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#4633390 - 01/13/18 09:15 AM Is buying farmland a bad idea?
skyactiv Offline


Registered: 03/02/13
Posts: 3715
Loc: The Midwest
I know ZERO about farming. The bank officer where I bank told me of a farm that is about to be foreclosed on.
The guy that owns it parents died and he bought out his siblings with a loan and is unable to keep up on the payments.
It has 146 acres of tillable land, a house, barn, no implements and is in NW Ohio. $903K. I can buy it without a mortgage.
The banker says it has very good soil and is a very good farming district. Who would I contact about evaluating it and what
else should I know? I would lease the land as I have no knowledge or intention or farming it.
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#4633402 - 01/13/18 09:25 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
TWG1572 Offline


Registered: 12/18/07
Posts: 530
Loc: Madison, Wisconsin
I buy farmland as investment properties. There are pluses and minuses, but overall it's been pretty good to me. I lease all my land out for cash rent, and do my own property management. But I grew up on a farm, so I know my way around one too.

These are generalities, but Ohio state says NW Ohio farmland was around $6,200 per acre in 2016 and average cash rents were $170. Those are just averages, and you really need to know the local area and production history to know where the place you are looking at falls in the spectrum. Ag is also in a downturn right now, so I'd expect both of those numbers to keep slipping downwards over the next couple years.

There are professional management companies that will do the management for you if you don't want to. Farmers National is one example. They will take about 6% of the gross though. If you have no Ag knowledge, or connections with Ag knowledge, it may be worth it to you. I say this as someone who has been in Ag all their life - farmers may be generally portrayed as honest down to earth people, but....like all walks of life there are good people and bad. You need to make sure you end up with a good tenant who doesn't take advantage of you, or who depletes the soil and then disappears.

If I were you, I'd also call the local Ag extension agent and pick their brain. That may or may not be worthwhile. I also call the local Farm Credit office. Their loan officers know the area, rents, etc. They can provide a lot of good local information. Just don't tell them you are paying cash.


Edited by TWG1572 (01/13/18 09:32 AM)

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#4633404 - 01/13/18 09:25 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
Al Offline


Registered: 06/08/02
Posts: 17786
Loc: Elizabethtown, Pa
Polssibly a state or university Ag. Department. Talk to the locals. You might even want to talk to a farmer who has adjacent land and lease it to him.
Obviously you need a lawyer.
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#4633407 - 01/13/18 09:30 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
CT8 Offline


Registered: 10/09/14
Posts: 9938
Loc: Idaho
Talk to the farmers around the area. To make a farm work as a business you have to be a shrewd business man . I do not understand how ranchers,farmers and airlines stay in business. The Farms around here have huge tractors and all the ground equipment needed is such as I couldn't imagine the cost to buy and operate them, Yikes. I love looking at them and watching them operating. The crop dusters are an air show in themselves and when they dust at night it is the ultimate air show to watch.If you can afford it with out mortgage it would be really cool you should see what the fields rent out for in the area. The people that own the big placeup from where I live have it leased out to a local dairy that does all the work and raises corn to feed their cows. It probably pays the water and some of the taxes at least. If it works for you put a low ball offer in and go from there.

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#4633440 - 01/13/18 09:56 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
BJD78 Offline


Registered: 08/05/17
Posts: 207
Loc: Nebraska
If are able to come up with $903K without a mortgage you have a far stronger wallet than I do. I paid $77K for our modest built in 1941 bungalow home with single car detatched garage on a double lot back in 1995 and we refinanced once to get to 4% interest from a 7% rate. Had I understood that the 30 year clock started over again I would have just stayed with the old rate as we had already paid for 7 years when we refinanced. Mortgage payment with insurance and taxes is only $605 per month so that is nice. I would say that if you can ensure that the lease will cover property taxes it would be a good deal. Especially if you could live there with no mortgage and a paid in full home I would buy a farm and live there as well if could find one, but I cold probably never afford anyting over 200K and that would be with selling current home (assessed at 133K) and paying off the mortgage in full about 30K and dumping 100K as a down on a 200K property Unless I win powerball tonight LOL! I hate living in a city and though Lincoln NE is not a real large city, it is much larger than I prefer and the older I get the more I would prefer to live in the country or at least in a small town of 2K people or less. With no mortgage you could really sock the money away
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#4633458 - 01/13/18 10:13 AM Re: Is buying farmland a bad idea? [Re: BJD78]
Leo99 Offline


Registered: 03/30/14
Posts: 2498
Loc: NJ
Originally Posted By: BJD78
If are able to come up with $903K without a mortgage you have a far stronger wallet than I do.


Yes, I'd have to believe there are better investments than farmland if I had $903K burning a hole in my pocket. If the current owner who presumably knows a lot more about farming couldn't make it work, what makes you think a person that knows nothing about farming could? I'd invest in something I knew about. Buy a Jiffy Lube or gas station or car wash.
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#4633470 - 01/13/18 10:23 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
Iowegian Offline


Registered: 01/05/17
Posts: 196
Loc: Iowa
Invest in what you know.
Investing in something you don't know anything about is a high risk proposition.

If you have other interests in the land such as hunting, fishing, or just having a country estate that would be different. It is serving another purpose.

But for purely an investment standpoint, put your money in mutual funds that invest in realstate. Less risk and probably more profit.

My 2 cents.
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#4633471 - 01/13/18 10:25 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
John_K Offline


Registered: 12/08/06
Posts: 2653
Loc: Columbus, Ohio
Having grown up in NW Ohio I can say most of the farmland there is great.

But that seems like a lot of money just to lease it out. When I was young I had a chance to buy some land fairly cheap. I knew there would be a freeway and development someday but I was scared and turned it down.

Guess what? They have now built a freeway next to it and the area is developing, I could have made big bucks. But unless your farm is right next to an exit with US24 or I75 I doubt that will happen in NW Ohio.
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#4633499 - 01/13/18 10:39 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
dlundblad Offline


Registered: 09/30/13
Posts: 9133
Loc: Midwest
$6100 per acre. Is this a good price?
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#4633510 - 01/13/18 10:45 AM Re: Is buying farmland a bad idea? [Re: skyactiv]
madRiver Offline


Registered: 07/11/15
Posts: 3048
Loc: New England
Is the house and barn nice and in good place to develop into a subdivision ?

Around my area the home if decent might be 400k-600k with first few acres.

The balance of acres are usually only worth $1000-$2000/1acre. Northwest Ohio that seems way over priced.


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#4633548 - 01/13/18 11:16 AM Re: Is buying farmland a bad idea? [Re: Leo99]
BJD78 Offline


Registered: 08/05/17
Posts: 207
Loc: Nebraska
I do not know if he could make it not, but since the guy is wealthy enough to plop down 903K to buy it out right he only has to pay property tax and ensure that whatever farmer he leases it too to grow crops, raise livestock or whatever can make enough for him to make a profit plus pay taxes. Owning the farm free and clear with no mortgage debt will give him a Huge advantage. Jiffy lubes do make money though.I would never go to one or invest in them as I do not trust them, but that is another topic for another day.LOL!! Car washes do very, very well here as people are wanting to get that road salt washed away before the vehicles rust away. I know a man who owns several Jet Washes and he is probably a millionaire or very very very close to it. His washes are almost always busy. Then again if I had 900K at my age 57 that would be way more $ than I could ever use. I make about 7K per month now with my military retirement and VA disability plus will have IRA that will pay out about 500 per month when I hit age 59 1/2 and then accrding o SS I will get about 1, 300.00 per month at age 62 and nearly 2k if I wait until age 70. I would probably just dump that 903K in a mutual fund and put in in the will for our 3 kids to split when my wife and I both pass.
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2010 Forester:122K
2009 Sonata :189K
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#4633610 - 01/13/18 12:41 PM Re: Is buying farmland a bad idea? [Re: skyactiv]
PeterPolyol Offline


Registered: 03/06/16
Posts: 770
Loc: toronto
I'd definitely buy farmland if I could and would LOVE to farm, but definitely not if random banker is soliciting it to me.

What the bankster is really saying:
"Hey Mr. Johnson, I noticed you're wealthy and we have a piece of property we're trying to financially recoup on, would you like a to buy a farm for just under a million? Really, you could be anybody and I don't care at all if you want- need- or know how to farm, we just want to close a sale by any means and extract money from an entity that's able to give it"
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#4633640 - 01/13/18 01:12 PM Re: Is buying farmland a bad idea? [Re: Leo99]
Lolvoguy Offline


Registered: 02/06/14
Posts: 1967
Loc: Canada
Originally Posted By: Leo99
Originally Posted By: BJD78
If are able to come up with $903K without a mortgage you have a far stronger wallet than I do.


Yes, I'd have to believe there are better investments than farmland if I had $903K burning a hole in my pocket. If the current owner who presumably knows a lot more about farming couldn't make it work, what makes you think a person that knows nothing about farming could? I'd invest in something I knew about. Buy a Jiffy Lube or gas station or car wash.


Best post in this thread!
approved

My spouse grew up on a farm and she was an only child so she inherited it. We still own it and rent it out, but there's no way in Kansas I'd ever live on one! It takes a special kind of person to handle the lifestyle of a farmer (of which this Botswana born immigrant, is not!).
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#4633651 - 01/13/18 01:22 PM Re: Is buying farmland a bad idea? [Re: skyactiv]
04SE Offline


Registered: 05/04/07
Posts: 889
Loc: Safe Space
Do the math...

146 acres of tillable
$903,000 purchase price
$6,184.93 per acre
$170ish cash rent per acre
= $24,820 gross return or 2.75% gross ROI

This doesn't include property taxes, insurance and maintenance and management if you hire a company. (I get mailings from Hurst out of Iowa and a few others - they are all $$$$ off of the GROSS figures, NOT the net)

You need to be at the FSA office checking production history and talking to them.

You can talk to a seed company about using the land for a test plot or for seed corn. We make $$$$$$ on renting some of our smaller fields for test plots.

If you truly have $900K in cash, you are nuts for parking it on farmland if you can't actually farm it. You would be doing great to net 2.0% ROI. You can negotiate flexible leases with production bonuses but that is market dependent. If your land isn't good the farmer will drop you.

Ohio - any gas/oil in the area? Who owns those rights?

You can cold call communications companies to park a cell/TV tower on the property and that is $$$$$$$.

Also, just an FYI... I am 6th generation farm family - on the same farm. I had $$$ to buy land with and parked it in a long term CD with a local credit union in a 'special' deal they offered a few of us. I am netting 4.74%. Cashing interest checks is easy.
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#4633792 - 01/13/18 03:52 PM Re: Is buying farmland a bad idea? [Re: skyactiv]
Kruse Offline


Registered: 10/05/05
Posts: 4189
Loc: Kansas
Originally Posted By: skyactiv
I know ZERO about farming. The bank officer where I bank told me of a farm that is about to be foreclosed on.
The guy that owns it parents died and he bought out his siblings with a loan and is unable to keep up on the payments.
It has 146 acres of tillable land, a house, barn, no implements and is in NW Ohio. $903K. I can buy it without a mortgage.
The banker says it has very good soil and is a very good farming district. Who would I contact about evaluating it and what
else should I know? I would lease the land as I have no knowledge or intention or farming it.



FWIW, I grew up on a farm, now live on a farm, help my brother with some occasional farming chores, including driving a truck during harvest, but I'm not a farmer.
I highlighted a few segments of your posts that I think you should concentrate on. First part is that you know zero about farming. It's like trying to jump into any other profession without knowledge of it, you would be at a disadvantage. Second, he's probably paying interest on a loan, but the current owner can't make ends meet owning it. Third, the banker will say everything good about the land because when it comes to land, "They just don't make it anymore" is the familiar saying about land. It's not like a car that wears out or a house that can burn down, the land will be there until the end of time, meaning that they can foreclose on land at any time there is no payment, unlike a car that wears out. (Yea, I know you said you could buy it without a loan) Bankers love to take out loans on land because it's easier to foreclose on it.
Sorry for the long post. A couple of years ago, soybeans were $14/bushel, corn was $8/bushel and it was easy for a land owner to make money. Prices for grain commodities have been cut in half or more and the cost of putting it into the ground, including the cost of seed, has not decreased at all. I don't think the price they pay for grain will increase in the near future. You will see a lot more farmland foreclosed on in the next few years, especially if NAFTA is dissolved.
Not saying to skip buying land, I'm just saying you better do your homework before you plunk down your money.

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