Should we buy the family farm?

[joemandadman189]

I have family in the Midwest who are aging and are open to selling their farm. It is about 900 miles away from where i live now, at a ~14 hour drive or a 2 hour flight and a 2.5 hour drive. The property is 80 acres with about 40 tillable and the rest is pasture/swamp. The current guess on price is ~$250k. There is a farm house in pretty bad shape, a gravel floor garage/pole shed, a loafing shed, grain shed, and an old milk house that became an indoor area for beef cattle. i dont think they run cows now but rent the farm ground to a neighbor. i dont know the cash rates in the existing contract but a cursory review of rates in the area is ~$150/acre and ~$20 for pasture land (any farmers know if this is per year or per month? i coudn't figure this out online). I guess other options would be to AirBNB a tiny house up in the trees and/or go hunting there as there are tons of white tail around.

My parents expressed interest in building a log cabin there and retiring to the property. i guess the farm house needs to be torn down. its pretty bad but grand parents dont care.

at current rates of ~4% and with 25% down ($62,500), a 30 year P&I is about $900/month

Am i crazy for considering it? DW has mentioned she doesnt want to live there, maybe a summer trip would change her mind

Anybody have experience with how cash rents on farm ground/pasture land work?

[Linea_Norway]

Maybe the neighbour who rents the land now would like to buy it?

[Paper Chaser]

I don't have any direct experience but from what I hear in my area, most people seem to consider it a good deal if the annual rents cover the property taxes. And I live in a low tax state.
I'd guess that the quality and size of the land have an impact in addition to just the local market. It all ties back into the yield a potential farmer might see. So soil type, irrigation, topography and total acreage are all variables that can alter the return or the amount of effort that's justified.

This might be helpful as a general overview:

https://www.nass.usda.gov/Publications/Highlights/2021/land-values-cash-rents.pdf

You might want to ping Maizefolk. This seems like it's probably in their wheelhouse, or at least adjacent to it.

[joemandadman189]

Funny i actually looked at that website yesterday, that metric of covering property taxes would lead me to believe its per year in which case, the farm would be in the $3k range for annual rents based upon average cash rents for the county

[joemandadman189]

Maybe the neighbour who rents the land now would like to buy it?

i dont have to buy it, it would be something fun and a way to keep it in the family, but i also dont want it to be a burden

[iris lily]

I don’t understand why you want to buy it. Why?

Are you sure you can get a loan for this? I would not make that assumption.

But hey if you wanna buy high quality family farmland for about the amount of money you name, you can buy me out.




——-Signed iris lily, owner of a family farm she doesn’t want and currently in court on the wrong side of a lawsuit to get it sold.

[PDXTabs]

I consider farm land with good water rights that isn't going to be too badly impacted by climate change to be a good investment. But I wouldn't overpay for it.

[franklin4]

I suggest you contact one or more local farm managers and ask for a rough estimate of rents and property value. My family's corn/soybean farm in Minnesota is rented this growing season at $315/ tillable acre. The manager takes care of everything, keeps us generally informed periodically, and mails out a check when the rent is paid. I'd expect your $150 and $20 rents would be for the growing season, which means annually starting in the spring.

[joemandadman189]

I don’t understand why you want to buy it. Why?

Are you sure you can get a loan for this? I would not make that assumption.

But hey if you wanna buy high quality family farmland for about the amount of money you name, you can buy me out.




——-Signed iris lily, owner of a family farm she doesn’t want and currently in court on the wrong side of a lawsuit to get it sold.

we can get a loan and make the payments, money wouldnt be the issue, The why would be the kicker. I feel like this would be a great climate change hedge for where its located (cold now) vs where we live now (dry and hot and getting worse). diversification into land is something we have discussed but more buying local mountain land and not so much a farm far far away. There is some nostalgia to the property. But i would guess we would be better off in the long run by investing the money. I day dream about owning a ranch, and regenerative agriculture, maybe i should keep it there as a day dream.

[Dr Kidstache]

I live in dread of the day my parents die and offload the remaining family farm land onto me and my brother. Similarly, it's far, far away from where I live (similar to your situation would require a flight and then a 2 hr drive from the nearest city) and I'm not a farmer. It's beautiful land that my family has been on for many generations but in a rural economically depressed community where I would never choose to live. I'm not nostalgic enough to saddle myself with that land voluntarily.

[Sibley]

Do you WANT to live in the middle of nowhere, Midwest? Because it's not just the location, its also the people and the culture.

Indiana is in the process of destroying public education, and the education level isn't great to start with from what I've seen. They don't talk about medical deserts without a good reason. Racism, sexism, xenophobia, homophobia, etc are often just baked into the day to day culture and behavior. You like Thai food? Good luck.

It sounds like your wife isn't onboard. A summer there isn't likely to change her mind. You can certainly try, but be prepared to choose between the farm and your marriage.

[Dicey]

Paging @SwordGuy.

[SwordGuy]

Paging @SwordGuy.

Thanks, @Dicey .

My grandparents had a family farm that my mom grew up on with her two siblings.  It's in a very rural part of Arkansas.
While my grandparents were still living my uncle and my parents kicked in some money for them to buy another farm.

I've inherited my parent's share of the two farms.

1/3rd of a 420 acre farm and 1/2 of an 80 acre farm (the one my parents and uncle helped purchase).

Our share of the earnings last year was $39,000.    That's nothing to sneeze at.

I do no farming.   I know nothing about farming.   We have two different local farming families that farm that land on our family's behalf and we share the crops with them.   The same arrangement with the same families was put into place back in the 1960s when my grandparents died.    We're having to replace one family with another for the first time in over a half century -- one farmer wants more time with his own family and wants to work fewer acres.   We've got 3 different local farmers already interviewing for the position.

Now, my uncle, and now his son, both lived in Arkansas a couple of hours away.  They took care of dealing with the local farmers and the occasional trip to see the farmland or visit with them.      But for $30,000+ a year I'll pop on a plane and go visit for a weekend every few years if that's what it takes.

So, if you've got the idea that WORKING a farm YOURSELF is one hell of a lot of work, you would be 100% RIGHT.
But owning farmland under a sharecropping arrangement can be a MIGHTY SWEET DEAL.

Farm profits on a given farm vary with the weather and the prices the crops can get.   It's not uncommon for us to hold some of the crop for 6 months to get a better price.

Of course, one very important difference is that my grandfather was a damn smart farmer who knew good farmland when he saw it, so he knew what land to buy and what to ignore.   I have no idea and wouldn't recommend buying land to farm without verifying it's good farmland first.   Since good farmland doesn't come up for sale very often, if no other local farmers want it, it's a good sign it's not the farmland you're looking to invest in.

Hope that's useful for you all.

[joemandadman189]

Do you WANT to live in the middle of nowhere, Midwest? Because it's not just the location, its also the people and the culture.

Indiana is in the process of destroying public education, and the education level isn't great to start with from what I've seen. They don't talk about medical deserts without a good reason. Racism, sexism, xenophobia, homophobia, etc are often just baked into the day to day culture and behavior. You like Thai food? Good luck.

It sounds like your wife isn't onboard. A summer there isn't likely to change her mind. You can certainly try, but be prepared to choose between the farm and your marriage.

I think the reasons you list above are why we left the midwest. If DW isnt on board, its a definite no go decision.

[joemandadman189]

@SwordGuy Thanks that was great info

[Fishindude]

I own a bunch of farm ground like you are describing.  It's a major part of our portfolio and spits off some real nice annual income with not much effort on our end, made over $30k from it last year.   We don't carry mortgages on any of our ground or it wouldn't be quite as attractive.   

(80) Acres at $250k, $3125 per acre sounds like a bargain.   I'd bet they could get quite a bit more for it on the open market.   That's a pretty typical price range for junk recreational ground, tillable would be at least $4k per acre for rather poor stuff.   Being that you are far away, I'd cash rent the 40 tillable and see if you can't convert some of that pasture to tillable as well to get as much income as possible.   Would tear down the house so you don't have to worry about that (I've torn down three).   If there is a decent barn or two, you could likely rent that out on an annual basis to your farmer or a neighbor.

Dealing with the farmers is no big deal, you can do all of that over the telephone or with just one site visit.   Farmers are always looking to pick up some more nearby ground to plant, so you won't have trouble finding someone.   Just take an annual cash rent check.    You'll have taxes to pay as well, but farm ground taxes are cheap.  I pay an average of about $20 per acre, you'll have to check the local rate.   Getting rid of the house and any non income producing buildings will also help reduce taxes.   

If there is wooded ground there may be potential to do a little logging and get some more income.   You could also lease the hunting rights out and pick up some $$.   There might also be some government habitat programs you could put the non tillable land in that would spit off some more income and / or lower your taxes.

I've been doing this stuff for about 35 years.   Bought our first piece of ground (100 acres) for $75,000 which was market rate at the time, it's now easily worth $700,000.   This piece is enrolled in CRP habitat programs and we've been paid enough from these programs to cover the original cost of the farm 3-4 times over.   Farm ground is not a get rich deal, but it's an excellent place to safely park and preserve some money and get some good long term appreciation, as well as a little annual income.   

[joemandadman189]

I suggest you contact one or more local farm managers and ask for a rough estimate of rents and property value. My family's corn/soybean farm in Minnesota is rented this growing season at $315/ tillable acre. The manager takes care of everything, keeps us generally informed periodically, and mails out a check when the rent is paid. I'd expect your $150 and $20 rents would be for the growing season, which means annually starting in the spring.

i think family is giving a locals discount to rent the property - a parent told me the rent was under $100/ acre (for the tillable 40+/-) including hunting rights this fall. This whole idea appears dead in the water unless i am hearing the wrong info regarding the rents.

[Fishindude]

i think family is giving a locals discount to rent the property - a parent told me the rent was under $100/ acre (for the tillable 40+/-) including hunting rights this fall. This whole idea appears dead in the water unless i am hearing the wrong info regarding the rents.

I didn't see where the farm was located, but $100 Per acre would only make sense if it is some low yield, poor soil. 
Should easily get $20+ per acre for the hunting rights.