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Buying Land

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picassomcp

Member
I am considering buying land as I would like to grow my farm. I have looked around a bit and have talked with local real estate agents, I have my eye on a couple pieces, mostly smaller parcels, and most have some trees and swamp, leaving 50% or less as tillable. This makes them hard to cashflow. I'd like to buy a piece of land that would pay for itself by farming it. Is this a pipe dream? I have outside income that can help support the farm, but I would feel better about spending money on land if I knew the land could pay me back. Is it possible to buy land that can pay for itself at all?

Also, it seems that lenders want a significant amount down to finance land, typically 30%-40% down. well, sheesh, thats alot of money to put down, and that makes buying land pretty difficult all by itself.

The other thing, the nice ag land that does get sold seems to never be advertised, it just gets sold without the public really knowing, how can I get the word out to local landowners that maybe considering selling some land?

These are all HUGE hurdles, any ideas on how to overcome any of these? I look around me, and within 2 miles of home, there are 4 farmland owners that I am guessing will sellout in the next 5-10 years. I would like to position myself to be in the buyers seat when the sale happens. Any ideas that could help a young inspiring farmer?

A bit more info: land in my area is selling for $2,000-$2,500 for nice land. Usually this means a 40 that is 10-20 acres woods and/or pasture, 5-10 swamp or meadow, 15-25 tillable.

Yields run about 85-135 bu corn and 20-35 bu soybeans. Clay based soils, generally heavy ground that is more apt to drowned out than to burn up. This is Central MN, Mille Lacs Benton County Area

Based on the above info, does $2,500 acre pencil out? is land in this area at these prices, with these yields a good investment? I wish it were more clear to me, I value your opinions and ideas regarding acquiring land.
 
Now days it is real hard to have land pay for it self unless you grow a crop that the cop will be looking for and then you might get by a few years. By the time you buy the land then the equipment and the seed your lucky to do much more then break even
 
I live in California (so.Ca) I use to rent two acres from people to plant a big summer garden. These where the things I would look for. 1 how hard is it to leval the land and clear it for planting.2 is there a well or water for irregation because i have to water down here.3. is it out of the way and easy to get to with my equipment plus well there not be alot of people walkng on it or playing on it. 4 will my crop and equipment be safe on the land and not be vandalize. I had learned a had way back when I was 17 years old I rented two acres and did all the work set up beans and it rain then three four wheel drives got on it and ran threw it all takeing my crop as a lose.
 
I've never bought land that didn't pay for itself, but cropland I know nothing about.

If you have a specific area in mind, send letters to the registered (tax bill address) owners expressing your interest. I've done that, gotten several favorable responses, though no closings so far.

Seller financing can solve a lot of problems, for both buyer and seller. Just be prepared to pay a higher interest rate than today's standard. For my first Va purchase I got the seller to accept 3% down, just enough to cover his legal fees. As part of the same deal, he agreed to allow me to sell half the acreage and keep the entire amount.

Sound fishy? He knew what my plan for the property was, and knew that the cash improvements I was putting into the property would more than cover his risk of having fewer acres if he had to foreclose. It wasn't a simple agreement, but it worked perfectly for both sides.

Determine what's a good deal for both sides and you have a good shot at getting what you need. BTW, I've never found this possible if Realtors are in between buyer and seller. Maybe why you're seeing sales without them.

Nothing wrong with Realtors, other than they're like anybody else, many prefer to do as little as possible. Sometimes they confuse the issues. I was licensed for more than a few years.

Figure out your business plan and proceed accordingly. If a property doesn't fit, keep looking.

Good luck. One caution: never get your heart set on a particular piece. Almost never works out.
 
Where I live, at the present time, a cow/calf operation will pay for $2500.00 per acre land and the cow pretty quick, but we can grow grass year round and that makes a big difference in feed cost and stocking rate. As long as you have good pasture which will support a cow/calf per 1.5 acres and can make silage or hay fairly cost effectively you should be allright. Even if the calf market were to halve from the present high you could still pay for $2500.00 per acre land in 5-7 years with cattle if the carrying capacity of your land is adequate and you have a living made on an off farm job and put down at least 25%.
 
There are way too many people around these parts that will pay more than the economic value or return from cash flow. So expect to pay for it from other endeavors and make the return when you sell it. This might change over time but is true today and for the foreseeable future. It sucks for guys like me that are not getting younger and do not have a trust fund to play farmer.
 
Old more and more states are making that "crop" legal. Good money to be made farming it and selling it now legal.
 
(quoted from post at 11:12:49 01/07/15) Old more and more states are making that "crop" legal. Good money to be made farming it and selling it now legal.
Click to expand...

Well those guys are starting to cry out here now.....seems the illegal stuff is plentiful at almost half the price and people are wising up.....
 
(quoted from post at 10:59:21 01/07/15) There are way too many people around these parts that will pay more than the economic value or return from cash flow. So expect to pay for it from other endeavors and make the return when you sell it. This might change over time but is true today and for the foreseeable future. It sucks for guys like me that are not getting younger and do not have a trust fund to play farmer.
Click to expand...

I heard a new word recently: "Trustifarians". Exactly what you are talking about. I think most farmers fall in this category. Most could not farm without inheriting the assets.
 
I figured it would get plentiful due to a lot of people getting in the business but would stay high priced due to every branch of government from the locals to the feds getting a piece of the tax action.
 
Check the topography maps to see if the swamps can be drained. How much would that cost?

Are you in a wildlife area that would prohibit draining the swamps?

Figure out if you could buy the tillable land at one price and the swamp for less - or an averaged price for the total acreage.

Don't forget to add taxes and property improvements into the land expense and loss of intetest if you invested that money somewhere else. Buying just to own some land may not be enough justification to do so.
 
Last farm sold here was 100 acres more or less. Went for 13,000.00 per acre. Tell me how anybody can cash flow that.
 
2100 ac farm just down the road here sold at $15,000/ac. Cows and orchard are still there, but it went belly up. They weren't overly successful growing McMansions. The plan hasn't changed but current owners have far less invested.

Those prices require some special crops. Or a hobbyist with deep pockets.

I grow trees, but my cost was $750/ac. Not recently. Leasing hunting rights covers my taxes.

Helps to get creative making land pay for itself.
 
When I bought my second 80 back around 1983,I paid $600 an acre for it. I told the banker at that time that it wouldn't pay for itself,that the other land I owned and rented would be what paid for it. That's the way you have to look at it and do it. One parcel won't pay for itself,the entire operation pays for it.
 
Coupla years ago, I sold a farm to the next door neighbor for $8,000 per acre. But, he and his son farm over 2,000 acres. (Before people go berserk over a BTO, I've known the guy since he was a teenager and you'd never hope to meet a nicer guy).

It was a private sale and I didn't even have to advertise. I approached his wife one evening, and the next afternoon he was over with a loan officer from the Farm Credit Bureau.

But to answer one of your questions, he could do it because he had a large operation to blend it into. At 8 large per acre, there's no way it would cash flow.
 
(quoted from post at 13:02:32 01/07/15) Coupla years ago, I sold a farm to the next door neighbor for $8,000 per acre. But, he and his son farm over 2,000 acres. (Before people go berserk over a BTO, I've known the guy since he was a teenager and you'd never hope to meet a nicer guy).

It was a private sale and I didn't even have to advertise. I approached his wife one evening, and the next afternoon he was over with a loan officer from the Farm Credit Bureau.

But to answer one of your questions, he could do it because he had a large operation to blend it into. At 8 large per acre, there's no way it would cash flow.
Click to expand...

2K acres isn't really a BTO anymore. One local here farms more than that, and he is also a vp of a local bank.
 
I wish I had a good idea but everybody is about the dollar anymore. It does not help if you are viewed as an outsider in the community. If the land owner in question goes back 50 years as being friends with a large financially capable farmer there is very little that is going to stop them from doing business with each other when the time comes. Can you do something on a smaller scale such as fresh vegetables? Something that would leave time for a career to help pay for the acreage and scratch your itch for farming. A lot of younger guys are at the wrong point in the cycle to live the dream that guys who are 65 and older have done by being able to start when things cost less and a job in town played a larger factor. I do the time machine fantasy once a week anymore just to imagine if I could have gotten started before the 1980's when bankers would not talk to anybody who did not have their own money.
 
Randy is telling it like it is. I can remember back about 50 years in my area, Number 1: land has very rarely cash flowed. Number 2: good land might come up once for sale and maybe twice in you whole life.
The only exception is land near a city that is sold for non-agricultural uses(ie speculation).
People always say this time it will be different.
It always might be, but do not bet on it.
 
It never really pencils out. More demand nan supply on land....

If you need to borrow 70% you will lose out to those who don't. Land is an investment, folks have $100,000 to $500,000 in their pocket, CDs pay nothing, they want to invest in something....

Best time to buy was 7 years ago, just before the farm ecconomy took off. Totally dumb luck, one doesn't know when that is....

We bought a 40 then, like you describe 8 acres is swamp, 5 acres is 'missing' for road easement and some discrepancies... Anyhow, we paid way, way too much for it back then.

Crop prices doubled that fall, and it got paid off in 5 years; the tax valuation has tripled on what we paid for it, could have sold it for that a year ago...

But - dumb luck. Good timing.

Could easily go the other way; and I think now we are in a period that favors the other way....

Value of th dollar is going up, the economies of the east and west coasts are improving always hurts ag. There are rumblings of inteest rates rising.....

The world has used higher grain prices to produce more themselves, China is getting better at finding other sellers and manipulating markets.

It would all point to hard times on the farm coming up,,and a couple years after that a bit of a land crash. The 1980s again, different this time, but you know the same.

Paul
 
I think land prices will soften over time. There will not be the collapse like the 1980's. The Western governments will have to get serious about their deficits and that will soak up a lot of the discretionary money out there. The neighbor used to think that would be solved by taxing the daylights out of the people in the trailer parks and welfare apartments but those people while having money for booze and cigarettes are not going to put a dent in the federal debt. Also, more areas of the world are on line to produce bulk commodities such as corn and wheat versus what there were in the 1980's. A few good crops in a row over most of the world means a prolonged slump in commodity prices. I think the government will be writing checks off its newest farm bill sooner than it thinks.
 
I would be very concerned about the property taxes. I heard some in Ill crying because their taxes went through the roof.

You have to prove to the banks you don't need the money before they will lend money.

I would like to see the actual production figures and expenses for the past few years before buying anything.
 
Sound alot like my deal, same land prices, yield rates. I would suggest maybe trying to rent/lease some land with hopes of making some inroads with land owners. Maybe a craigslist add. Talk to local seed dealer, veteran, fertilizer spraying company. Those boys seem to be in the (known) realistate agent around here western Wisconsin seem to be running prices up on farm land...hunt land... Good luck
 
Its possible to get loans through a government program for farm land that's going to be farmed you can finance the land for like 40 years with little to no money down. The loan requirements are kind of strict like you have to have farmed the last 5 years I think. Let me know if you need info. I have some paper work around here for it somewhere I use to be a realtor part time.
 
I personally know this family. It will be corn and bean rotation. And a couple of hog finishing houses.You build the hog house and the other fellow furnishes the pigs and feed type of deal.
 
What you do is, those four land owners that you think will be selling out. Get in your car go to their houses and have a good visit with them and express your interest and see if you can strike a deal. Tell know one about your visits.

For every acre bought, ten payed for acres is a good formula if you want it to pay.
 
We won't repay 17 trillion dollars.... We won't ever get serious about that. Japan has bought its own debt for decades, they won't change that.

Sad thing is we look strong again compared to the rest of the world. Brazil, Europe, OPEC is trying to remove Putin by debasing his energy sales..... Its back to USA dollar, top of the world, the dollar is king again.....

Just got home from a marketing meeting this evening, corn and soybeans. The Funds bought us a little upswing here because they took their money out of Energy, and intrest rates haven't gone up yet, so Grains are easy to park money in for a time. But they are only here short term, they will drop us like a hot potato and no where to go but down with the carry over we and the world has. Will be blips upward, but the dollar is going up, oil and grain is going down together.

Then intrest rates kick up, and like you say we have land trending down.

But if anything goes wrong, anything at all, then we hit the cliff, and then its the 1980s again. We will ride it to the bottom, next year will be better, cant be like this another year, yadda.... Meanwhile East and West coast are prosperous, everything is wonderful, don't care what is happening in flyover land everything is roses.

It happens so fast, no one has time to step out of the way, or recover, or catch their breath.

Paul
 
20 yrs ago I sold my avocado grove in so calif and moved as fast as I could to Oregon. After a year going thru various realtors and not finding anything I put an ad in the local agricultural newspaper and quickly had a few promising leads. One was timber property which I bought.
Don't rely on a realtor.
 
Have you farmed before? Your county Farm Service Agency (FSA) has low interest, no down payment loans to first time farm owners. You can have even farmed for several years on a small basis and still qualify.

Go down to your county office to check it out.

Gene
 
First of all, the land in your area sounds dirt cheap to me.

You are quickly learning how difficult it is to start out even small time farming. Makes me wonder what the future will look like at this rate.

Around here there are fewer and fewer farmers. The ones that are left simply buy out the ones who retire, making them larger and larger. You either get into farming by inheriting or you are out of luck. You can't afford the equipment unless you have a large operation to spread the cost out on.

But back to the main issue. The more tillable land the better the price. Even areas with lots of trees go for high dollar to the people that want a little land to hunt on, they are driving up the price on a lot of this stuff. You will just have to be persistent, it really does pay off. Follow the advice of knocking on doors.

Not trying to depress you, I just fear we are returning back to some sort of plantation or feudal system. You can't just go get a loan and get some farmland and poof, you are farming. You are priced out of the land, out of the equipment, and if you didn't grow up farming good luck learning all of that in a year or two. I have never met a farmer who was less than 3 generations or so, and they usually have hundreds of acres they inherited and lease another couple of thousand, and can afford to outbid you on most anything that comes up.

Which leaves people like me one option: Livestock! somebody mentioned that above and it requires very little equipment, far less land and mostly labor. If you are willing to go this direction then your cashflow "may" work out better for you.
 
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