Tenancy Advice Needed - Newbie

[GallopingGoat]

I'm new to this site, so please excuse stupid questions, etc.... I'm trying to see what would be acceptable in a tenancy situation where I cannot work the land (lack of time, strength and know-how) and my husband has a demanding day job (and also lacks the know-how). We want to put the land to good use, and are thinking of a tenancy as a solution.

Basically, I would offer use of the land (100 acres, 50 fields/50 woods) in return for 1/3 or 40% profits of the year, to cover land taxes, and food for my family. The tenant would have to build a cabin for housing (I have a small apartment they could use until they complete the cabin) - I would pay for the materials and the installation of a well, etc.

I would retain design control, in respect to barns and buildings that the tenant erects (but not to be obstructionist - just to make sure the buildings all work cohesively on the property and don't cost too much!), and have a hand in the overall vision of the production, which would include sheep, limited dairy, beef/pork, poultry, vegetables, fruit, syrup and grapes. I would also help to market as needed. At some point in the future I would also like to have an agri-tourist cottage overlooking the lake (we're near Lake Champlain), which could generate even more income. My desire is to make the land generate enough income to cover some or all of the taxes ($8000), if not contribute to the cost of maintenance/improvement - but offer no salary or benefits. There could be the possibility of the tenant purchasing a lot of land from us in the future - but I wouldn't want that initially. I could see this arrangement lasting as long as the tenant would like it to, as long as I find the right person/persons.

The long-vision goal is to have a thriving farm offering a simple but abundant life for both the tenant's and my family.

Does anyone have any experience with an arrangement of this kind? Is my thought that a couple would be best, so that the wife could work for some income for the family while the husband works the land, feasible or rational? Have I left out anything important? Any and all comments, critiques and suggestions are welcome! Thank you!

[Mike in wny]

dont do it it will cause to many problems

[Yvonne's hubby]

My grandfather did this for years with his original homestead. After he had the place in production and held a deed to it, (120 acres) he rented the land out to various neighbors for a few years, then added another house on the property where he and granny lived, then he found a tenant who lived in the original house, who supplied all required labor and equipment, grandpa supplied the land, and they split the crop right down the middle. Grampa maintained control of the property, but worked with the tenant as far as deciding what crops were to be grown, this worked well for both parties, that tenant stayed on the farm for well over 20 years.

[Mike in wny]

the key here is had a working farm not raw land with nothing on it

[Yvonne's hubby]

Originally Posted by Mike in wny

the key here is had a working farm not raw land with nothing on it

It was pretty much "raw land" when grampa moved on it in 1934, all sagebrush and rattlesnakes. He cleared it, put in the ditches for irrigation and then rented the land out to neighbors. Other than the two old houses that grampa moved onto the property, there were no other improvements when the tenant came into the game. Any other buildings required were shared... grampa furnished materials, tenant furnish labor.

[sidepasser]

Originally Posted by GallopingGoat

I'm new to this site, so please excuse stupid questions, etc.... I'm trying to see what would be acceptable in a tenancy situation where I cannot work the land (lack of time, strength and know-how) and my husband has a demanding day job (and also lacks the know-how). We want to put the land to good use, and are thinking of a tenancy as a solution.

Basically, I would offer use of the land (100 acres, 50 fields/50 woods) in return for 1/3 or 40% profits of the year, to cover land taxes, and food for my family. The tenant would have to build a cabin for housing (I have a small apartment they could use until they complete the cabin) - I would pay for the materials and the installation of a well, etc.

I would retain design control, in respect to barns and buildings that the tenant erects (but not to be obstructionist - just to make sure the buildings all work cohesively on the property and don't cost too much!), and have a hand in the overall vision of the production, which would include sheep, limited dairy, beef/pork, poultry, vegetables, fruit, syrup and grapes. I would also help to market as needed. At some point in the future I would also like to have an agri-tourist cottage overlooking the lake (we're near Lake Champlain), which could generate even more income. My desire is to make the land generate enough income to cover some or all of the taxes ($8000), if not contribute to the cost of maintenance/improvement - but offer no salary or benefits. There could be the possibility of the tenant purchasing a lot of land from us in the future - but I wouldn't want that initially. I could see this arrangement lasting as long as the tenant would like it to, as long as I find the right person/persons.

The long-vision goal is to have a thriving farm offering a simple but abundant life for both the tenant's and my family.

Does anyone have any experience with an arrangement of this kind? Is my thought that a couple would be best, so that the wife could work for some income for the family while the husband works the land, feasible or rational? Have I left out anything important? Any and all comments, critiques and suggestions are welcome! Thank you!

What if there is no profit from the land? Does the tenant have to pay rent? It almost sounds like you want someone to do the work on the land, build a house (again that is labor intensive even if you are providing the materials); there is fertilizer and seed, who provides the machinery to work this land?

I think you need to provide more information as right now it sounds like a lot of work for the tenant with very little in the way of return other than getting to use the land (which many tenants already do if they rent a farm - the farm normally will come with a house, barns, etc.) it sounds like you have raw land and you need all this stuff built (house, barns, equipment sheds, etc.).

Would you pay the tenant to provide the labor? I think that will be key and never, ever under any circumstances think that land will cover taxes. Sometimes it might, but often times you are left scrambling if that is the only way to cover the taxes.

I've had a farm for almost 30 years. At times it was very productive and I did very well - other times I had losses of one kind or another, which led to a very lean year. Livestock and crops do not always make money, one large hail storm or a cow breaks a leg, a coyote gets in with the sheep, and there goes your profit.

Have you given thought to what the tenant will get out of this? Other than the opportunity to live on a farm and work the land? To get "good" tenants, there must be equal opportunities for both parties, otherwise one or the other party may feel taken advantage of.

Whatever you do, I suggest a very good contract detailing exactly who pays for what and when, how 'profit" is determined, etc. Also, expect any tenant to want a very long term proposition if they are going to have to build a house.

[Yvonne's hubby]

Originally Posted by sidepasser

Whatever you do, I suggest a very good contract detailing exactly who pays for what and when, how 'profit" is determined, etc. Also, expect any tenant to want a very long term proposition if they are going to have to build a house.

Yep, get everything in writing!

[rambler]

Just my opinion.

Total disaster the way you have that structured. Will never work out. Well, 99 out of 100 won't work out.

How big a property, you say 1/2 is crop land, other 1/2 is trees?

(Oops, i see 50 acres crop land, 50 of trees. What type of crops are you trying to grow? Grains, hay, truck garden, what? 50 acres would likely be hay or crops, corn-soybeans in a Midwest climate, perhaps wheat in a drier climate. Rent could go $50 to $300 an acre depending on where you are and the shape of the field. Forest land is a 20 year management deal, get filthy rich one year and lose money on it the other 19, so hard to be a rental situation, its just yours, call a good govt forester and pay him to map out a clear cut or selective cut plan for the long term health of your forest.)

You won't get anything if you take a % of profits, you need to split the gross on a crop share.

You basically want total control and your hands in on every decision, yet you don't want to do any of the work.

That is another disaster. Either pay someone a living salary/hourly wages to do your work, or lease it to them and keep your nose out of it so they can make something work. Your plan is a disaster - knowledgable folk will stay away because they see the disaster, you will attract people with little experience and between you will be sunk before you start.

Offering a residence as part of pay is cool, but you are offering them to build on your property so it is there expense, your property in the end, so what incentive do they have to build, a house is a 20-40 year investment, if the deal doesn't work out they are tossed out in a year. So, again, as you have it set up, total disaster.

There is no part of this that will work as you have it designed.

Sorry for the very very blunt message. I welcome you to the forum, and am actually a much more pleasant person than this sounds. you have an asset, and you have an idea to work with someone. And those are big pluses, and can work out well for you. I'm glad you are thinking on it, and asking questions. Shows you care and want this to work.

My blunt reply is a wake up is all.

You have an asset, and you want it developed.

You either need to figure out your way, best way to develop it, and pay people hourly pay to have things done your way. This is very hard if you are new to an area, or have never developed a property and markets and crops to make things profitable. The learning curve is very very expensive and very very steep. Make a mistake and you can lose a whole year's crop, or worse yet tick off your buyers and lose them for several years.....

Or you need to lease it out, take a cut of the gross income, and sorta keep out of the day to day operation so the person you are renting to can make things work. Obviously you put in guidelines and controls of what you want, but in this situation you are hiring a person who already knows what needs to be done with the property, and brings knowledge, tools, and experience to develop it properly. You need to keep out of the way, silently learn from what they are doing.

Ask more questions, tell us more what options your property has to develop, and plan more. I promise not to be such a jerk in future messages. just need to get your attention here is all. You can't have total control but lease it out, and that is pretty much what you are saying.... We need to refine this into a workable, profitable, and pleasant plan you can live with.

Hope you have updates and info and more.

Paul

[Lazy J]

No location specified so it is difficult to give more specific advice.

What you are looking for will take a really special person. IF you are in Oregon there is a man here posting about the loss of his farm, that might be an option for you.

If the ground is tillable the simplest solution would be hiring an Independent Forester to manage and harvest the timber and rent the tillable acreage to a local farmer in a simple sharecrop or cash rent arrangement.

Jim

[agmantoo]

You manage the tree land passively and land rent the open land. Get the rent for the open land at the beginning of each year. Find an established farmer as the lessee. If he is astute he will ask to be assured of having the land available to him for at least a specific number of years with an option to renew. Have a soil sample done and specify that the farm land not drop below that level. Specify the lessee use the "best use practices" set by extension office.

[rambler]

Originally Posted by GallopingGoat

The long-vision goal is to have a thriving farm offering a simple but abundant life for both the tenant's and my family.

Ok. A Midwestern farm, one person can run 600 acres of crop land well, and if careful can make a living at it. Or a person can run half that, have a regular full time job, and make a living. Many farmers are combinations of 2 sons, a retired dad, and get a wife or other brother to help out a couple busy weeks, and will be farming 4000 acres between them, and have side jobs in construction, trucking, or the like to provide health care and dependable income.

That is just where common agriculture has gone, the costs of machinery, fuel, seed, and so on is high, and even with the higher grain prices of the last couple years, grain and milk and meat prices have dropped over the last 50 years in real dollars to where you need that much land to make a return.

Now, you are looking to get $8000 back on your land every year.

As well you are looking to make some improvements, namely buildings. Sounds like $100,000 at least in buildings, spread over 40 years, that's another $2500 a year to you, as the buildings will be your assets.

A person who rents from you needs $20,000 a year to live on, health care, retirement, and so on, if you want to have a future how can you expect to live on less, would really need a way to expand that wouldn't one?

So, you are looking to create $10,500 income for you, and $20,000 income for your renter. Plus some for interest costs on the buildings.

So you are looking to create $35,000 net income on your 100 acres. Or $350 an acre profit on each 50 acres crops, 50 acres woods.

That is a tall order.

Paul

[GallopingGoat]

Thank you everyone for your replies - I really appreciate it. I realize I was vague in ways that I didn't mean to be... Not that I have answers, but more information:

Rambler, I appreciate your pessimism. If I can't answer your questions then I am deluding myself! Yvonne's Hubby, your Grandfather's arrangement seems very close to what I am after.

My land is in Vermont, in the lower Champlain Valley - zone 5. While we have a short growing season, it is generally very productive. In my area there are vineyards, beef and dairy herds, vegetable and fruit farms, salad greens, poultry farms, sugaring operations, beekeepers, cheese makers etc. (I know I am forgetting MANY). My neighbors on all sides farm in one way or another, and this whole 100 mile or so valley is farmland up to the border of Canada.

There are tenancy agreements in Vermont, like the one I have outlined. The Vermont Farmer's Extension offers listings of land/tenancies/leases available to their graduates, as well as the University's heft in terms of mentoring and help. These are all new or newly re-educated farmers who don't have the resources to lease land that needs to be developed and established. I wouldn't expect the tenant to pay for anything farm related, frankly. On start up, I would assume the costs, and would hope that I could market our venture well enough to provide income as it becomes established. I would provide the tools, machinery and materials that we would need to build, etc. The tenant would provide the labor as well as any machinery they might have. As I said, all of my neighbors farm, and we are a friendly bunch. It is possible to borrow one person's auger, another's tedder, etc. While I don't own very much machinery, I have access to it, either through rent or borrowing.

I have a barn and garage that I've had built in the last few years. They're not fancy, or large, but they work. The barn (36X30 with 600 sq. bale hayloft) cost $12,000 and the garage, with the upstairs apartment still unfinished, has cost $10,000. I have 5 acres in fenced pasture for my four geriatric horses. While the cost of building is high, I wouldn't expect for the house and additional barn to bankrupt me - these will be simple buildings - but useful/comfortable.

The forest wouldn't be logged, but the maples would be tapped. I haven't counted them, but we have many. My cleared acreage is established in hay, and has been for many years - on good years we get three cuts. It is fertile soil and would not take much to convert some to plots. Also all of the pastures flank the dirt road, so there's good access.

To answer a question, if the year is tough and there is no profit, then no - the tenant would not have to pay rent. My husband's job currently sustains this land, and could in a lean year. We would just have to work for a better year the next time around. I also wouldn't expect to cover all of the land taxes until we are established, and I have been able to market our product. It wouldn't be the burden of the tenant, in other words, to make that work - it would be mine. I have connections in NYC to whom we could sell our whole lamb crop, for example. I also would think our land would be better used for hay, planting and grazing more than grain - unless we supplied the local boutique distillery- but even then the added cost of machinery wouldn't make sense.

As for health insurance, I'm not aware of any renter who expects their landlord to provide medical insurance. This arrangement would be rent-in-kind... While I may be wrong, I don't think that is an issue I will have to address. Also, if they're a couple, the wife could theoretically insure the family through her employer...?

Thanks again - sorry this is so long -

[Alice In TX/MO]

You will ABSOLUTELY have to have liability insurance and tell the insurance company of the arrangement.

I think you could rent the land and rent a house and hire a worker. Three separate deals.

I'm going to share with you the desperation in a letter posted to a goat list I'm on. Paraphrasing....

We have tried hiring 4H high school students, but they are not managers. They fill the water containers, every day, but never notice that they need to be cleaned.

They milk fast to get home for THEIR dinner and forget to feed the goats.

They forget to keep us appraised of the hay supply in the barn.

If they are tired/bored/in a hurry, they look at the stemmy ends of the hay in the feeders and assume it's enough for the whole herd to make it through the day.

Same with grain.

The morning milkers are late to work, and the evening milkers come early to get home early, and this disrupts lactation.

They don't trim hooves, notice the does in heat, or pay attention to normal details.

We have to register unintended offspring because they can't remember to latch gates.

* * *
This pretty much sums up MOST of types of employees and renters you might get.

HOWEVER, here in Texas, my next door neighbor is my renter, and she milks two of my does for her family. She is my substitute milker as needed.

BUT.... I asked her and her family to move in from one of my other rent houses in town because I knew they were what we needed, and I knew the farm was what her family needed. Before that, we've had a couple of less reliable folks. The last one stole my cat when he left. (I got her back)

You might find the perfect folks. I hope you do!

I also have perfect renters in a house in Missouri. I am blessed.

[rambler]

> As for health insurance, I'm not aware of any renter who expects their landlord to provide medical insurance. This arrangement would be rent-in-kind... While I may be wrong, I don't think that is an issue I will have to address. Also, if they're a couple, the wife could theoretically insure the family through her employer...?



Well, I'm under the impression everyone needs health care in the next year or 2, college kids probably have a pass, but if they are in work situation I'd guess they need to buy health insurance or not work..... While you might not be employing them directly, health care needs to come out of everyone's income now.... I think this is a real issue that we all get to face one way or another like it or not.

Otherwise, sounds like you have some nice programs up there to get the kids out in nature and working on a farmette. I think this might be more expensive than you think to get into, livestock and wine and such crops take years to establish, but sounds like fun and you can have something by the end. Good luck with the adventure.

I am in a different branch of farming, so I will watch this thread with intrest, see what good ideas others bring forth.

Paul

[rharper]

Well, I can say this:

I wouldn't touch it with somebody else's ten foot pole. Here's why:

My mother-in-law has deeded my wife and myself some land, on which we intended to build. We can't afford it at the moment, but we will be able to do it soon enough.

Still, there is one issue, on which I've put my foot down. She wants us to use her land, because it's essentially gone to seed. It isn't much--8 acres in addition to our three, so nothing like what you've got--but it is hers, not ours. Thus, any improvements--and improvements ain't cheap--will not be ours, and our sweat equity goes up in smoke. My wife isn't the only kid, so when Mom dies, it goes into the common pot. Thus the barns/fences/etc. become part of the estate, and we may not even get to use them any more (or we may have to pay the siblings for the privilege).

This is not a contentious situation either--the siblings all get along very well, and we're the only ones who currently have any use for the land--but nonetheless I won't pay for any improvements on, or invest significant work in, land I don't own unless someone's paying me for it. The gift of the land was wonderful, and I have no problem helping out Mom and taking care of her as we can, but life is short, and land isn't going anywhere, and I don't want to be fighting over it years from now.

So, to sum up, I'd work the land for pay, or sharecrop (which is essentially what you're talking about) if there's a decent setup, but I'd never invest money and labor in land I don't own. I've seen families fall apart, more than once, on the death of the matriarch/patriarch, and it's hard enough to be at the mercy of your own, let alone somebody else's, family politics.

My suggestion is to build the cabin/outbuildings to your own specs, then offer a sharecrop tenancy. To ask a tenant to build their own place, to your specs, is not a reasonable option.

[Molly Mckee]

I have been trying to figure out why anyone would do this. You are asking for a lot of work including building your own house, you admit you don't really know much about farming but want to control things, there is little machinery and you are planning to borrow or rent it, and you want to make an unrealistic amount of money per acre. I think your life would be much easier if you hired help, and rented the land and the trees-if they can produce syrup.
I have a feeling that you will have a very hard time getting and keeping a tenant under the conditions you are offering. Thirty three to forty percent of nothing is not enough to live on and you haven't suggested anything that will bring in much money at first. Without your own equipment you will be at others mercy when you try to get crops in, and you will have to have perfect conditions to make the kind of money you are talking about. My impression is that maple syrup is a valuable crop, however the processing equipment is expensive and I don't see that you have any.
The "employee" has no security, if he loses his job he loses his home as well. No matter how hard he works he is not going to make much money and the attitude that his wife can work so they have insurance and some money sounds like a situation that will not work. I would be interested to know what all these other farms are offering. There is a big difference in a tenant situation in a going concern. You don't have buildings, equipment, or enough land to support this kind of enterprise without a large infusion of cash. If the tenant can go several years without income while you are setting up the farm, he can probably buy his own.

[GallopingGoat]

Thank you again for your comments, suggestions and critiques. I want to clarify a couple of points - I would definitely have liability insurance, etc., just not provide medical to the tenant. If I did, the nature of our arrangement would change to one where I would have to also pay worker's comp, employment taxes and the like, which I couldn't for an extended period of time. A rent-in-kind agreement is much less complicated, for both parties. The whole point of offering a tenancy is for a long term agreement, so that the farm could be well developed and run. I also want to stress that I wouldn't expect the tenant to invest his money, just time. I also think it's important to maintain overall control as this is my only real asset and I need to live here, as well - I wouldn't want to be powerless over something I object to occurring on my land. Tenancy gives me that protective power, I believe - but ultimately, it would be wonderful if this ended up more of a partnership with a complimentary vision.

I'm not unwilling to do work, I am capable, I just don't know how to do farm labor and this is a huge job for anyone - even someone who is capable and not chasing children around. But if I am honest, my strengths are marketing and business. I could use those to make our products generate income.

I did speak to my USDA rep yesterday, on the advice of one of my neighbors. The rep did say there are two land databases that cater to farmers looking for land, and that they offer tenancies, leases and sales. He said there are farmers in the area looking for such situations as tenancies, and that he would help me determine what my land and soils would support, as well as craft an agreement if I wish. I checked the databases, and most of the listings are sales at market value, followed by leases with and without structures/living arrangements. There were three tenancy agreements available, one included a yurt (not a bad idea) but no water, but the others were of raw land and the tenant was expected to provide their own shelter/machinery/investment, etc. These tenancies are listed as 1-5 year and 5-15 year offers - where the landlord could essentially take one's investment out from under one's feet at the end. At least I am offering materials, access to machinery and shelter.

But I have a question. To address the issue of why anyone would invest sweat and time in a tenancy like this - what if the agreement included being deeded a seven-acre lot with the house/cabin they built at say, eight or ten years in the future? Is that incentive necessary to inspire long-term partnership?

I realize the numbers are rough, that I am expecting a LOT of income per acre (thank you Paul - I understood that easily) which I will work on...

Again, I truly appreciate all input!

[LittleRedHen]

I don't see much for the tenant in the long run. Most people who rent, do so, just the land and by the acre. At least that is how it is in my area. They don't tend to put up buildings as for most farming, it doesn't require a barn. Even with cattle they don't often have barns. Most people who rent do so for crops but a few for hay fields or for pasture. A lot of people rent out for the cost of property taxes so that those are covered. Wooded land though really doesn't get rented around here. Now Vermont might be different because of tappin' but i tend to think that the 50 treed acres would appeal to a totally different person than the raw farm land and thus might end in two tenants instead of one. But I think beyond that, you would have to look real hard for someone interested in putting up barns, houses etc because they are only a tenant, not the owner

[haypoint]

Right now on CL there is an offer to come use their land, for free, to develop an orchard or vineyard on their bare land. I doubt they'll get any takers. That's a huge investment.

Tenent farmers were about a step away from being slaves, back in the early 1900s. My grandpa was a good farmer, but things change and he had to move every 5 or 6 years. Managed a show herd of Polled Herefords for a number of years. The bull died and the owner/doctor decided to liquidate. Grandpa was head herdsman at Michigan State University, but politics changed and he was out.

It is hard these days to find anyone that will toil day and night, produce a profit above the living expenses, year in and year out and still lay his head on a borrowed pillow.