Land paying for itself

[2nstonge]

You don't say if you want to be an active or passive participant - is it something you want to set up and run or are just looking to lease the acreage to a farmer or someone else?

A friend of mine has a 130 acres, his property already had the house and barn. He doesn't need to work it as he already has a job but what he and his wife do as a sideline was the eco-tourism deal. They dedicated 2-3 bedrooms to a B&B and then got a variety of typical farm animals. People come and stay and participate in the farm chores. Since they've got the space - and some great views - they added wedding hosting to the list of offerings; they rent their field and charge a 15% management fee on top of whatever concessions will be onsite - tent, catering, band, etc. The sideline pays their mortgage and then some.

If they need a break they just start blocking time out of the calendar and tell folks "we're booked solid" which creates a further buzz about how great the set-up must be if they're sold out.

-Norm

 

[tractorman1234]

Thanks for your responses. Let me clarify some. I am wanting to purchase the land to build a house on. I want the land for hunting for myself and do not want to lease it out. As to any type of ecotourism I think it is out because this is a very rural area. Closest town is 10 miles away and is less than 10,000 people. No big cities nearby. Even if there was that is not what I am looking for. I just want the place for my family.

I currently own a 150HP tractor, plows, drills, etc. I do not have a baler or combine or any harvesting equipment but I guess I could buy it. I was thinking of planting winter wheat for cattle, or maybe something else. I don't know for sure.

Bones, I am in Texas. Land around here sells for $750/acre. Some land is a lot more I have seen it $3000/acre, but the stuff I am looking at is $750/acre.

In all honesty I can afford the place at $1000/month with zero income from it, but I am trying to justify the purchase. I mean I figure I have $200,000 to spend on a house and land. I can buy 160 acres at $750/ac which is $120,000 and then I have $80,000 left for a house. I guess it all boils down to priorities ,but I don't mind spending more on the land than the house if I can get some sort of significant return out of it. On the other hand if I can't get a decent return on the land I am better off buying 80 or even 40 acres, still having my privacy, and having more $$ left over for the house.

For example:
Option A:
160 acres@ $750 = $120,000. Finance 100k. Payments roughly $800/month which equals $9600/yr. Do some sort of agriculture that profits $4800/yr. Translates into net payments being $400/month (not considering my labor and time which I think I would enjoy doing on weekends and after work. I love being on the tractor and outdoors).

Option B:
80 acres @$750 = $60,000. Finance 50k. Payments roughly $400/month which equals $4800/yr. No farming.

What I would like to do is purchase 160 acres, farm it, and basically end up paying what it would cost me for 80 acres (not counting time and my labor). Is this feasable or realistic?

 

[MossRoad]

Too bad you are not near more people. There are lots of people starting U-Pick operations. They seem to be popping up more every year, and people from Chicago, over a hundred miles away, come out and pay stupidly high prices for summer fruit and Christmas trees... I'm talking really high prices because they get a horse and wagon ride into the orchard and some hot cider. They come for the atmosphere and shell out big bucks. They could go down the road to a small orchard and pay 1/2 the price for the fruit, but no horseys or gift shop. People are nuts!

Have you considered raising organic beef? Any organic animals seem to fetch a premium price.

Can you grow specialty crops or flowers?

Just some thoughts.

 

[avorancher]

In southern CA where land is outrageous, we buy and live on acreage because we love the lifestyle... but we justify the purchase to others by using the following:

1. You have to live somewhere... so if you build a house on the land and live there, you can subtract the average home cost and taxes in a nearby town from the land/house cost.

2. The crop is considered separate from the land. Usually without the land cost and taxes, the crop (or farm) can earn a modest profit after expenses. You can continue to work at a "regular" job and donate weekends, etc., or subtract your salary from the crop income and become an employee. You can also lease the rights to use the land to a farming company.

3. The land itself is considered a separate investment (with or without house). It needs to appreciate more than the additional taxes and inflation rate... and preferably more than your money could make at other relatively safe investments.

 

[goodoleboy]

Have you considered selling hay of the land?

Im in cattle country, no produce farms, mostly cattle. So lots of folks with bailers and equipement to gather the hay.
We have been having it bailed on 2/3 share and keeping 1/3 to sell. It covers part of the mortgage but we didnt take out a huge loan only 15% of the total cost.

County Assessor stated that as long as the hay is bailed I would recieve Ag tax rates.

In addition to this you could lease for hunting.

 

[dholly]

Not necessarily helpful in your situation but I have a friend who purchased property closer to population and put most on annual lease for tillage. Hoping some day to develop or sell parcels. It doesn't come near supporting his carrying costs (he paid considerable more per acre), however, he also put up a couple of relatively inexpensive self-storage buildings with about 20 rental units each. Must be doing ok, he is seriously considering adding more.

 

[CharlieTR]

Sounds like a great plan.
The key is being able to afford it and not counting on the land to live on.

Check out all crops and decide which ones you can support labor wise.
In TX the pecans do great and will pay for the land in the very long term.
You can find good solid research on the web that tells you thing like you have 73% chance of getting $1100 per acre for melons (that is if you have the soil to support that crop). Peach trees are also high money makers, but 20 acres is one person full time job 9 months out of the year.

USDA DCP program will pay $10 per acre, checks come in Oct or you can get two payments Jun/Oct. 150 ac = 1500 = 25% or your target 6000.

If possible, before purchasing land go to USDA office and tell them to show you map of the farm. First thing to look for is the letters HEL on that piece of land. That means Highly Erodable Land. HEL has some drawbacks and benefits, but unless you really like that land you might want to stay away from HEL. Mine is HEL and I am not allowed to till year year for annual crops.
Because I am in the program, I get caught and big big fine like 6 digits, and kicked out of DCP. On the other side, the soil conservation guys have EQIP program that will pay"50%" of cost to plant Coastal Hay cause of HEL. (that's 50% of their est. cost.) not bad.

While at the USDA ask the soil conservation guys to let you see the satilite soil map that tells you the name of each soil and location and degree of slopes. Once you have that you can talk to the ag professors about success of crops. I have 5 soils on 11 different locations (46 acres).

I like pecans because you have the option of old fashioned labor, or automated harvesting (in ten years that is).

Hay, pecans, little cattle, garden, lots of work, great fun, can't beat it!

 

[rox]

CharileTR,
Pecans? In texas? I never knew, seems to my recollection they all came out of Georgia. I would vote for pecan trees. I love tree farming, although we are farming olvies not pecans. We LOVE pecans and they are very expensive in France like $32 a Kilo (2 1/2 lbs). Would you be intersted in trading some Pecans for some olive oil?

 

[CharlieTR]

You bet Rox, Pecan trees are the Texas state tree.
But mine have about 5 years to go. (well at least before this drought anyway). I think they did get damaged a little dispite all the watering.
I can't believe the price of pecans in France! I'll have to send some over.

 

[twabscs]

Tractorman,

Yes, it is possible to find land that pays for itself, although it's much harder now than it was just four years ago. Here in Missouri, you used to be able to pick up ground with CRP on it for $800/acre and the CRP was paying $70/acre. After the down payment (20%), the CRP payment would make the yearly land payment (and taxes/insurance as well - Taxes are ~$2/acre). Today, though, with higher interest rates and that land now at $1500/acre, it's much harder to pencil out, but it would meet the "half" payment you mention. I picked up a 60-acre parcel last year with $75/acre CRP for $1100/acre, but I haven't seen anything like that since. It's all $1500/acre now.

I know there is CRP ground in Texas also as I've come across it when looking at farmland real-estate sites. You might look at that option. The only downside is that you have to leave the CRP ground alone, with maybe a once a year brush-hogging.

Also, there is still good pasture ground available for maybe $1000/acre around here and with the high price of Cattle these days, you can just about pay for it but it requires some sweat equity, if you know what I mean.