Author Topic: 8 acre apple orchard...can you lease the “fruit rights”?  (Read 1829 times)

Captain Cactus

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8 acre apple orchard...can you lease the “fruit rights”?
« on: September 23, 2018, 08:06:28 AM »
8 acre apple orchard, approximately 400 trees, for sale at $50,000.

I do not want to manage the trees or harvest the fruit at this point.  Ever heard of leasing the rights to another farmer to farm the land and keep the proceeds?  Basically just hold the property as a long term passive investment.

Thoughts?

Kl285528

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #1 on: September 23, 2018, 09:14:18 AM »
I don't see why not. We are just getting into helping my inlaws with their finances, and they own a couple of small pieces of farm acreage that they lease to farmers. Looks like it would be the same. The question is how much does it lease for?

maizeman

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #2 on: September 23, 2018, 09:40:12 AM »
People certainly lease bare ground on a year by year basis for row crops. However, there is one challenge with that, and it would probably be even more significant with row crops, which is that the interests of the landlord and the renter are not aligned.

Farmers working on short term leased land don't have an incentive to manage the land to maintain quality year after year, while the land owner clearly wants their piece of farmland to maintain or increase its quality. As a result, leased land is less likely to go into no-till production, less likely to have winter cover crops planted, less likely to be put into suitable crop rotations, etc. Now as the landlord, you can specify a bunch of these things in the lease, but it still requires you to know that the correct agricultural practices are for your land, and ultimately to check that they are being applied correctly.

Working with fruit trees, the same misalignment of incentives exists, but poor management practices can impair the productive capacity of fruit trees more and faster than it can row-crop farmland. So unless you know a lot about proper orchid management -- or can commit to learning it -- and are willing to take on the job of at least check in on how the management and harvesting is being done each year, I'd say this approach has some substantial downsides.

MarciaB

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #3 on: September 23, 2018, 10:07:29 AM »
I have a 5-acre vineyard that I lease to a neighboring winemaker. He bought my equipment (tractor, implements, etc.) and does all the farming. And then takes the crop and makes wine and sells it. I have no involvement in the process at all (but get a couple of cases of wine per year as part of the contract).

Make sure you have a good lease agreement, and then talk to your insurance agent about what needs to be included in your property insurance.

I agree totally with maizeman that the interests of the property owner and the person leasing/farming need to be aligned. The trees are your asset (as well as the soil, the fences and anything else) and the person leasing them needs to have farming practices that retain and/or improve the quality of your assets.

Interview several interested parties and show up with a series of questions aimed at getting to these points. Ask about farming practices. Ask about farming philosophy. And also ask about any business dealings they are in - is there a customer for what they would produce with your apples? Can they make and the SELL whatever they produce (fresh apples, cider, dried apples, apple sauce, jam...whatever)? Because if they can't sell...they probably can't pay you the lease fee. What's their track record with sort of thing, and how many references can they provide?

Do you want to own this land because it's adjacent to something you already own? Or because it calls to you in some way? What's the interest in this in the first place?

Keep up posted!

Captain Cactus

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #4 on: September 23, 2018, 06:03:56 PM »
Thanks for those responses, I appreciate it!

Here’s some more info to flesh out the scenario.  The land itself is being sold by the neighbors and it sounds like they’ve never farmed the apples...just let the trees go wild.  So the trees themselves would need to be rejuvenated before they start producing commercially viable fruit again.  Good news though, there are multiple orchards in the area which tells me there might be some expertise in the area in how to rejuvenate neglected trees and perhaps some interest for one of the orchards to want to expand their operation, or perhaps for an experienced employee at one of these farms to start his own operation. 

Why would we want to even go down this path?  This may seem silly to some but recently my grandparents passed away and my wife’s grandparents passed away a few years ago.  They left us a little money, about $20K total between both sets of grandparents..  Using this money to buy something real, tangible, seems to be a much more fitting final gift than the money getting buried in VTSAX.  We’d pay the difference in the purchase price of course.  As long as whatever arrangement we come up with for income/lease, I’d really only want it to cover taxes, insurance, etc... then we’d have something tangible to pass along to our loved ones some day.

MarciaB

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #5 on: September 23, 2018, 07:04:38 PM »
What state are you in? Will the property be agricultural from here to eternity (like it probably would be here in Oregon), or is there a possibility of a commercial developer buying it later down the road (maybe the zoning would change)? This might make the decision a different one - something that has value now, and then a different value in the future?

Captain Cactus

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #6 on: September 23, 2018, 07:44:01 PM »
Hi Marcia,
This property is in Maine.  This is not a situation in which the land is to be perpetually farm land.  It is farmland now but They’re selling it as a building lot now.  It’s near Maine ski country so I think it’ll continue to have value and grow in value over time.
« Last Edit: September 23, 2018, 08:23:56 PM by Captain Cactus »

Car Jack

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #7 on: September 24, 2018, 09:14:29 AM »
Maine laws tend to follow Massachusetts (where I live) so you might want to look into farm land tax treatment.  I forest manage my land in Mass and applied through the state for tax treatment of the land.  The plan runs for 10 years, after which, it must be renewed.  Following the plan results in the managed land being taxed at only 10% value (vs 100% otherwise).  The same law has another section for land being used for farm uses and simply requires that some farm product sales occur.  A friend harvests sap from maples and makes syrup.  This is a very part time activity as he's a full time engineer (like I am).  A plan will cost a few hundred dollars but you'll save ten times that a year, at least.

GuitarStv

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #8 on: September 24, 2018, 09:27:25 AM »
My dad bought his farm while he was still working as a teacher, and leased the land out to farmers in the area for five years until he quit and moved to the property.  He continued to lease half the land after he had moved there for another five years because it was too much work for him initially.  Dad eventually put in a small orchard (about 200 trees or so).

Leasing farm land is pretty common and not super risky.  Commercial fruit trees require a lot of care though, and can be temperamental.  You have problems from disease, insects, deer, high winds, cold/hot temperatures, flooding/drought, etc.  Harvesting the fruit can be pretty labour intensive too.  I'd be a bit leery of letting someone else make important decisions about my orchard . . . because what do you do if they get it wrong?

Captain Cactus

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #9 on: September 24, 2018, 02:06:25 PM »
This is all good feedback.  I’m starting to think that I may be over my head with this one...while I love the idea of the orchard, I have a lot of learning to do (who would I lease to, how much does orchard land lease for, etc...).  I’m going to keep my eye on the land and continue to research.  Thank you all for the insight!

MarciaB

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #10 on: September 24, 2018, 02:07:37 PM »
Also - those apple trees...how old are they? I'm not sure what the bearing-life of an apple tree is, but perhaps they've been allowed to go wild because they're past that age?

Do you have an Ag Extension office in your state (and/or near you) that you can get some free expertise from?

lhamo

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #11 on: September 24, 2018, 03:10:35 PM »
If there are existing orchards in the area that are not snapping up this piece of land, then it probably isn't a good deal -- there is a reason they are marketing it as a building site, not a working orchard....

maizeman

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #12 on: September 24, 2018, 05:27:43 PM »
Oh, it's probably also good to check what kind of apple trees are currently on the land.

Farmers are currently ripping out acres and acres of old red and golden delicious apples as newer (and tastier) varieties like honeycrisp are killing demand for what used to be the standard apple across the country.

If your trees are pre-red delicious there may be local markets for heirloom varieties, and if they are post-red delicious then there may be demand from local and national grocery chains.

Fishindude

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #13 on: September 25, 2018, 10:42:07 AM »
We own quite a bit of farm ground (row crops) that we cash rent to farmers.
If those trees haven't been cared for for several years, I'm guessing you don't have much value to offer there.   Also, orchards reach a certain age where they are no longer highly productive so farmers typically tear them out and replant.   Could be the case here?    If there are some orchard farmers in the area, just stop by and talk to somebody, to see if there is any interest.

If you are in an orchard area, the trees are in good shape and have some productive years ahead of them, I'm sure you could get a nearby farmer to cash rent the ground.   He pays you $XX per acre annually and harvests all of the fruit.  All upkeep and maintenance; pruning, fertilization, insecticides, etc. are on him.

Cwadda

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #14 on: September 25, 2018, 10:55:44 AM »
Apple orchard? I'm perplexed. Why aren't you pursuing a cactus farm?

It can be used to harvest cactai and provide even more cactus recipes than usual!

pressure9pa

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Re: 8 acre apple orchard...can you lease the “fruit rights”?
« Reply #15 on: September 26, 2018, 06:53:50 AM »
Most states will even offer sample lease templates for farmland.  I've only looked at the for grain crops, but I cannot imagine it would be too difficult to modify for fruit trees.