Leasing my Land

[EddieWalker]

I have 40 acres that's 65 miles from where I live. It's mixed land with open pasture, 3 ponds, and a lot of mesquite trees. The fencing is in poor condition. It has an old house that isn't livable, a shed that's pretty new, and a 30x40 shop that is full of junk that I haven't gotten around to cleaning out.

A neighbor has a very big cattle ranch. He just bought all my cows and he is wanting to lease the land too. He offered $15 an acre. Since I've never leased land before, I don't know anything about this. He would be responsible for the fencing, and he said that he would work on improving the land.

Another neighbor works for him, and he has already been mowing and improving it for me, so I'm confident that this will continue doing this. With the fence being as bad as it has been, he has had a few of his cows on my land for awhile now, and mine have been going onto his land already.

My goal for the land is to hold onto it until it's worth stupid money. It's an hour out of the Dallas area, and the area is still very rural, but there is a lot of building going on there. The land has city water and power to it, but it's not turned on at this time. My hope is that it will continue to increase in value, and that would only be better with somebody taking care of the land. I have no interest in going there, or messing with it, it's just an investment that's sitting there.

Another concern is in keeping it Ag with his cattle on it. My taxes are very low because of the cattle that I just sold that were on the land. Keeping it in Ag should be easier with his cows using that land.

Does this make sense? Is $15 an acre fair? I'm not very motivated to make this a big legal issue. I would really just keep it informal and let him do what he wants to the land to make it better to feed his cows. The way it is now, there really isn't any way to make the land worse, the mesquite trees or really bad there, and if he removes some of them, it's a win for me!!!! Just mowing it once or twice a year would be a huge savings for me and an improvement to the land.

 

[hayden]

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

Regardless, it sounds like all upside for you unless some sort of sh$t show develops. I’d still put something in writing, even if very simple. Lease rate, how long, who can terminate, why, and with what notice. Responsibilities of each party. No lawyers required, just look at it as documenting what the two of you are agreeing to so there aren’t any misunderstandings.

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.

 

[part-time-Farmer-NC]

Seems low to me. Here (NC) ag farming leases go for $50 an acre minimum.

Also I would separate out hunting from that agreement and lease that to bow hunters. Hunting land here leases for about $15 an acre for deer hunting rights, if you have turkey you could get more or split that as another lease.

 

[Hay Dude]

Having someone else's eyes on your land if you aren’t there daily is worth money. Especially if you are storing stuff there.
I’d get in writing your expectations and make sure you can terminate if he doesn’t meet them.

 

[NorTracNY]

I'm in agreement with hayden on most of his points. The only concern would be liability of the lease. The lease makes it clear that it's your land, but it likely would put you in the seat for potential liability. If the courts weren't screwed up in this country, I would think a handshake would be all that's needed. Otherwise, it should all be upside for you.

 

[jyoutz]

I have 40 acres that's 65 miles from where I live. It's mixed land with open pasture, 3 ponds, and a lot of mesquite trees. The fencing is in poor condition. It has an old house that isn't livable, a shed that's pretty new, and a 30x40 shop that is full of junk that I haven't gotten around to cleaning out.

A neighbor has a very big cattle ranch. He just bought all my cows and he is wanting to lease the land too. He offered $15 an acre. Since I've never leased land before, I don't know anything about this. He would be responsible for the fencing, and he said that he would work on improving the land.

Another neighbor works for him, and he has already been mowing and improving it for me, so I'm confident that this will continue doing this. With the fence being as bad as it has been, he has had a few of his cows on my land for awhile now, and mine have been going onto his land already.

My goal for the land is to hold onto it until it's worth stupid money. It's an hour out of the Dallas area, and the area is still very rural, but there is a lot of building going on there. The land has city water and power to it, but it's not turned on at this time. My hope is that it will continue to increase in value, and that would only be better with somebody taking care of the land. I have no interest in going there, or messing with it, it's just an investment that's sitting there.

Another concern is in keeping it Ag with his cattle on it. My taxes are very low because of the cattle that I just sold that were on the land. Keeping it in Ag should be easier with his cows using that land.

Does this make sense? Is $15 an acre fair? I'm not very motivated to make this a big legal issue. I would really just keep it informal and let him do what he wants to the land to make it better to feed his cows. The way it is now, there really isn't any way to make the land worse, the mesquite trees or really bad there, and if he removes some of them, it's a win for me!!!! Just mowing it once or twice a year would be a huge savings for me and an improvement to the land.

Usually grazing land is leased per animal unit month (AUM). One animal or cow/calf pair per month of grazing. I would check with your cooperative extension service to see what local AUMs fees are average. Also, there’s usually a big price difference between a situation where the landowner provides fencing, water, and any other improvements and the situation you describe where the lessee provides the improvements.

 

[MMC]

Usually grazing land is leased per animal unit month (AUM). One animal or cow/calf pair per month of grazing. I would check with your cooperative extension service to see what local AUMs fees are average. Also, there’s usually a big price difference between a situation where the landowner provides fencing, water, and any other improvements and the situation you describe where the lessee provides the improvements.

Eddie, your question is a difficult one to answer as others note above. The USDA provides some baseline date on rents by county. You can find information and links on their site:

USDA - National Agricultural Statistics Service - Surveys - Cash Rents

USDA National Agricultural Statistics Service Information. NASS publications cover a wide range of subjects, from traditional crops, such as corn and wheat, to specialties, such as mushrooms and flowers; from calves born to hogs slaughtered; from agricultural prices to land in farms. The agency...

www.nass.usda.gov

But...that's just a starting point. Yes, maybe $15/ac is a little low, but having someone responsible for animals present and available is important. And for property as well.

Put it another way. If you sold your cattle, you now have some idea of how much per head a farmer might make (be realistic). Now, how many head can he run on your property? Be conservative in your estimate on animals per acre because in a bad year (drought) that will really cut down on his profit. So will a sudden market drop...

The profit is probably not as much as people think. Then consider how much you would have to pay to have the improvements done that you might receive on your land from the farmer. Comparing the rent and value received might give you a good starting point for an honest discussion. And write up the final agreement, if for no other reason than to forestall any future confusion on individual responsibilities.

But frankly, having someone around to watch your property is worth a lot (or it would be to me). And managed well, grazing of cattle helps to actually improve land.

Best of luck.

 

[ponytug]

+1 on the value of having someone around and improving the fencing.

+1 on letting the local fire department burn the house, or demolishing it.

I would formalize the lease, but accept the offer. Might you do better? Possibly, even probably, but there would be no guarantee that the other person would be a good steward or reliable. BTDT. You know this person meets your expectations and needs, and he has been a great neighbor so far, which means this is, in my view, a great offer.

All the best,

Peter

 

[ultrarunner]

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.

 

[txdon]

The ag exemption make it worth it. Otherwise your taxes could be 10x.
Be sure to add no hunting to the lease and get liability insurance for the property. You might have to tear down any dilapidated buildings before you can be insured.

 

[ultrarunner]

My guess is Eddie already has a policy on the place?

As long as both parties are honorable and in agreement it's a win/win.

My grandfather says the purpose of a written agreement is because things can change... one party might die and overnight you are dealing with strangers you have never met.

A one page agreement should cover all the essentials...

What is being leased and for how much and how long and responsible party for repairs and spell out access along with any restrictions such as hunting or who can be on the property.

Someone my brother knows leased land for grazing and all was well until the rancher had a stroke and his daughter replaced the cows with horses...

 

[kthompson]

We are on the other end as landowners. We could sell today probably our farmland for developers. We are doing our best to save the family farmland. Now it looks like we will have a major issue with a proposed new road.

As you have been told verify how that $15 is calculated. I agree you are better off on lower rent price to a person who will take care of it than higher price to a person who does not. Now how much the fencing is going to be worth in selling the land for development it "might" be a negative depending on the type of fence and it will need to be removed and how much that would cost. The buyer will take than into cost of developing it. I could see the cost to remove being as much or more than the installation cost.

Yes, you want a lease. Yes, you want YOU OWN liability insurance and require the renter to have his own liability with you named under the coverage. With him keeping it ranching doubt the taxes would be affected as the use of the land normally sets the tax rate and not who is running the cattle on it.

I expect a long-term lease for him would be better with the cost of fencing and such. Yes, you do not have to have a lawyer to write it but depending on all the details it might be best to hire one to write the lease.

Being an hour away from Dallas to me in Texas is not far to travel. I would talk with real estate agents, or developers NOW and find out what it could be sold for. You might be better off to sell now, take that money and invest in stocks or whatever suits you rather than low-income level for several years waiting on the demand to make up the investment growth.

 

[kthompson]

Just reading the thread on age and such. One tells about his renting a campground in the woods. Depending on your land, what it offers and being large enough to build one you might find it a great property for a campground. If you want to sell.

We are about 25 miles from Myrtle Beach. Campgrounds are very popular there but land is not available. In the last 6 years two large campgrounds have been built several miles from the ocean and look to be doing a very strong business. The roads will have big influence on the location.

 

[garry1p]

I would think renting for grazing as opposed for farming would be less $$. I have about 40 acres leased for farming and they report all their cost to the Government so I have to pay taxes on the income. Rent is $26 acre annually.
I recently had to pay a little over $1000 for a new culvert, they installed it at no cost.
TX may be +/- the rental in MS. I am happy with whatever $$ since I can not work the land.

 

[ultrarunner]

At one time Eddie ran the pluses and minuses of operating a campground and decided against.

As to liability I my agreement requires I be added as a co insured on the renters business policy... it has worked well and twice when there were issues the carrier notified me so I was still covered during the time I aced my own coverage.

 

[jyoutz]

I would think renting for grazing as opposed for farming would be less $$. I have about 40 acres leased for farming and they report all their cost to the Government so I have to pay taxes on the income. Rent is $26 acre annually.
I recently had to pay a little over $1000 for a new culvert, they installed it at no cost.
TX may be +/- the rental in MS. I am happy with whatever $$ since I can not work the land.

Typically grazing leases are based on the number of animals, not acres. But of course they are connected because X acres can support X animals for X amount of time. Yes, crop farming leases is more lucrative than grazing, but it sound like this land isn’t suitable farmland.

 

[mjonesnh]

Not sure about pasture land but in my area farmland leased for grain production is running $100/acre and up. Just depends on how well the land produces. Some farms hit 200 bushel /acre of corn this year, and do 180-190 regularly. Owners have no trouble getting top dollar for their acreage.

 

[Lastkidpicked]

Any negative to removing an existing structure?

There may be one negative. (Or one positive to keeping the house)

Our neighbors have a house on their land that is not livable. They are keeping it anyway because of the grandfathering clause.

If they tore it down, and then decided later to build, then the utilities, water line, and septic would need to be upgraded to the newer and more stringent building codes.

But they could "remodel' the existing structure at any time and be free of the more expensive requirements of the upgraded codes.

This may not matter if you plan to sell to a developer, but it's something to keep in mind.

 

[oosik]

OR you could look at it this way. He is looking after your land. He will make improvements - even if minor. His cows on your land keep the taxes low. And - between the cows and his occasional mowing - the wildfire danger is reduced.

My neighbor to the south, ranges his cows on about 3/4 of my 80 acres. I charge him - zero. The cows keep the grass chewed down and being on my land - it remains classed as AG land for tax purposes. We both win.

 

[dougtrr2]

I would write up a simple lease, but I think you need to address the use of the buildings in that lease. What if he decides to use a building for storage and junks all of your stuff?

Doug in SW IA