Sometimes people question why they would ever want to invest in farm ground. There is only one simple answer to that. Farm ground is, and always will be, the safest investment available. Regardless of our country’s economic state, land will always have value. If you own farm ground, and choose to sell it, you will almost always get your money back, and possibly more than you originally paid for it. If you own farm ground, and you keep it, you will make a profit on it for a lifetime. There are 3 ways to rent ground, you must decide which is best for you.
Under a cash lease agreement, the owner gives management responsibilities and use of the farm to the farm operator in exchange for an agreed amount of cash. This cash payment is the rent. Under a typical cash lease, the operator will receive all crop income, make all management decisions, and pay all crop expenses. The owner will pay property taxes, his/her own insurance, and major building repairs. For this, the owner receives a known, stable income, and is freed from farm management responsibilities. Normally, PFI would be willing to pay 4% of appraised value/or sale price, annually for cash rent.
Cash Rent With A Bonus:
Under a cash lease with bonus program, landlords who are willing to accept more risk may be rewarded when resulting crop revenues are higher than expected. What this arrangement is designed to do, is to provide some flexibility in uncertain economic times. If revenue turns out to be good in the fall, or after the lease is signed, there will be a bonus based off of the farms production. If the lease and economic times turn out to be not so good, there will not be a bonus.
An economic system whereas a landowner "leases" property to a farmer in return for a share of proceeds from there crops typically 1/3 of the total income. Since PFI would be required to buy fertilizer, seed, and supplies, as well as work the crops. They would retain the other 2/3 of the total income. With any farmland agreement PFI enter, PFI always maintains adequate, or above, soil nutrient levels. We also mow all roadsides and waterways, twice yearly, & repair any tall drainage tiles that breakdown throughout the lease. We also try to work with landowners to increase the value of their farmland. We install systematic drainage tile for only the cost of materials. And work on waterway & terrace projects with no labor cost to the landowner.
Here at Phenix Farms, Inc. we are always here to help with any questions you may have, whether it is about farm ground values or how to purchase ground. If after reading these different ways to purchase and you have any questions or concerns please feel free to contact us, we are always happy to help.