Leasing my Land

[ddgood]

$15/acre per year is not unreasonable if the goal is to keep the land long term, without having to do upkeep on the fences. It will pay the real estate taxes on the land, the base electric charge on the property if it is still hooked up and a liability policy on the land.

We have family property in the county west of this 40 acres. A 50 acre tract that is owned by me and my siblings is leased back to a cattle operation partnership (which we are also members) that runs cattle on an additional 250 acres owned by us and some other cousins. The lease rate is a little less that what you are offered but it covers all of those thing I listed above.

Look on the Texas Agrilife Extension website for a generic lease agreement.

There is also a great handbook on ag pastures leases:

https://agrilife.org/texasaglaw/files/2021/01/Ranchers-Agricultural-Leasing-Handbook.pdf

 

[EddieWalker]

Just to show how little I know, is that $15 per acre per year? Or per month?


I’m not a fan of dilapidated houses. They are a potential hazard, attract curious people, and could become a flop house depending on where it is. I would tear it down. A day with an excavator and a few dumpsters and it will be gone.

That's for a full year. Basically $600 a year to let his cows eat the grass on my 40 acres. He has over a thousand acres, so I'm not sure how much will use my 40, but with the fence in such bad shape, our cows have been going back and for for a few years now already.

The house is an unlivable shack that the County is taxing me for with a value of $100,000 It has no floors, just a few joists and then it's open dirt. It doesn't have any sheetrock on the studs, the windows are broken, the doors do not work, or don't exist. No ceiling, and no insulation of any kind. It's really just a shell of a house with all the brick cracking really bad.

My Loan Officer says that I cannot tear it down, or I violate something with the loan. If it falls down, my Insurance Agent tells me that I'll get the $100,000 appraised value for the house. I have pictures showing the condition of the house when the land was bought, and it hasn't changed or improved. I'm just waiting for a good storm to knock it down, but so far, Mother Nature has disappointed me.

 

[ultrarunner]

No move by the bank to force payoff?

Often lenders will want out unless the party assuming is a spouse, parent or child occupying the home.

I have no experience regarding Texas property tax and insurance.

Can you appeal the value and is insurance OK continuing the policy in condition and with no one there?

Any idea as to the year of construction?

 

[jyoutz]

That's for a full year. Basically $600 a year to let his cows eat the grass on my 40 acres. He has over a thousand acres, so I'm not sure how much will use my 40, but with the fence in such bad shape, our cows have been going back and for for a few years now already.

The house is an unlivable shack that the County is taxing me for with a value of $100,000 It has no floors, just a few joists and then it's open dirt. It doesn't have any sheetrock on the studs, the windows are broken, the doors do not work, or don't exist. No ceiling, and no insulation of any kind. It's really just a shell of a house with all the brick cracking really bad.

My Loan Officer says that I cannot tear it down, or I violate something with the loan. If it falls down, my Insurance Agent tells me that I'll get the $100,000 appraised value for the house. I have pictures showing the condition of the house when the land was bought, and it hasn't changed or improved. I'm just waiting for a good storm to knock it down, but so far, Mother Nature has disappointed me.

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I would first talk with cooperative extension and get an idea of how many animals for how many months that your land can support without resource damage. Yes proper grazing can help to maintain or even improve the land, but overgrazing isn’t beneficial and can destroy native grasses and cause erosion. Then I would make the arrangement accordingly so your land isn’t overgrazed. Letting him graze cheap is one thing; damaging your land shouldn’t be acceptable.

 

[zzvyb6]

Check to see if an Ag exemption/designation can be changed by government. Here, only the landowner can 'Request' a change in tax status (ant maybe not get it !. There are also lands that go back to Ag. If you raise bees off your back deck on a 1/2 acre postage stamp lot and sell some honey, you're a farm !

Also check with a few of your nearby ag universities, hopefully, that they have numerical data over the past 10 years of land rental by county. I found a Michigan State University publication for some NextDoor questions.

USDA Farmland Cash Rental Rates

Rental rates per county taken from USDA's National Agricultural Statistics Services

www.canr.msu.edu

I was able to cut & paste the numbers out of the .pdf to make a more 'presentable' comparison. Some folks here are opposed to a proposed huge neighborhood and studying alternatives. Its a hard question to answer.

 

[Jstpssng]

I'm surprised that your insurer will cover the building. My mother got visited by an inspector a few years ago and almost lost her policy because he stated her house was vacant... despite the fact there were plants visible through the windows, lawn is mowed regularly and she was home most of the time.

 

[ultrarunner]

Would it make any sense to retire the mortgage and then you could demo the building?

Maybe a yard light to keep electric active?

Hookup fees for utilities are no joke so keeping a presence might pencil out.

 

[RayIN]

I would first talk with cooperative extension and get an idea of how many animals for how many months that your land can support without resource damage. Yes proper grazing can help to maintain or even improve the land, but overgrazing isn’t beneficial and can destroy native grasses and cause erosion. Then I would make the arrangement accordingly so your land isn’t overgrazed. Letting him graze cheap is one thing; damaging your land shouldn’t be acceptable.

Yep, here in S. Indiana grazing land/pasture will support 1 cow on 3 acres minimum without detriment. Any more and what you describe slowly happens.
I talked with a man from N.M. and he said there it was 1 cow for 35 acres minimum.
So that is a very important point for consideration.

 

[airbiscuit]

Lots of good advice here. In my case, in WI, when I inherited the family farm, I was approached by a farmer to rent the cropland. He cleaned up the old fencing, removed some old junk, and would be a good steward of the land. He paid me $17 an acre. That was less than what the charts said I should get, but he was a straight shooter, the property would be used as it should, and I get to keep the Ag property classification. It was absolutely worth it to me.

Your neighbor sounds like he also is a straight shooter. I agree with putting the lease/rent in writing.
It should include the fencing/mowing, etc.
I would give him a three year contract, renewable annually.
You might want to include a clause that the agreement can be terminated in 30 days if the property is sold.
I like the idea of having separate hunting lease
Might you be able to rent out the shop and/or shed?

 

[jyoutz]

Yep, here in S. Indiana grazing land/pasture will support 1 cow on 3 acres minimum without detriment. Any more and what you describe slowly happens.
I talked with a man from N.M. and he said there it was 1 cow for 35 acres minimum.
So that is a very important point for consideration.

Very true. NM has a lot of different climatic zones and very different grazing ratios depending on where you are. But regardless, it’s smart to know what your land can support and not exceed that wherever your land is located.

 

[Gem99ultra]

Any negative to removing an existing structure?

Our family dentist bought an old homestead and built a very nice home.

There was an old barn near the creek that had seen better days and the cost to repair was close to replacing so he had it removed.

The shock came when he went to build he was told no way as the old barn was grandfathered but the area was no build due to proximity of the creek.

I ran into that situation once in the past. Strangely, a fire mysteriously broke out in the middle of the night and destroyed the old dilapudated building. Oh gosh, what a shame. Fortunately there was no creek restriction involved.

 

[oosik]

Sometimes peoples way of thinking leaves me a loss. The planning/building dept were not going to allow me to build on the 80 acres. Also - no permit to cut-in my driveway to the county road.

FINALLY - a county official came out and verified the old homestead house and out buildings. NOW - they were more than happy to take my money for the permits.

Honest to God. Whatever were they thinking. It was a homestead - granted by the Federal Gov in 1892.

When my father purchased the property in 1939 he also got the homestead grant paperwork. Regardless of their inherent, in-bred stupidity - this paperwork was something the county officials could not deny.

 

[ning]

Eddie mentioned that the land is in poor condition. I suspect it would be difficult to plant without significant work.
The neighbor's offer sounds... neighborly, in a good way.
I'd also encourage Eddie to look at the current value and consider if changing the mode of investment would be better, but suspect that going with this deal would be a nice diversification.
Definitely write it all up!
I've taken to writing up agreements with my (grown) kids too, just so we can both refer to a baseline agreement to refresh our memories.

 

[paulsharvey]

The lease termination and/or renewal is my only concern. I think it wouldn't be unreasonable for the renter to ask min 90 days notice of intent to terminate, and something like a 3 year lease, with 2 optional, 1 year extensions, possibly with a price adjustment of 5% per year, but for what you have going on, I dont think i would worry about that last part.

The value is really in the fencing and the tax breaks,

 

[redman135]

Eddie, some things to consider for your lease.
1) YOU do the insurance so you KNOW it is PAID UP.
2)Photograph the fences so that there is a record of thier condition.
3) Soil test , standard for the area(include ph[soil acidity]). I have a clause that states the amount of fertiliser to go on to maintain fert' levels.
4)Weed Status ie what weed speicies are present and how extensive. (Successive leasees on my place have done a piss poor job of blackberry control.) That section of land is steep and slip prone.
5) Water supply. A map showing the water source and if mainline/circut, branches and all troughs.Don't forget the taps.
good luck.

 

[lman]

Around here, I've heard that typically farmland owners are satisfied if they get enough to pay the property taxes for that land. Some of the good corn growing land leases for $350/acre. That land is too good for cows though. There's a 3,500 cow dairy here and it's more practical to bring the food(mostly silage) to the cows than have the cows on the land. The cows stay on cement.

 

[Lucky Dog]

Personally, I'd offer to remove the $15 per acre and replace it with some mutually agreed on amount of beef.

 

[EddieWalker]

Nothing has happened yet. We are still talking about what we want to do with the land, and what our expectations are.

Something that's come up is that he is interested in buying the land, but he hasn't made an offer, and I'm not really interested in selling right now. But my long-term goal is to sell the land. I don't need it, I don't enjoy driving an hour to get there, and I don't have any time to spend there.

The neighbor has a lot of land. I'm not sure exactly how big his place is. I've been told 1,000 acres, and I've been told it's over 2,000 acres. And that he has another 600 acres somewhere else nearby. The only reason that I can figure that he's interested in my 40 acres would be to stop anybody from developing it.

And to be honest, splitting it into 5 to 10 acre parcels and building a house on each parcel has crossed my mind.

The challenge will be in knowing when to sell and not missing out on an opportunity if it happens.

 

[caver]

Is it a fair deal? I really can't answer that. Grass is hard to come by in the Ozarks so I would let me neighbor keep a couple horses down there for free. My thought was free mowing as I still live over 2 hours away. We would talk every year as in the winter he would run them up at his place that has no pasture to speak of just woods. What I learned was horses eat all the good stuff and you are left with a field full of weeds. Fence maintenance? This guy was lazy. His idea of fixing a droopy fence was tie some bailing twine up against something else to hold it up. After doing this off and on for a couple of years I just said NO. The horses made a mess around my junky barn and I got nothing in return.

 

[ponytug]

Nothing has happened yet. We are still talking about what we want to do with the land, and what our expectations are.

Something that's come up is that he is interested in buying the land, but he hasn't made an offer, and I'm not really interested in selling right now. But my long-term goal is to sell the land. I don't need it, I don't enjoy driving an hour to get there, and I don't have any time to spend there.

The neighbor has a lot of land. I'm not sure exactly how big his place is. I've been told 1,000 acres, and I've been told it's over 2,000 acres. And that he has another 600 acres somewhere else nearby. The only reason that I can figure that he's interested in my 40 acres would be to stop anybody from developing it.

And to be honest, splitting it into 5 to 10 acre parcels and building a house on each parcel has crossed my mind.

The challenge will be in knowing when to sell and not missing out on an opportunity if it happens.

To me this sounds as if you are trying to maximize your return on investment, like trying to sell at the top of the market. That's closer to luck in my book

Could you divide the property and build homes and sell it all for a lot more money? Probably. Would you make more of a profit developing homes an hour away from you? Who knows, but it doesn't look like a sure thing to me. I have known more than a few general contractors that went bust trying to do this, and, of course, some that did well. It seems to me that external factors like markets and interest rates often were the deciding factors, and not under the general contractors control. Could you afford to have 4-8 homes partially rented out for ten years if the local housing and loan rates went against you?

I've seen undeveloped properties around us held for a generation or two, and those folks all lost out against the stock market, even here. Someone I vaguely know was trying to develop a disused old park like area in town for twenty years before finally selling it for not much more than he bought it for to group of developers who are in turn trying to put in the 1,500 lower to middle income townhouses. They clearly think that they will make money doing it, but from the outside, even they will have to finance hundreds of millions, making the costs on the project not insignificant. Add to that that almost nobody wants it built, some tax issues, and all of the significant costs to hook up to city water and sewage, which is not guaranteed, placing the developers over a barrel as they will have to agree to whatever the city asks... I think it meets a need and in the long run, the city will benefit from high density housing there, but whether the developers will make money on it is much less clear. I would argue the same for your project. Timing is almost everything in my experience, and I think that it comes back the old "bird in the hand..."

All the best,

Peter