Is there any basic land rent formulas anyone goes by?

Philip d · Nov 19, 2023

Land prices here have more than doubled in the last 10
years but rental prices have barely budged at all. As you
can probably tell by now were renting out not in. Tks for
any input.

Tony in SD · Nov 19, 2023

Not really. Seems to be different for everyone

Wheat47 · Nov 19, 2023

Some do shares, some do cash.

Butch(OH) · Nov 19, 2023

Land rent deals vary too much regionaly and individually to make many assumptions based upon other's dealings. As an example my tillable acres are all cash rented and the rate has more than doubled in 10 years, matter of fact it has close to tripled. It has more or less followed the sale value trends, not year to year but over the time I have owned the farm. Rental discussions this year may prove interesting with $4.50 corn and land price records falling with almost every new sale and thus affecting my taxes.

Check Break · Nov 19, 2023

(quoted from post at 17:10:20 11/19/23) Land prices here have more than doubled in the last 10
years but rental prices have barely budged at all. As you
can probably tell by now were renting out not in. Tks for
any input.

Have crop prices in your area doubled in the past 10 years. Is a farmer's net before tax twice what it was ten years ago. Do you get any reduction in your property tax by farming your land as opposed to not farming. Things to think about because the market value of your land has nothing to do with its rental value.

Philip d · Nov 19, 2023

Ive been asking a bit and were getting about the same as many are in our area. Just seems like low rent if itd take 73 years worth of rent per acre to equal what the sale price would be. They all say thats all they can afford and quite possibly it is but when a piece of prime land comes up for sale all of a sudden theyre fighting for it.

NY 986 · Nov 19, 2023

Rent in most places is governed by fools who have a hole burning in their pocket and a desire to work any ground no matter how poor. When they run out of money another fool with money takes his place. I don't think a formula based on profit for the farmer has been in use for over 25 years from what I have seen. I'm not trying to be a wise guy but just saying that real world rental rates seem to be devoid of any logic.

Philip d · Nov 19, 2023

I cant imagine that net before taxes is any better than it
was 10 years ago no. We do get a reduction on our
property taxes. Dont get me wrong we have a great
relationship with the guys we rent to , they take great
care of the land. Weve turned down almost double per
acre to pull it away from them to give to another
neighbour. All that being said we still were just looking for
information on if what were charging is in check. The
rent is a great supplement to our work incomes and the
longer we hang onto it history tells its a better
investment than most retirement savings accounts.

Butch(OH) · Nov 19, 2023

Agreed and would add sale prices also. Last large tract of tillable ground here brought over $23,000 per acre and was bought by a farmer. As a land owner my renter of 35 years has said he currently isn't making money and I believe him but my rates are biased upon what the market is offering and he has first refusal and can walk away but he hasn't. As you said economics doesn't seem to drive rent, the desire for more acres does?
Untitled URL Link

Butch(OH) · Nov 19, 2023

Not sure how that link from another post got there???

john in la · Nov 19, 2023

I know little to nothing about farm rent so this is just my personal comment.

Economics 101 should tell you land rent should have nothing to do with the profit or loss of the renter.
No reason for a land owner to suffer because fertilizer and tractor prices are high squeezing profits from a farmer.

First and foremost the land owner needs to show a profit.
That would be land value divided by say 30 (to pay a 30 year loan) plus yearly cost such as taxes.
This will give you a fixed base to start at.
From here you would adjust based on supply and demand.
And as NY 986 said in most places the demand for good land is so high that any formula gets thrown right out the window and the land rents to the guy with the deepest pockets.

Traditional Farmer · Nov 19, 2023

I get hay land for free on the farm next to mine on land that would easily sell for $50,000 an acre,sign the farm use property form for them.

TerryfromSWIowa · Nov 19, 2023

If you ever find a farmer who claims they are making money grab him, it would be like getting the leprechaun with a pot of gold.

ajl · Nov 19, 2023

Are you prepared to sell some land? Right now 6% interest on guaranteed savings so land prices should be falling soon. Am watching auctions and do see some parcels likely lower but good land is staying up there for now. Because land value have been inflated they seem to be well ahead on rent in our area too so am watching auctions. Value of your land may be lower than you think and would require a sale to verify what it actually is. We do have some auctions in the next couple of weeks in our area of central Alberta. I rent a few fields of mediocre land. One field has never really made any money over the 3 years I have farmed it but a bit over a mile away I got a good crop on another rent field (best ever on that field). The rent on field #2 is higher for next year and now is above field #1. Fairly similar land. Weather and timing made the difference as one field got a rain that the other one missed. With the lower commodity prices my rent is likely high enough on these fields that profit prospects will be very slim in 2024 so it is likely that my rent is fair.

ss55 · Nov 19, 2023

Iowa State University uses a CSR2 Corn Suitability Rating for comparing different parcels of cropland and possibly estimating fair rental value.

https://crops.extension.iastate.edu/cropnews/2015/04/corn-suitability-rating-2-equation-updated

https://www.extension.iastate.edu/agdm/wholefarm/html/c2-20.html

https://www.fbn.com/community/blog/iowa-corn-suitability-rating-index-csr2

https://dreamdirt.com/iowa-farmland-cash-rental-rates-2023/

https://www.extension.iastate.edu/agdm/wholefarm/html/c2-09.html

Is this what you the type of thing you were looking for?

Check Break · Nov 19, 2023

(quoted from post at 18:55:35 11/19/23) I cant imagine that net before taxes is any better than it was 10 years ago no. We do get a reduction on our
property taxes. Dont get me wrong we have a great
relationship with the guys we rent to , they take great
care of the land. Weve turned down almost double per
acre to pull it away from them to give to another
neighbour. All that being said we still were just looking for
information on if what were charging is in check. The
rent is a great supplement to our work incomes and the
longer we hang onto it history tells its a better
investment than most retirement savings accounts.

This is your answer in a nutshell.

ss55 · Nov 19, 2023

Your landlord should be paying you to farm it. The farmland property tax reduction is worth far more than any rental income or crop value. Yeah, there are probably 500 other people who would be happy to farm it for zero rent too.

ss55 · Nov 19, 2023

A lot of people hold onto farmland like it is gold, believing it can never drop in value, until one day it does. The 1980s is a good example.

Bruce from Can. · Nov 20, 2023

The 1980s was 40 years ago. You sound like my parents during the 70s talking about folks loosing their farms in the 30s. The only folks that lost everything in the 30s or the 80s were the people that had gone too far into debt. None of my family lost any farms either time, in fact my grandfather bought the farm next door in 32.

Bruce from Can. · Nov 20, 2023

Land prices are based on local market. I would think if your land on PEI had irrigation and could grow spuds, it might fetch a good rent from growers. Land rent always has to leave the tenants enough room to make a buck, regardless what land price is.

Is there any basic land rent formulas anyone goes by?

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