boundaries, any leases in place, mineral/water rights commitments, appraisals and other key details. Historic income statements will also help market the earning potential. Buyers will conduct due diligence on these materials.

2. Decide on Sales Method

You can attempt to sell inherited land in Iowa yourself as a For Sale By Owner (FSBO) offer directly to buyers you source yourself through local marketing. Or engage experienced real estate professionals. RE agents charge commissions but facilitate all sales complexities for you.

Alternatively, some companies like [Land Boss] specialize in buying and reselling land. They may present fair cash offers to take the property off your hands, avoiding commissions and buyer finding efforts. Evaluate multiple Iowa land buying companies to identify the best terms if going this route.

3. Market the Sale Opportunities

If selling yourself or via an agent, you’ll need to actively market the land sales opportunity through local farm bureaus, online listings, print ads in regional newspapers/magazines and Iowa-specific land sale marketplaces. Plan for this process to take around 6-12 months on average if priced fairly to attract buyer interest.

Be responsive to communications and make the inherited property accessible for legitimate potential buyers to tour and assess in-person. Also prepare all legal sale transfer paperwork early in the process.

4. Close the Sale Transaction

With the right marketing and fair pricing tactics, you will attract interested and qualified buyers to make competitive cash offers or bid at auction for the inherited Iowa land. Protect yourself legally by only accepting purchase agreements contingent on inspection approvals. Demand proof of funds letters from buyers and use qualified third party escrow services to ensure safe and efficient land title transfers at closing. Pay capital gains taxes appropriately.

The strategies above will help successfully sell your inherited farmland, vacant acreage or other Iowa property for fair market value within around a year. Get guidance from local real estate and legal experts to ensure you follow all regulations and maximize your financial reward.

Turning Your Inheritance Into Passive Income

If you decide to keep the inherited Iowa property long term or need time to prepare for an optimal sale, generating rental income in the meantime through one or multiple tenants can provide helpful cashflow. Here are tips to effectively rent out the land:

Farmland Leasing

Over half of Iowa farmland is leased out to farmers rather than owner-operated. To estimate fair cash rent or crop share rates, research typical rents per acre in your county based on soil productivity estimates from Iowa State University. Market through local channels like the Farm Bureau that farmers rely on. Use precautions like requiring proof of insurance from renters.

Recreational Land Leasing

Allowing activities like hunting, camping or fishing through annual or multi-year licensing agreements can also produce rental income from your inherited land, even undeveloped acreage. State regulations apply for liability waivers and hunting tag policies.

Alternative Land Uses

Get creative and leverage unique parcels for purposes like equipment storage leasing, billboard/sign advertising, cell tower hosting, event venue rental or other commercial uses approved for income generation if zoning allows.

Manage rental contracts, insurance requirements, payment collections and lease renewal discussions yourself or outsource to a reputable land management company for hands-off administration. With multiple income streams from your inherited property, it can produce fairly passive ongoing returns during your ownership tenure.

Final Thoughts

Inheriting any kind of property or land can be a blessing but also comes with its challenges in deciding what to ultimately do with it. Hopefully this overview gives you a helpful starting framework if you have come into ownership of farmland, timber acreage or other real estate in the state of Iowa. Conduct further location-specific research, connect with trusted advisors, and assess your personal financial needs to determine the best path forward. Iowa land can be a valuable asset, so take time to explore how to ideally leverage your inherited parcel.

Frequently Asked Questions (FAQs)

I inherited farmland in Iowa and live out-of-state. What are my responsibilities as an absentee land owner?

As an absentee land owner of Iowa farmland, it's important to identify and pay all taxes owed, carry adequate liability insurance in case of injuries on the land, pay to install and maintain any necessary drainage tile, and fulfill weed control duties. Many choose to work with a farm management service for hands-off administration.

What taxes are due on inherited farmland in Iowa?

Taxes on inherited Iowa farmland can include income taxes on revenue generated from any harvested crops or cash rent payments. Additionally, property taxes must be paid annually to the county assessor's office based on the assessed value which may increase after inheritance transfer. Capital gains taxes apply if you later sell at profit.

My siblings and I inherited 400 acres of Iowa farmland together from our grandfather. How do we determine a fair rental rate to lease it out?

Work with your siblings to obtain multiple cash rent rate estimates from the Iowa State Extension service based on average county-level rates per acre and the corn suitability rating or CSR of the acreage's productive soil. This will help determine comparable market rates to educate negotiations with potential farmer renters.

I inherited timber acreage in Iowa but live out-of-state. What regulations and best practices apply for managing the cut and sale of timber?

The Iowa DNR Forests & Forestry Division can guide you on all regulatory requirements, permit needs and sustainable planning for any inherited timber or forest land. They offer a Forest Stewardship Program covering management planning assistance, cost-share incentives, and referrals to professionals.

How long does the inherited farmland or acreage sale process typically take in Iowa when working with a real estate agent?

Industry experts report that the average timeline to sell Iowa farmland and receive payment into escrow is 190-240 days, or roughly 6-8 months. This allows time to gather documents, vet buyer financing, complete due diligence inspections, negotiate offer terms if needed, and close.

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