| Podcast
For this episode of Landowner Insider, I sat down with my own banker, Brock Demere of Citizens National Bank in Stephenville. Brock grew up on a cow-calf operation in San Angelo, so he understands ag lending from both sides of the table. We talked about what lenders look at before approving a land loan, how much cash to keep in reserve, what higher rates do to buying power, and why the tax question comes first on every deal. We recorded in October 2026, so the rates mentioned reflect that time. This is educational only and not financial, tax, or legal advice, so check anything here with your own banker, CPA, and attorney.
How Much Cash Does It Really Take to Buy Land?
- The example: On a $900,000 ranch purchase, 20 percent down is $180,000, and with loan origination, appraisal, and other closing costs you’re near $200,000 to close.
- Then there’s the work: I showed a 90-acre Erath County place recently that needed about $120,000 to get build-ready, which puts the cash need at $320,000 or more before any house.
- Why sellers feel it: Buyers often don’t have that much liquid cash for a property that isn’t their primary residence, so turnkey ranches sell and ones needing work sit.
- A silver lining: Brock noted that improvements you pay for can count as equity injection when you later get a construction loan.
- Not a yes man: Brock said his job isn’t to approve every loan. If waiting six months makes more sense, he’ll say so.
What Makes a Strong Borrower
- Character first: Most of what Brock evaluates is the person across the table: are they giving the full picture, and will they do what they say?
- Cash flow: Repayment ability across the business and personal finances is a major factor.
- Short-term debt: Auto and equipment loans eat into cash flow and debt-to-income ratios.
- Reserves: If you can cover your down payment and still have, say, six months of reserves, a lender will look at the deal differently than if the down payment drains everything.
- Self-awareness: Brock looks for borrowers who know their business and market, and keep their banker in the loop.
Build a “Fortress Balance Sheet” First
- Brock’s reserve target: At least three months of lost income, plus about a month of operating costs and overhead, before investing in the next deal.
- Adjust for risk: If you carry a lot of debt service, hold more.
- Why it matters: Reserves let you put more down, own more of the asset, and qualify for better terms.
- Biggest young-entrepreneur mistake: Chasing a deal before building reserves.
Rates, Buying Power, and Timing
- Mortgage rates aren’t the Fed rate: Brock explained that residential mortgage rates follow the mortgage-backed securities bond market, and that rates rose in the 45 days before we recorded. He quoted high-7 percent range for a 30-year mortgage at the time.
- Every point matters: Each 1 percent increase raises the monthly payment roughly 10 percent and can cut buying power by more than $100,000, which pushes buyers out of their price range.
- His outlook: He expected rates to rise in the short term and land near 7 percent a year later, but said he’s not a forecaster.
- Don’t wait for perfect: A higher rate doesn’t make it a bad time to buy if you don’t overpay and your reserves can absorb a downturn.
- Citizens National’s mortgage approach: They offer 10 percent down on a primary residence with no PMI, and keep mortgages in-house instead of selling them.
Paying Off Your Home vs. Leveraging It
- Opportunity cost: Brock isn’t a fan of refinancing every time rates dip, because closing costs add up every time.
- Cash-out refis: He views cash-outs with caution, especially if you’re pulling out more than you paid for the equity.
- Homestead protection: In Texas, a primary residence has stronger borrower protections than investment property, so Brock would rather carry more debt on the home than on an investment.
- The deployment case: Using $600,000 that would pay off the home as the down payment on a $3 million income property could add cash flow, depreciation, and appreciation. My wife would prefer the castle paid for, so it’s a personal call.
Why Land Flips With Debt Don’t Pencil Right Now
- Debt eats the upside: Loan origination, appraisal, and interest carry consume the profit while the market isn’t appreciating quickly enough to offset it.
- The buyer problem: If you buy, improve, and subdivide land, your buyers face high mortgage rates too.
- Where it can work: Brock and I both said it takes lots of cash and reserves, a long holding period, or a distressed property where you can add value with your own labor.
- Stay in your lane: Don’t start your first flip when conditions are tough.
Truck Payments Are a Cash Flow Killer
- Short-term debt: Brock called vehicle and equipment loans a cash flow killer.
- The math: A $1,900 monthly truck payment is nearly $24,000 a year, money that could be going into investments.
- Year-end purchases: Buying a truck to write it off mostly steals from next year’s profitability.
- Equipment replacement: Plan a sinking fund so you can trade equipment and cover the gap with cash, instead of financing again. Brock noted that 84- and 96-month auto loans are now common.
Taxes Come First on Every Deal
- Brock’s first question: On any opportunity, the first thing he asks is the tax question.
- Strategies we discussed: Cost segregation and bonus depreciation, real estate professional status (REPS), the Augusta rule, and paying your kids.
- Compliance vs. strategy: Most CPAs focus on compliance. I fired a CPA who wouldn’t educate us and hired one who acts like a consultant.
- The audit: Our returns went through an IRS audit of every line item for three years, and when it was over, the government owed us $60.
- Show real profit: I’d rather show maximum profitability and manage taxes with a strategic plan than understate income, especially if I ever want to sell the business.
- Books we like: Profit First by Mike Michalowicz and Tax-Free Wealth by Tom Wheelwright.
Profit First: Pay Yourself Before the Business Spends
- The system: Pick the minimum profit margin you’ll accept, then move that percentage of every dollar of revenue into a profit account.
- Other accounts: Do the same for estimated taxes and for giving.
- The result: The business has to operate on what’s left, which tells you whether it’s truly profitable.
Where to Park Cash and Planning an Exit
- Beat inflation: Cash in a basic account loses buying power every year.
- Options Brock mentioned: High-yield savings, CDs, and sweep accounts, with a CD earmarked as a sinking fund for a planned purchase.
- Lines of credit: Many buyers use a line of credit to buy with cash, then pay it down later.
- Retiring ranchers: When a family sells a low-basis ranch, I ask whether they need the $2 million or the income and security off it. Taxes and closing costs mean they won’t net $2 million, and most people need income, not a lump sum.
- Income-producing assets: Brock’s own family is diversifying from cattle into rental property while the cattle market is high.
One Annual Review to Do
- Sit down with your spouse: Agree on goals for the year.
- Meet with your team: Brock recommends a yearly sit-down with your banker, attorney, and CPA at a minimum.
Watch the Full Episode
This article is based on my conversation with Brock Demere of Citizens National Bank on Landowner Insider.
Work With Mock Ranches
Knowing your numbers before you shop for land puts you in a stronger position when the right property comes up. Explore Texas ranches for sale or all Texas land for sale at mockranches.com, and see where the market stands in our 2026 Texas land market report.
About Citizens National Bank
Thanks to Brock Demere of Citizens National Bank in Stephenville, a community bank that serves business owners, ranchers, and families across Erath County and beyond.
