How much to charge for leasing farm?

sidepasser · #1 03/04/13, 10:07 AM

I have someone interested in my farm who wants to lease it and then purchase it in a year.

I know what I want as a purchase price. I can't figure out what to charge for leasing though as the house needs to be finished and it needs a lot of maintenance on the fencing. I have not lived there in over 3 years and had been letting someone keep their horses there just to have someone on the property every day. Those people never maintained the fencing, etc. I did not charge them rent though as I was letting them use the place just to have someone there (a presence to deter thieves and vandals).

Now I have someone who is interested in buying but wants to lease it for a year first.

Place is half woods, half cleared. 31 acres. Deep well, two septic tanks, house/barn combo - barn is completed, house is in various stages of completions (some areas have sheetrock, some don't, all is plumbed, electrical in, ceiling fans in, no a/c, no heat pump - just wood heat). Every room has electrical. It is a large structure at 3200 sq. feet.

Land is hilly, there are 6 paddocks, one dressage arena, underground water to all paddocks with freezeless hydrants.

Garden area with raised beds, needs to be cleared out again (has small trees growing up and grass coming up, but you can still see the raised beds).

Has a chicken house that is separated into four runs so breeds won't cross and has an outside "yard" that is totally fenced to keep out coyotes/dogs.
I am leaving a 53 ft. trailer that is wired for a shop and there is an outbuilding for storage that is 10 x 10. Also two hay sheds, one is large and holds almost a 1,000 bales of hay and is nearly new (less than 5 years old and steel), the other is small and holds about 150 bales of hay and is older but in great shape - it's tin though.

Way off road with total privacy. Small stream on property behind house. Old road goes around property for trail riding or walking. Lots and lots of deer, turkey, squirrels.

House wired for satellite and has phone hardwired too.
Barn has misting system for horses, matted stalls, tack room, feed room and storage room. Concrete aisleway with real nice stallion doors. 12 x 12 stalls.

What would you think this would be worth knowing you would have to split wood to stay warm and finish the house? All upkeep and so forth would be on the person leasing as I do not want the responsibility of running back and forth to take care or every little thing that breaks or big things either. Well pump goes, it is on the lessee..etc.

Right now it costs me just the taxes to keep this place. I don't need to add more expenses to my outgo each month.

scott · #2 03/04/13, 10:24 AM

do a quick penciling on what the monthly mortage would be and throw that number at them. My old friend always wanted to make 15% on his investment capital and always used that rule for setting his rents...sometimes it worked, sometimes not. sounds like you have a bit of flexibility.

luvrulz · #3 03/04/13, 10:29 AM

Is any of the lease amount going towards the down pmt or purchase price? What is the appraised value of the property?

opportunity · #4 03/04/13, 10:34 AM

My leases vary in price from a what i how much hay I can put up and what it would sell for to how much the morgage would be a month. The land here is way more expensive then what you can make off of it by about 10 times.

FarmboyBill · #5 03/04/13, 10:35 AM

Id say, find out what land rents for an acre, and your likely not going to get anything out of wooded acreage.
IF a BIG farmer leases a 80 say, and it has a good barn iof the old style, which is useless to him, and old wood grainery, a hog shed and chicken house and brooder house, all in relatively good shape. He isnt leaseing the property cause those buildings are on it, regardless of their shape. Hes leaseing it to farm the land. Were it him owning the place, he would likely burn and doze in alla of the buildings so he wouldnt have to go round them.

Point is, The land itself is what defines the amount of rent/lease.

Dad rented out his farm for , at the end, $100 an acre. The farmer renting it had absolutly NO use for the barn, grainery, corn crib, chicken house, smoke house, ect.

Whatever the amolun t you figure it runs up to, Id raise it to the next $100 mark and that would be the lease amolunt.

sidepasser · #6 03/04/13, 10:41 AM

Appraisal last year was 175,000. that was in the worst of the economy for our area.

Five years before that, it appraised for over 300,000. Place is 1 mile from a huge public lake and two miles from KIA, five miles from city limits and grocery store.

Fella doesn't want to "farm" it, he wants it because he has horses. the cost to board a horse in the county at a boarding stable is around 350-500 per month depending on quality of care. Pasture board can be anywhere from 50. per month and no stall to 200. a month for stall, grain and hay.

We haven't discussed whether any of the lease amt would go towards purchase. He just asked me what the lease would be and I have no clue what to charge. I had not planned on leasing it out, I want to sell the place so I can buy another farm where I live now. Leasing beats paying someone for cutting the grass all summer and doing maintenance on the fences which has to be done.

unregistered41671 · #7 03/04/13, 11:09 AM

I have seen in the past SP, that lots of people that lease or rent land, saying they will fix fences or rebuild them usually does not get done. I have also seen the people that are leasing the land to hire or either build new fences and take the cost out of improvements out of the rent for set amount of years. You would need to check from time to time which I am sure you would anyway.

sidepasser · #8 03/04/13, 11:51 AM

I would have a written lease agreement spelling out exactly what is required by each party. I do not want to take advantage nor do I want to be taken advantage of. I am trying to come up with a price that is fair to both parties. Hard to do when there are no comparables in the area to look at. As I said before, not very many farms in my area anymore, most land is now converted to subdivisions.

edcopp · #9 03/04/13, 12:41 PM

Too many unstated details to attempt to give a logical answer.

mnn2501 · #10 03/04/13, 12:51 PM

I have found that very few people who lease end up buying, it gives them a chance to find everything wrong with a place.

ymmv

Bret · #11 03/04/13, 01:34 PM

If they qualify, they could ask the lending institution for full financing with an interst only payment the first year. They will pay a huge amount in interest with no reduction of the principal. Use this number for a comparison for both of you so that you see what the true value of the money is for one year.

You have a huge asset. Have you talked to an experienced, qualified, reputable attourney? There are many qualified buyers for good properties. Do all of them know that you want to sell?

sidepasser · #12 03/04/13, 01:50 PM

Quote:

Originally Posted by Bret

If they qualify, they could ask the lending institution for full financing with an interst only payment the first year. They will pay a huge amount in interest with no reduction of the principal. Use this number for a comparison for both of you so that you see what the true value of the money is for one year.

You have a huge asset. Have you talked to an experienced, qualified, reputable attourney? There are many qualified buyers for good properties. Do all of them know that you want to sell?

I listed the property with a realtor who was not proactive. He showed the place three times to people unqualified to purchase after I requested that he not waste my time with people who were not prequalified to buy. He put it on a multi list but I don't think he really understood the value of LAND vs. HOUSES on postage stamps. So when the contract ran out, I took it off the market and continued to clean out the house and do things like that while I tried to decide what to do with it.

Anyone wanting a quiet, and I do stress, quiet property that is well insulated from prying eyes and has excellent neighbors (the kind that help when asked and leave you alone the rest of the time, don't have dogs that chase your stock, and no idiots running amuck on your property) would love this place. It needs work but I discounted the price to reflect that the house needs to be finished. On the plus side, I am leaving quite a bit of "stuff" to help with that as well.

I will keep figuring and I did send a text and ask him what he had in mind as far as the price of leasing. I will see what he responds back with and go from there. On the plus side..I don't have to sell. On the minus side - I want to so I can buy another place and go back to having my horse at home, garden, etc.

sidepasser · #13 03/11/13, 09:03 AM

Well I met the guy at the farm on Saturday and it is apparent that he was just looking for a "bargain" as first thing he said when I told him the price for the property was he could get a foreclosed house for 60,000, but it didn't have any land .... uhm he has horses and said he was looking for a farm..

Oh well, at least I got a full day and a half in on cleaning the place up and clearing out more of the house. If I had two solid weeks off with some help, I could get this job finished. Alas, I have to do it on weekends with generally NO help. Hard to move furniture by oneself.

Anyway, nothing ventured nothing gained. but I sure get tired of lookey lous who have no intention of buying anything or renting anything. Edited to add: my contact with the realtor was supposed to expire in December and the sign was removed the first of December. I thought the realtor removed it so figured that was fine, I would just sell it myself for less than the realtor was asking. No sign Jan, Feb. Went down this weekend, the sign is back up and it is listed on the MLS.

Can realtors do that? I did not resign the agreement or in any way contact the realtor or indicate that I wanted to relist the property. I haven't spoken to the realtor in several months.

Just curious as I did not want to relist. I suppose I should contact them in writing to tell them that I did not want to renew?

Waiting2Retire · #14 03/11/13, 11:20 AM

Quote:

Originally Posted by sidepasser

Place is half woods, half cleared. 31 acres. Deep well, two septic tanks, house/barn combo - barn is completed, house is in various stages of completions (some areas have sheetrock, some don't, all is plumbed, electrical in, ceiling fans in, no a/c, no heat pump - just wood heat). Every room has electrical. It is a large structure at 3200 sq. feet.

Land is hilly, there are 6 paddocks, one dressage arena, underground water to all paddocks with freezeless hydrants.

Garden area with raised beds, needs to be cleared out again (has small trees growing up and grass coming up, but you can still see the raised beds).

Has a chicken house that is separated into four runs so breeds won't cross and has an outside "yard" that is totally fenced to keep out coyotes/dogs.
I am leaving a 53 ft. trailer that is wired for a shop and there is an outbuilding for storage that is 10 x 10. Also two hay sheds, one is large and holds almost a 1,000 bales of hay and is nearly new (less than 5 years old and steel), the other is small and holds about 150 bales of hay and is older but in great shape - it's tin though.

Way off road with total privacy. Small stream on property behind house. Old road goes around property for trail riding or walking. Lots and lots of deer, turkey, squirrels.

House wired for satellite and has phone hardwired too.
Barn has misting system for horses, matted stalls, tack room, feed room and storage room. Concrete aisleway with real nice stallion doors. 12 x 12 stalls.

.... drooling here. This is exactly what we will be looking for when we are closing in on retirement, except the location- we intend to settle in eastern TN or western VA. Trails and an arena... jeeze..

If I were you, I would seek out a better real estate person. On the other hand, if you still have this place in 8 years, I may change our property hunting location

sidepasser · #15 03/12/13, 08:09 AM

Well it seems that I might just have it for the next 8 years - lol..

Just got my conservation inclusion back which lowered the taxes to a whopping 536. a year - that inclusion means that for the next ten years, I won't have much tax payment at all compared to those that do not use the inclusion. Doesn't restrict use of the land unless you want to build a subdivision or a gas station so is a value to a new owner who buys the place to homestead on.

Oh well, back to the drawing board.