The Bellingham Real Estate Podcast
The Bellingham Real Estate Podcast
EP: 0042 - All Things Agricultural Land. Farming & Developing in Whatcom County
Agricultural land is a major part of the economy in the rural areas of Whatcom County including Lynden, Everson and Ferndale Washington. Whatcom County is also the top producer of red rasberries in the country.
Harm Lidhran joins the podcast to talk all things farming, as well as developing agricultural land.
1:20 Harm shares his story developing agricultural land for profit.
13:00 Buying land for berry farming.
14:00 Blueberries verse Rasberries.
16:20 Finding berry farm listings for sale.
19:00 Financing berry farms.
22:00 How water adjudication is affecting farm land.
For more, you can reach Harm at harml@johnlscott.com or at 360-318-6311
Hello, and welcome to the Bellingham Real Estate Podcast. I'm Paul Balzotti I'm here with Harm Lidhran, good to see you, man. Thanks for joining us. And, today we are talking agricultural berry farmland. And in the ag world, you are a really good guy to talk to because we want to discuss dividing and developing agricultural land, as well as the berry farm world.
basically all things. If you have agricultural land in Whatcom County, or Skagit County for that matter. ways that you can, you know, build a business or, or create revenue from the agricultural land and you are and all of that. Right. So let's get right into it. So you, you, you own and run a berry farm, you've sold berry farms, but then you've also divided, subdivided, and developed agricultural land as well.
And I we're going to touch on berry farms how to evaluate them a little bit. And, and the water adjudication situation around the farming in a bit. But I want to start with the subdividing and the developing of agricultural land. So give us your personal you have a, you have a success story doing it and then you're in the middle of doing it again.
Walk us through, you have what you already have done as far as how you you had, was it 20 acres? What was it?
Yeah, it was a 20 acres, parcel that I had. And then, it was in a five acre zone. But, instead of having 4 or 5 acre lots, we decided to cluster lots where I was able to do one acre lots and then, keep the rest for eg. So I was able to have a 16 acre farm plus three extra lots on it.
Sweet. So you basically and you just went down to the county. They expressed that you could do that.
Right? Yeah, yeah. But it's a bit of a you got to jump over a little bit of hoops of getting, the soil tested for the septic because we're out in the county. Yeah, yeah, just getting that storm to watch. And, what else was there? Yeah. Just to it it to have the permits to build. Yeah.
It was the biggest thing.
Yeah. So basically you're saying dividing part was, was a few hoops, but just making sure that you could then the lots would be buildable essentially. Right. Yeah. So so you basically took 20 acres. You did cluster plotting. That's what we call it divided and then did so even though a zoned R5.
Right. But we were able to cluster them and then keep the rest rig.
And that's really interesting to know. So if somebody sees a 20 acre or a ten acre parcel. Yeah, sometimes you can take less than five of those acres and put them in one acre pieces. Correct.
But however, when you are purchasing and if it's in a five acre zone, but for example, 16 acres, nobody else can subdivide these right now. Yeah. Yeah. So yeah. So it was.
Like a, a trade off essentially. Right. So because you so basically you, you take the and yeah that makes perfect sense. So you take the 20 and instead of being able to make 4 or 5 acres. Yeah. You keep 16 and then you get one acres of the three, which eliminates the others from being able to be divided.
So you're still getting four lots, right? Yeah. but then you get to keep 16 for farming.
Yeah.
That's brilliant. Yeah. That's brilliant. So, so then and here's the thing. When you're doing development development as you learned and people may or may not know, a lot of times a one acre lot, could be worth, I mean, 80% as much as a five acre lot in some cases, you know, because not everybody really needs five acres, you know, unless they have a very unless they're farming or you have a very specific purpose is like equestrian or something like that.
So, you probably got more bang for your buck all around because you have more acreage to continue to farm. And then, so you, you, you divided the you did the cluster planning for the for lots, which is just like surveys. Did you have to do a wetland delineation?
No, I didn't I wasn't in the flood zone or okay. It was a wetland either. So worked.
Oh that's good. So you just did you surveys then you.
On the septic and make sure where was there.
Oh yeah. Yeah. And you would you bring power into each lot.
I could have, but I didn't get to that stage. I was able to sell it before.
Oh yeah. Yeah, basically. So to couple who are willing to pay, bring the power. Right. Yeah. Right. So and then, and so how much were you selling those lots for?
I sold them for 250.
250 each.
250.
Each. So that's my point is let's say you would have done so you, you got you got 250 for each one of those acres at five acres there probably only worth 350.
Right.
And so and so it was a better. And then you get to keep 16 acres. Right.
Because if I was able, if I was going to sell the 20 acres, I think I would have got like 750 out of it. but it's since I subdivided and stuff, I was over 1.2.
Very good thing. Yeah, yeah. Wait, wait. Okay. Do that. Let's back that up though. So you're over 1.2 because 250.
250 each. Three lots. Three lots. Yeah. And then the other one was I believe, almost, 450 plus to we added the 215 for that fourth lot with the 460. So we sold that one for 640 that.
That because of the six.
16.
Acres. Yeah. Okay. And then did you sell somebody who wanted to farm it essentially.
Correct. And they can still build a house there too.
Okay. So yeah. So I want to talk to you about the ability to farm. Yeah. You know, and how you evaluated that. but let me just while we're still talking about developing property, you then, just went ahead again and took some of that money and you bought another property, right? And, And you're okay. You already started subdividing it?
No, I'm still waiting for the wetland delineation.
Okay, okay.
But once we get that, let's.
Talk about you saw that on the MLS.
Right?
We talked about it and then evaluated it kind of together. But you you you're the one who found it looked it up. And so somebody wants to contact you and learn how to do this. You have to kind of have your eyes open for these opportunities because they, they, they can exist. But you sometimes you have to kind of dig a little deeper.
What caught your eye with this next investment that you just got involved in.
Well especially with the water adjudication. There was no water rights for that one. So it wasn't moving. And so they had to bring the price down. And I was looking at it and then I'm like, oh, it's in the R5 zone though. And but it does have a wetland. But it was like 30 acres. I still could at least get four lots out of it.
So it was a 30 acre property.
Yeah.
Which, which priced it what?
It was a price. Originally it was priced at like 700,000 by the time I picked it up, but it was like 570.
Do you have a house on it? No.
Nothing. No power? No. Okay.
So 570.
For 20, 30.
30 acres.
30 acres.
And you evaluated the 30 acres and realized that you could still break it out into five acre pieces? You said, yeah.
And then make them cluster lots, but, what do you call it? Because it's wetland, so I won't probably get all six lots. Yeah. So I'll probably get at least four though.
So are you going to do the same thing there where you'll have one big lot and then.
Correct. So yeah, one big lot. And then I'll have about three smaller lots okay. Yeah.
And then but you said there's no there's water issues, there's water.
So there's wetland which we'll stay in the ag part. And then I did get some shares with that too. So I got three shares that came with the farm.
They came with water, water shares. And when you say water shares, are they literally like, well, water rights shares that were in the deed with the property. Is that what.
It's a mountain view association.
Oh it was a water water water association. Yeah. So that's always.
Right. Right. Yeah.
I mean you're not dealing with the owner well trying to get that approved. Right.
So I got those water rights, I came which was like another 20,000 each. Okay. Which I didn't have to pay for came with the property. Okay. So that was a nice.
So let's just let's just, you know, because this is, we're trying to give good information here and trying to be a little provocative here about what's possible. So walk everybody through, if you don't mind. Yeah. okay. So you bought it for this much, right? How much do you plan on putting in? How much do you expect to get out?
All right, so the application and everything I believe is going to be about 10,000.
Okay. But you paid the how much for it?
I paid for 7470.
Okay. So 10,000 now for 80.
Sorry, I paid 570.
Oh, if I set this by 70. Yeah. Put 10,000 in the application. Right.
And then, for soil testing and septic, all that, I'm going to be putting in another about 10,000.
Okay. So okay. So five, five, five, 75, 85, 90.
Nine, 90. And but I'm done. just with all the permits and everything, I think I'm close to 600.
Okay. So let's say we're round up to six, 600.
Yeah. And then after that, there's still need to be power if I want to put it in a road. And Yeah. And the septic designs, septic design.
So you're not going to put the septic in but you'd like to get the designs and so that somebody knows.
Yeah I like to put in the design. So everybody knows it's possible to put the septic in. And they don't have to get the study.
And how much is a design.
Design is about $3,000 okay.
So let's say you have another 12,000 into that. So we were already at 700. now we're putting in septic designs and maybe putting a road maybe. So you're, are you thinking your budget to maybe do another $100,000 maybe in all in, so maybe now you're up to 800 total?
I could be, yeah, if I put it in the road. But then I bring the price of the lots up, right? The more I put into it, the more the price comes up. Right?
Right. So you have 800 and then so now I mean obviously we're not pre marketing because we're not listing these right now. You don't even know if you're going to list you just theoretically, if you the the proposal would be then you're assuming you would have each lot list for how much.
Right. If there were ready to build, I think I would put it up for about 3 to 300,000 each, each lot.
And they all would be about the same.
Same. Yeah. Yeah. So three lots would be 300,000 each. And then I still have the form and.
Then you still have the.
Farm. Yeah. So I kind of make my money back and I still have the farm as my profit.
So that's sweet. So then the farm, but there's no house there.
There's no house and there's no water rights. So that's tricky. That's where that issue comes up. Yeah. So I could make it into a ranch though, because it's pretty plain. Yeah. So, it could, work as a ranch for horses or even cattle.
A you mean, you mean lease it to somebody else so that they could. Or what do you mean by correct?
Yeah. Because I'm still allowed to put a well in there, I believe, without even a permit. I think I'm a lot of get about 5000 gallons per day. Okay. So just for the residential well. Yeah.
Residential. Well.
not for domestic animals.
Okay. Oh, yeah.
Yeah, yeah. So we can put that in and then. Yeah, I can have a little ranch going.
So. And then build a house to build a house.
Yeah. The ranch. And then sell it as, like a ranch.
Like a spec, like build a spec house developed. Right. So but you so if you get, you could be 800,000 in let's say all in. So the other three lots for 900 after closing costs or maybe 850. Yeah. So now you're at, you make $50,000 and then you have a five acre lot for free.
I know it'll be more than that because it will.
Still be because you're going to cluster plot them.
You cluster. The other work can only be taken about three acres. Okay. So. Oh, there is one. Yeah. So yeah. So I still have about 27 acres.
That's. Yeah. See. So this is what I wanted to share with everybody what's possible. Yeah. And and so I presume it's not like these are you know, they're not on the, they're not all the time on the market on the MLS like this. But it's kind of like when you're looking for a certain type of car, you see that kind of car on the road all the time, right?
You know, when your eyes are open to these opportunities, you are looking for opportunities like this. And you.
Know, exactly. It's. Yeah, because it depends on the land, right. What the possibilities are. Yeah. Because if had water rights it would have been a lot more. Yeah. Yeah.
So but that's still quite good. I mean that's still quite good because even if you, you know, if you got a building permit on that lot and just decided to sell that last lot. Yeah. You know, let's say that lots now worth 500,000 or something like that.
Yeah. It should be more because I was thinking with that one, all the there's, other houses around that neighborhood that are going for $1 million each, and you don't have 27 acres.
Yeah, yeah. So it's a nice area too, right? So and it's.
Pretty close to the city too. Yeah. So yeah.
Yeah. So I mean there's the that's a huge profitable venture. But it's that's all also going to take a couple of years to correct. Yeah. Yeah. It's like a.
So because to subdivide to break it down it takes about a year. Yeah. Yeah usually.
Okay.
Yeah.
So there's time involved too. But I wanted to go through that because it's super interesting. And not a lot of people understand those possibilities that are out there. So thank you for sharing that. Let's jump over to the Barry side of things. So I know that Whatcom County, is one of the largest Barry agricultural areas in the country.
Right. you have a Barry farm. You've helped people buy and sell Barry Farms and you kind of specialize, obviously, in agricultural land and development. but also in farming, when you are, when you have somebody looking for a Barry farm, or looking to farm in general, or is it pretty much almost always let's find something existing.
that's already farm or is it or is it there just as much of a demand for like finding land that they that somebody. Yeah. Could how does that how's that world is usually.
finding land because some usually especially with blueberries once you put blueberries and they're good for 50 years and, and, but it takes about 8 to 10 years before it gets a full production. So someone does invest in blueberries. And I've already been there for eight years. They want to usually keep that farm because yeah, that's the one that's starting to produce really good income.
Right. Yeah. And then but yeah. And what I've noticed is a lot of dairy farmers are leaving and they're turning into berry farms.
Interesting.
Yeah.
Why is that? Do you think.
It is more.
More, more profitable.
Yeah. They're saying that dairy is not profitable here anymore. Just, it's too expensive to run a dairy farm. So they're moving towards Idaho? Just the. Yeah, they're leaving the state for that. And then berries are getting picked up. But there seems to be a lot of blueberries now, though. And the thing is, with raspberries, they're their life cycles about 5 to 10 years where you can replant, pull them out where blueberries, once they're planted, you don't want to pull them out.
And since there's so many blueberries out there this year, they had, overproduction. So there was, farmers that could even sell their fruit.
So I was going to.
Ask you what.
The demand is, what the demand.
Is. Sometimes you're getting a dollar a pound or more and sometimes nobody wants your fruit. So that's the thing you have to look into.
So yeah. So I mean, and is is most of the production, is it selling to, is there like a middleman industry for that or where are you going to sell your berries?
There's canneries. there. Yeah. We used to sell the cannery and then they have contracts to sell it out. Yeah. And so but thing is a payment some canneries will pay you every two weeks, some will pay you within two years as the fruit sells. It's like a co-op. Yeah. So they can't pay you until they sell it themselves.
And which is right. But the thing is. Yeah, again, the every year you don't know what you're going to make. yeah.
It just depends on the demand.
Depends on the demand, depends on the weather. Do you get can get frost damage on next. You know last year blueberries 40% damage.
Oh because we had that huge freeze
And so yeah last year blueberries are pretty bad. Yeah. And this year that there was no damage. But now it crashed. The market crashed.
Yeah. So everyone's everyone's income dropped on that right. And so what about the raspberry world then.
Raspberry is doing right right now. They've been, pretty good. I would say raspberry is still in the market. It's a good market for raspberries, especially as the farmers. Everybody's starting to plant blueberries around here.
Yeah, yeah. So if they're like the demands, more.
Demands still.
Lower supply, higher demand in the raspberry world right now than blueberries. Right. So but what you're saying is and I think we've had this discussion before, that one of the trickiest parts about an existing berry farm is if it's once they've done all that work, if they do want to sell, they want a premium usually, right? Yeah. And that can be a very tricky sale.
And so you a lot of times if you do see a, I mean, most of the and most of it's like off market where they don't even want to list it. Right. They'll just say, if I can get this dollar amount, yeah, I'm going to sell. And we call that a pocket listing. And walk in and obviously we try to put it bring everything to market.
But it does seem like there's that, that whole thing where they generally don't want to list, but but they maybe would sell for the right price.
Right.
Yeah. You see the older farmers that want to get out, they don't want to list usually on the but they're like, if there's prices, right, they'll sell it. And usually that's the thing was Zillow. You can't really run any comps or anything on these, prices. They don't know what the market value because of the water shares, the land, the pH level.
What can you grow there? Some of these lands are like flood land or wetland where you can only have like corner potatoes. And where and then there's other lands. You can plant berries, but sometimes there's a parcel that has bad berries on it. They're like making maybe one ton an acre. And it could be just because of the farmers just lazy.
All right. It could have been but the land is great. and then if another person comes in and they can make it into five, ten an acre. Yeah, it all depends on the land and what you keep.
So you have to really walk it and talk to the people there and understand what they're doing, how they're doing it right. And to really get any idea of what the value really could be. And I mean, would you look in other businesses, you might say, okay, well, I want, you know, a seller might say, I want two years of profit for my business.
You know, two years of, you know, the income on the business, plus this. Do you guys take like, let's say, a berry farm, let's say the house and it and, it's on 50 acres and the house and the 50 acres. Zillow says it's worth 1.5 million. Just spitballing here. Right. but the berry farm is producing 200,000 a year income.
I mean, are you are you generally. Is that kind of what you're trying to do with the valuation? I know you said it's more complicated.
Yeah. Yeah. It depends. Right. Because what again, because you could have nice berries and all of a sudden you find out there's no water rights to it. But this farmer has been using the water. So you got to look into that too. You have to have that feasibility. Yes. Yeah. And sometimes it takes longer than 20 days. The average is 20 day feasibility.
Sometimes you need two months feasibility just to make sure everything checks.
Because some of it's not always on the up and up. As far as.
exactly, Yeah. That's the thing. Yeah.
So, so but you do you are here and I'm going with that as far as the, the valuation as far as like are you you would be taking the building the lot.
Correct. Yeah. You'll be put in the value
Adding some income into like look they're not going to just sell that like they're going to, there's a 150,000 they're making every year on this. They're going to want some of that future like out for their, you know, added the business value added to the property value, which also can be difficult to finance. But there is there is farm loans.
Right.
Well correct. Yeah. So you could get a farm loans and then you can even get loans for the plants. But usually the way I've seen it is where you pay for your plants, but then you can get that money back as a loan.
So you refinance because the bank sees that they're planted.
Yeah. Yeah. So it's like a.
Construction loan on.
Correct. Yeah.
Exactly. Yeah.
For you. But you have to pay upfront though first or contractual loan. You get that for the nine months usually. And then you can turn it into a mortgage. Yeah. Yeah. Yeah.
So if, if you are a buy, if you have a buyer who is interested in and having or let's say they want to do raspberries, they say, Harm I want to do raspberries. So they call you tomorrow and say I'm looking for raspberry farm. Obviously you're going to you know people who would sell their farms. Yeah. So you're going to start with your network.
Yeah. But beyond your network let's say they look at those opportunities and what's listed which there's not really usually much listed. Yeah. In that world. Yeah. but then are you, is there land out there still here and there that you see that you're like that could be farmed, you know, most likely.
Definitely. Yeah. There's a lot of farmland around the county. And again, it's just, because the wetland doesn't really hurt most of the farms, depending on what you're planting and flood. Even I have a raspberries in a flood land, which are doing great because it does flood sometimes in the winter for maybe a week, but after that's fine.
And the raspberry plants are dormant at that time, so it doesn't really matter. Yeah.
So yeah. That's right. So the it could be wetlands that are much more valuable as a raspberry farm than the way to a somebody which wants to build a house. Correct. Yeah. Yeah. And is that generally going is that in all directions or is there certain parts of Whatcom County that tend to do better?
Yeah. Well, wetlands are good for blueberries where, the raspberries don't like to have too much. so.
It has to be a little less wet for raspberries. Right. And so, yeah. And we're talking Skagit, Whatcom County. There's different sections all over.
Yeah. Skagit, you're there's more of a frost damage over there compared over here. So it's a little tricky. But I think we get better production out here in general.
Yeah. Last question on this. And then I want to just touch on water adjudication Then we wrap up. But what about you see a lot that's that's wooded. do you ever see. But it seems to have good soil. do you ever see guys actually clear cut and then try to, like, literally uproot stuff or you or do you generally need to have kind of that pasture land that you're.
I mean, have you seen guys.
Like, clear Cut? My dad's actually done that. We had about ten acres or it's just all forest. And we were able to sell the trees. Yeah. And get them to work the dirt up for us. And then we were able to plant it. Oh, we made some money off that too.
Yeah. Okay. So it can it, it doesn't just have to be pasture land. Right, right. It could actually be if the dirt's good enough. So it's.
Good. Yeah. You can make money off the trees at the.
Marketable if it's marketable wood.
Right.
Okay. That's interesting. I didn't realize that. That's good to know. okay. Well, last thing, water adjudication. I know you've been, talking to talking to your sphere about it, talking to farmers about it. where what's the latest as far as my understanding is, the biggest concern is still that, you know, you could end up if, I mean, this could be years and years and years of of of going through.
But even just for resale and all that kind of stuff, the biggest concern is, is do I have a right that is going to be proper for a farm versus just a basic water, right. Is that kind of the biggest concern right now, the level of the gallons per the amount of gallons that, the county will say you actually have?
Yeah. So as a farmers, I think everybody's trying to put meters on their wells because they know that they're going to have to show that soon enough. And, yeah, just, again, it's hard to tell who used and who didn't for a while. And so if a property might come with water rights, but technically, are they valid or not?
Yeah. Yeah. You still have to go court case. But I would say since everything's going into court, I would say make sure there's an application before you buy any property. Now make sure they already put an application for that.
The application for their water rights. Water adjudication.
water adjudication in. Yeah. And then and then even if savvy. Yeah.
But you don't know if it's going to go through or not. But unless there's an application.
Yeah. And then, and then basically if there's production, if there's if there have an actual business going, if there's if there's an then especially if they've been metering it, that's going to further help their case. Right, to get what they're looking for.
I know some farmers are the one. They didn't need to use the water. They ran the water anyways.
Oh my gosh.
Just to run the meter. Oh so they would just run you right back into the well just to keep the meter going to make sure they didn't lose it.
Interesting.
Yeah.
Because the justification process is indicating that they want to see what.
Yeah. But every year the weather's different. So sometimes in July it's raining throughout it. You don't need that much water. And sometimes it doesn't rain in July.
And you can't work off of any of these community, or municipality water rights. You need. Well, you.
Need well.
Yeah. Yeah, you need.
To use a lot of water right when it comes to plant.
And then do you guys ever does anybody using any catchment systems, to, to supplement.
No.
Not saying they're generally just, they're just coating on all the water.
Right.
Yeah. And so and then maintaining those rights and so it's a big it's a big.
Yeah. And just trying to prove it now. Yeah. Then initiative. Yeah. Yeah yeah.
Well there's you know there's a long way to go in that that's it's it's definitely a something everybody has to be thinking about when they're in this bit when they're in that business. Right. Property. Yeah.
Yeah for sure.
Well good stuff. This is this has been really interesting man. So if you're interested obviously in, berry farms buying or selling, agricultural land. Developing land, Harms your guy. thank you for joining today, Harm. And thank you for listening. You're watching you guys.
Thanks for having me.