Land purchase update

notjustair · Jan 14, 2016

I got out the books and did some looking - all total the land going up for sale around the farm is close to 220 acres. There is a 110 acre chunk on the north side of the road. That one I had figured in my head. I didn't realize the other patch was that big - I have been haying nearly half of it for ages.

The energy company has had a survey and appraisal done. The honcho is emailing me particulars on the mineral rights and production but the rights go with it and production is around 10 barrels a day. These wells also produce natural gas but it is off-gassed. At one time the house was hooked to one of the wells before it was split up. That may be an option in the future.

A sister-in-law works with FSA so I have talked with her and gotten that ball rolling. As someone mentioned, land adjacent to your farm comes up for sale about once in your life. I'd regret not buying it just as much as I would hate loosing that many acres to farm. It has some of the best dirt I farm and some of the toughest. More than any of that, it would ensure that some cidiot doesn't decide to buy it and do something stupid. It would really annoy me to have someone else between my farm and the quarter of ground I already own to the east. They aren't making any more land. I might as well hoard it!

Greg1959 · Jan 14, 2016

notjustair- I think you'll do fine. You seem like a level headed person and have checked things out. You are correct...land comes up for sale about once every generation.

To this day, I regret not buying an adjoining parcel that came up for sale about 17 years ago.

You have farmed it and know it...Buy it!

Old bob. · Jan 14, 2016

With that land joining your farm, it is worth more to you than any one else. I have bought land that I thought was too high and it has all worked out. I have to admit during some of those lean years I doubted myself at times. With hard work, good management, little luck, and the Good Lord beside you it will all be good.

This was a comment that I read on this site, and won't get it word for word, but it went like this----As I look back on my buying farm land, I never regretted what land I bought, but I have regretted the land I didn't buy. Not word for word but the thought is there.

Good luck.

ajl · Jan 14, 2016

Just keep in mind you are buying land during deflation now not with inflation. During inflationary times you can't screw up buying land but there is now deflation so stakes are higher. Just look at the usdx chart. USDX peaked in 1985 and you will see that it has been rising lately just like the 80's. Many regretting buying land during that time it is just that this hasn't happened recently so there are not many who regret buying land recently. Five year from now there will be more. The oil company is selling because they need cash. Land that adjoins yours is worth a lot so if it takes a lot of debt then consider a sale and lease back of outlying land to make it work.

JerryS · Jan 14, 2016

Just some thoughts to offer some perspective: I paid $3000 an acre for 17 acres of tangled woods and brush; of course for me it was just a homesite. Around here pasture land goes for $2000 to $3000 an acre with no minerals.

I don't know anything about big-time farming so I have no thoughts on the potential return on your investment in an expanded farming operation.

I do know that 10 barrels of oil a day is not an insignificant consideration, even with the current price of oil. The fact that the oil company/landowner is willing to divest this production tells me that they are getting out of the production business in your area, which further suggests that any future production will have to be handled by the new owner--you and/or whoever you hire to service the well and haul the production. It makes no sense that they would sell you the oil with the land and still provide and operate the production apparatus. Are they leaving their downhole and surface equipment there?

My area is dotted with small, shallow "stripper" wells that produce anything from ten barrels a day to ten barrels a month. The main reserves have been extracted, but these wells have been seeping oil for 50 years, and will probably continue to do so for the next 150 years. Nobody knows for sure. As for the natural gas, it sure would be nice to run pipe to provide energy to your farm. Get answers to all the "who, what, when, where's" before you act.

In any case, I'd say go for it. It seems that the worst case scenario would find you being forced to sell it in the future, possibly at a loss, but at least you would know that you gave it your best shot. I think that down the road you'd be bothered more by not taking a chance at all rather than to come up short in what gave all appearances of being a good opportunity.

caterpillar guy · Jan 15, 2016

If there are oil or gas wells. Is the ground around the wells worth working inside of a quarter mile. I ask as the drilling mud, and debris will have been left slopped around on the ground if it is anything like a water well.
Does the oil lease to the current owner go with the land so the previous owner doesn't own the lease and mineral rights.

ohiojim · Jan 15, 2016

don't know where caterpiller guy is from but i've worked in the oil patch and have never seen drill mud scattered around,...state would really frown on that....

bobwny · Jan 15, 2016

there're not making any more of it.sounds like you've answered your own question.worst case,you can resell it.

FBH44 · Jan 15, 2016

I bought next to me. Smart move, there was a guy with a big stock-car race-track looking for new acreage.... looking at it, right across the fence from my house. Now it can never happen.

Mike M · Jan 15, 2016

For sure check into seeing if free gas is available. That is worth a lot of money right there if in a northern climate.

Ultradog MN · Jan 15, 2016

Dude,
I am rooting for you!
Property is always too expensive when you buy it. But it always looks cheap with hindsight.

DoubleR · Jan 15, 2016

I'm still regretting not buying property next to me when I had the opportunity several times. It seemed like a outrageous price at the time. After looking at it years later their price at the time wasn't really that bad. Not to mention all the new neighbor I have acquired as a result. Luckily I've had no problems with any of them yet but I bend over backwards plowing gardens, removing the snow and what have you for them. Just Saying

Bonnan · Jan 15, 2016

Now that is a quote! Land is definitely an inflation hedge.

01gentdc · Jan 15, 2016

you are off and running !!,.imho ..God intends for good caretakers to watch over his paradise on earth ,, you are not hoarding if you follow Gods rules .. you know nuthin worthwhile ever comes easy ,.. caution , if fear of failure and everything going wrong and going to hale In a hatbasket starts haunting you and making you have doubts ,,.realize those thoughts are from the dark side ,, no good can come from them , ,,. since 1st of yr , Peronally ,,. I blew a 300 dollar starter and lost a cow worth 2 grand!! hoping the grain markets rebound ,, rite now lookin for a silver lining ,,. !,. Sure ,, Things do run a foul and go to ruin ,. that is to be expected and ENDURED and Cured by you and me thru wisdom and WORK !,. the more you have the more you can lose ,,.and more effort is required to keep all on the straight and narrow... go with God and He Will See You Thru ..

72supr · Jan 15, 2016

(reply to post at 09:11:06 01/15/16)

First post here. Buy it it'll turn out right for you. Bought my first land in 1982 could have bought it two years later for half the money. But two years later somebody else might have bought it and I would not own it today. Land always cost a lot of money but you gotta spend money to make money. Good luck.

Andy Martin · Jan 15, 2016

(quoted from post at 22:50:10 01/14/16) Just some thoughts to offer some perspective: I paid $3000 an acre for 17 acres of tangled woods and brush; of course for me it was just a homesite. Around here pasture land goes for $2000 to $3000 an acre with no minerals.

I don't know anything about big-time farming so I have no thoughts on the potential return on your investment in an expanded farming operation.

I do know that 10 barrels of oil a day is not an insignificant consideration, even with the current price of oil. The fact that the oil company/landowner is willing to divest this production tells me that they are getting out of the production business in your area, which further suggests that any future production will have to be handled by the new owner--you and/or whoever you hire to service the well and haul the production. It makes no sense that they would sell you the oil with the land and still provide and operate the production apparatus. Are they leaving their downhole and surface equipment there?

My area is dotted with small, shallow "stripper" wells that produce anything from ten barrels a day to ten barrels a month. The main reserves have been extracted, but these wells have been seeping oil for 50 years, and will probably continue to do so for the next 150 years. Nobody knows for sure. As for the natural gas, it sure would be nice to run pipe to provide energy to your farm. Get answers to all the "who, what, when, where's" before you act.

In any case, I'd say go for it. It seems that the worst case scenario would find you being forced to sell it in the future, possibly at a loss, but at least you would know that you gave it your best shot. I think that down the road you'd be bothered more by not taking a chance at all rather than to come up short in what gave all appearances of being a good opportunity.

He indicated the mineral rights go with the land, that is not the lease. Since it is in production, the production company will still produce it and he will get the royalty. Now if I misunderstood and they are selling the land, rights, and lease, then he has to find someone to produce it and meet all the regulations, or learn how to do so on his own. That would be a lot more risky investment because he may not know for sure how long the wells will continue to produce at 10 BPD. I have the opportunity to buy 160 acres minerals and lease for $360,000. That's too high for Oklahoma and the current price of oil.

If he is buying the lease he needs to get future liability for existing conditions locked down. He could have a multi-million dollar cleanup bill in a few years.

OliverGuy · Jan 15, 2016

I was scared to death getting that mortgage on our first farm. Now I look back and it is half of the current going rate and I'm going to build a house there now and hopefully we'll stay there till our last day. I couldn't be happier. I did pay about too much for 30 more acres next to it, but I don't have to worry about someone putting in a neighborhood there. Your prices seem very fair. I'm used to $8-10,000 an acre

Land purchase update

notjustair

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Greg1959

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Old bob.

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ajl

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JerryS

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caterpillar guy

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ohiojim

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bobwny

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FBH44

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Mike M

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Ultradog MN

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DoubleR

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Bonnan

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01gentdc

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72supr

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Andy Martin

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OliverGuy

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