Farm land rental income

[Joshie]

What is the best way to determine the average rental income on central Illinois farm land? There is a piece of property close to us that sounds interesting. My preference for land is a piece of land we can purchase without a mortgage. This piece of land, though, has two homes and much more land than we need (nearly 100 acres). We would need to carry a mortgage with this piece of land so would not be able to be debt free. We've only seen pictures of this property. But it makes me ask the question: how do you estimate rental income for farmland? I think beans were planted in 2008.

We could probably sell off one of the houses with about 5 acres or so and need to mortgage little to nothing. Even so, it would be nice to rent out the farmland. I would like to leave some of the land in hay for our horses and for our trainer's horses.

[Bearfootfarm]

The best way to find out is ask area farmers. There are too many variables to get a good answer any other way

We lease out part of our farm and it brings enough to pay all the property taxes for the whole farm. and they also maintain all the ditchbanks, which saves me a lot of time and money

[rambler]

Extension office in your county would be a big help to you.

FSA (Farm Service Office) would also be able to help I should think.

What does the land yield? 200bu corn, 50 bu beans - it would bring $200 an acre if in a nice big rectangle, well drained, good soil. Need good soil test for N,P, & K as well, not run down wore out soil.

Now, if you cut it all up into little chunks, it becomes much more difficult to farm, and will be worth less.

If it is poorer ground, on not regularly shaped (ditches, wetlands, groves, etc making it odd shapes) all this decreases the value.

Farm rent for good land has gone bonkers, I hear anything from $50 to 500 so it really, really depends. We are on a rollercoaster of ag land values, so whatever it is this year, it might not be next year! The ecconomy bubble is going through the ag world right now.

--->Paul

Edit: that should be Farm Service Agency, not Office. It & the Extension office are in most every ag county in the USA, typically in the county seat.

If you like to have some control, you can even have the land custom farmed. You get to have all the risk, just hire the machinery operations done for a set fee. It allows you to have all the fun of farming, get all the big checks & take the big hail/ drought/ etc losses. You just don't have to get dirty doing it. Again the Extension office can explain how that works in your area. It is a big risk on your part, you need to invest $500 or more an acre just like a farmer would.

Crop share is another option - you both pay some of the costs, and both of you get a portion of the crop. Often the land owner pays 40% of the seed, fert, & herbicide costs, and gets 40% of the crop. But there are many local varriations of that. Again it allows you to make more if crop yield and prices are good; but you can lose more if things are bad. It also used to mess up govt program payments with tons more paperwork, but they changed that for this year.

I'd do the cash rent as you plan if it were me. Cash rent you just get the check each year, and let the farmer farm it. No hassles either way. Just mentioning alternatives, which may or may not be common in your area.

If the houses are near each other, I too would not like that. Or share a driveway or such - it only creates headaches, as someone mentioned. If they are on different ends of the property, that's different. That's your call, but something to ponder on.

--->Paul

[blufford]

In Delaware I know of a farm (soy beans) 150 acres for 80.00 an acre. It wouldn't be any problem to grow field corn there either. I've heard 130 an acre in some parts of the mid-west.

Here are a couple of web sites that may give you some answers.


http://www.farmdoc.uiuc.edu/manage/Cash_rent_index.pdf

http://www.farmdoc.uiuc.edu/manage/index.asp


Why don't you put some soy beans in yourself?

[wwubben]

Cash rent for Iowa row crop ground runs from $150 to $350 per acre paid in advance for 2009.This information involves cash rent contracts handled by my attorney here in north central Iowa.This is too much money not to have a written contract handled by an attorney.You can take offers from local farmers to see what the rent is for your farm.You can ask a farm management agent in your area to get an idea of local cash rents.

[clovis]

You have gotten excellent advice so far. Please reread what everyone has posted, because they have very valid points on everything they posted.

My BIL is a crop consultant and soil tester. I was surprised that a good portion of his income is derived from figuring yields, and soil testing to determine rental prices for farm ground. At least the work that he does helps support what the land owner is asking.

How big are the fields?

Clove

[Michael Kawalek]

Hello Joshie
One problem I could foresee is that if you sell off that 5 acres with a house on it, you are guaranting that you will have a neighbor within 200-300 feet of your property. Will that be acceptable to you? How far apart are the two houses? If I owned 95 acres, I would not want to have my neighbor just a stone's throw away.

[switchman62]

I got just $125/acre for a small 8 acre plot last year in Western Illinois. This was on short notice and I did not do alot of asking around but from what I found out later is about right for this area. A larger acreage would probably get a little more per acre.

[wwubben]

You can also rent the land on crop share.The renter provide you with a set amount of hay and/or grain per year.Take your time educating yourself.

[travlnusa]

RESEARCH what you may want to rent the land for.

I would suggest trying to get a 3-5 year deal. Many Ag forcasts are calling for land values to start to drop in 2010 (or so).

Grains are back to "average" prices, inputs are still very high, milk is back to around $10/100lbs.

The Ag bubble is deflating quickly.

[Joshie]

Thanks for the ideas, guys. My hubby said he wouldn't want to sell off the other homestead. It is located at one edge of the property and would be pretty easy to separate. It may make better sense, though, to rent out the other house. It would certainly offer more control.

We've not been out to see the land yet. It's in central IL and we have good soils but I've not see the soil reports. I'm not even certain how much of the acreage was in crops last year. There is also fenced pasture and timber they're advertising as "hunting" timber with trophy whitetails. Somehow, around here, every single piece of acreage has "trophy" populations of whitetails.

Thanks for the pointers! We have a lot to think about.

Laura

[DixyDoodle]

I have a question: we are thinking of leasing out 20 acres of tiled farmland. Not sure what we should ask for it, but will check with the neighbours for typical lease prices. But how is it typically paid? By the month, or by the year, or do some owners wait for the farmer to get their crops in and then get payment? What is the usual way, I mean?

And a contract on paper is a given, as far as I'm concerned. I'm been burned a couple times by hay sellers (handshake deals, even by friends! Grrr!), no way will I do THAT again!

You know, I put an ad out recently for the land, you know what I got? A response from a 14 year old who "wanted to own some land". Ok, first off, READ the ad, it says "lease" (go back to school if you don't know the word), not "for sale", and as IF I'm going to get into a contract with someone who's not an adult, it wouldn't be legally binding anyhow. Nutters.

[DaleK]

Dixy in Ontario it's usually paid after the crop comes off. We have one farm we rent where we pay half in June, half in November, but the rest are all at harvest.

Depends where you are in the east but $40-100 is what I hear from down that way depending on the quality of the land and local pressures.

[rambler]

Down here in the States, most farm leases are now paid before the crop is planted.

Some pay 1/2 before it's planted, and 1/2 after harvest.

But, almost anything goes - I've heard of monthly, and 1/3 payments too.

It used to be paid after harvest, but some didn't get paid.....

So it moved to 1/2 before, 1/2 after. Sometimes the 2nd half wouldn't get paid....

So now it's about 1/2 contracts you pay before you plant, about 1/2 are still 50-50.

Of course, I'd do what is common in your area, if you upset the apple cart you might scare away bidders on your land.

Here in the States, there are rules about terminating a rental agreement, you need to notify the renter before fall that they won't get the land again the following year - this protects the renter from doing fall tillage & applying fertilizer & buying seed, and then you yank the land out from under them. It's pretty straight forward common sense stuff, but be aware of what the rules are in your area so as to do things properly. Some items like lime often last for 5 years on the soil, so that issue needs to be addressed too - who pays for the 'unused' lime if the lease is less than 5 years?

You want the land returned back to you in the condition the renter got it - fall tillage the same, fertility levels the same, and a date for the lease to end.

Especially if you need lime on your soil, it is common for a lease to run 3 years or so, both you & the renter can be more comfortable with fertilizer applications, etc.

--->Paul

[Snakeoil]

Go to your local ASCS office and they can tell you the average corn yield for the farm you are interested in. They can also tell you the average dollar value you could expect for cash rent of the property.

[Bearfootfarm]

Mine is leased by the year with a written contract, and paid in full at the beginning of each year.

[Ken Scharabok]

The local rate for land such as my farm has been $30 per acre per year for about as long as anyone can remember.

[Quint]

I've got mine set up so that I get half the crop. He gets half and I get half. Occasionally I pay for spraying or fertilizer and stuff but generally he takes care of all of that and I get half of the crop.