buying land to cash rent out (what do I need to know)

Discussion in 'General Discussion' started by strozt, Nov 12, 2012.

  1. strozt

    strozt New Member

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    My apologies if this inappropriate...this is my second thread since joining and I'm ignorant of board etiquette.

    I'm looking to buy some farm land that is being cash rented for the next three years. Before I decide to purchase, I want to make sure I'm learning something about what I should consider. Note: I have no farming experience and am buying the land for investment ;).

    I figure before I make an offer, I'd like to see the current contract for the rental agreement and probably meet with the tenant to get a feel for their present and future plans on using the property. (I've been told the agreement is for 40 acres at $175/acre; for 3 years)

    Frankly, thats all I can think of. Surely there is something else I should watch for or consider. Would any of you out there be able to advise me on what I should know before I buy the property.
  2. woolleyworm

    woolleyworm Active Member

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    Welcome to TFF and your question is just fine for the GenDiscussion board; this is just fine to post here. I'm not knowledgeable on your question, so I can't give a good answer. There are a few folks here that may be able to give you some pointers though; just give'em a little time to check your post and reply.

    Semper Fi,
    Woolley
  3. SmallCaliberGuy

    SmallCaliberGuy Active Member

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    For starters, go to your local county or city treasurers office and research the land.
    Make sure the taxes are paid up.
    Make sure there are no leins on the property. Especially IRS leins, if it has an IRS lein then you become liable for what is owed.


    Jody
  4. jjmitchell60

    jjmitchell60 Active Member

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    THere is lots of questions to be ask in you question.
    What is teh land being rented for as to use, livestock or crops?
    What rights do you retain as land owner?
    What all is in the rental agreement as to what rights renter has?
    And many more.
    Here in KY when we rent or lease a farm we spell out the exact rights as to owner retains and renter/leasee has. An example is 186 acres beside me rents for $5000 a year + it has to be mowed each year (bush hogged). The renter has the right to crop it as they see fit or run/feed livestock on it. IF cropped then when renter ends lease and no longer wants to rent it, they must plant the crop land they cropped back into what ever the owner and they agree on. Renter has the right to fix any and all fence as well as build new fence BUT owner has the right to also build new fence as they see fit to "enhance or increase value" of the property BUT in doing so cannot take away the right of the renter to use of the land. Then there is general upkeep. Renter must make sure the land it always in a state of upkeep so as to not decrease the value. Bascially that means no dumping of trash, no logging, or other things that can decrease current value. Also there can be different prices of rent depending on use. If livestock, then a per head lease can be done or a lump ssum lease. As to crops it can be a lump sum per acre or a percentage of profit from the crop/s.
    I lease out the crop land on one farm and the man who leases it raises soybeans. He pays me a set fee per acre and once he decides to not renew or I decide to not renew, he has to sow the ground down in a forage crop (clover and/or other forage crops), he has no hunting rights, he has no rights to any ground other than the crop land (we are good friends and he bush hogs the rest for me as a favor), and he cannot tell others to use the land other than the acres he leases. He can sub-lease the crop land with my permission.

    So not to avoid answering your question, there are many varibles as to a rental/lease agreement that you need to decide on and in part is decided on what the renter plans to do with the land. There is no one fits all rental/lease agreement or at least here in my area. n I know that $175 per acre here would be avery high price to rent/leqase a farm but that is here. Other areas of the US I know do draw higher price as to rent/leases.

    Sorry I can be of no more help.
  5. strozt

    strozt New Member

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    thanks for replies so far. Just to be clear, there is already a contract for lease on it, which I assume, will be transferred to me. I'm pretty much ok keeping the current contract, but I would like to see it and talk to the tenant.

    I hope the contract isn't lopsided and I get burned somehow....that's what I want to watch out for.

    For most rental contracts for apartments and such, I don't think a lawyer is used....but what about for this...Is it common to get a lawyer to check the contract? I'm sure it wouldn't hurt; but is it 'normal' and expected to involve a lawyer in this case?
  6. aandabooks

    aandabooks Member

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    jj covered it pretty well. Generally no lawyers but make sure everything is put in writing. The tillable I rent out gives me two payments per year. I have no obligations for fertilizer, drainage, seed or any other costs. My farmer gets access to the tillable acreage only and can't sublease without consulting me. Generally these agreements can be done on a single sheet of paper.
  7. rosierita

    rosierita Active Member

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    get a lawyer well versed in agriculture.
  8. Blackhawk Dave

    Blackhawk Dave New Member

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    Be sure to get a title search. You want to look at reserved rights, especially gas, oil and coal. If the oil and gas rights are reserved, but are reserved by the current owner, try to get a percentage of the rights in the transfer. If it is a prior owner, just be aware that a well can be placed on the site. If it is coal, be aware that they can surface mine right across your property, no matter the improvements on the site.

    Be sure you can get fee title, with no outstanding heirs, etc. Be sure to get a title policy at closing.

    As to the lease, trash is always the biggie. Be sure you get a deposit forwarded to you if there is an existing deposit on the lease being held by the seller. Read the existing lease. IF it is a "handshake" lease, the lease is not binding on you and will allow you to renegotiate (formal lease with all the protections mentioned above).

    Finally, get an hour's time with a local real estate attorney. A little money spent now can save you a bundle in the future.
  9. carver

    carver Moderator

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    A title search, while a good idea, sometimes won't show everything. I now buy Title Insurance. I've been burned, and I hired a lawyer to do a title search. And I would suggest that you don't sign, or pay out anything with out the advice of a good, and trusted lawyer.
  10. Double D

    Double D Administrator Staff Member Supporting Member

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    You wont get title insurance without a title search first.
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