My farm is 50 acres of almost all forest and steep ridge land in ky. I drive through two farms to get to my place and want to someday purchase the second of those farms--currently bordering my property. I've tried in the past to purchase it and come super close only to have the farmer turn around and purchase more land and nearly double the price on me. His farm is not on the market yet but I would love to be the one who buys it when he does decide again to sell. I'm trying to run through my options and I'm digging deep. Ha. Have any of you leased to own property where you pay a farmer per month which goes to an eventual down payment? I'm interested in your thoughts. Is this a wise move?
Question: lease to own farmland
- Thread starter nateb440
- Start date
Tree Spud
5 year old buck +
What would you be leasing the land for? You would have to subtract any amount he could get for leasing to someone else (for hunting, Ag, etc), from the amount you are willing to lease for to look at what he might consider towards an eventual purchase. If he is smart, he would reserve the right to accept the highest purchase offer from you or someone else. As he knows you are hooked, he can keep raising the lease price every year. What happens if you break the lease, or he raises the lease amount higher than you want to pay, do you lose everything? So in short, you will pay an above average lease premium with very little security on your pymts against purchase. You would need a pretty well written legal contract prepared by an attorney to protect your agreement. Even then, if he defaults on the agreement your legal fees could exceed whatever you want to recover. How old is he, does he have children? If he dies this really through a wrench if they contest the lease by saying you "coerced" him into setting up a bad deal. Trust me, I had a friend who went though scenario, cost him $45k in legal fees and lost the deal in the end.
Lease to own deals are always set-up so that you pay way more for the item that if you were originally to purchase out right.
I would save your money for the down payment amount, you'll get there faster by not leasing. Get your financing set-up so you can offer him a cash deal with little of no contingencies. You could also consider a land contract. You could lease the farming rights back to him. Depending on the lease pymt amount, you could set the farm up as an LLC and use for write-offs of your equipment.
Lease to own deals are always set-up so that you pay way more for the item that if you were originally to purchase out right.
I would save your money for the down payment amount, you'll get there faster by not leasing. Get your financing set-up so you can offer him a cash deal with little of no contingencies. You could also consider a land contract. You could lease the farming rights back to him. Depending on the lease pymt amount, you could set the farm up as an LLC and use for write-offs of your equipment.
yoderjac
5 year old buck +
If you can't afford to buy the land now, but would like to use it now to hunt and want to purchase it in the future, I would consider two different agreements. The first is a hunting lease with whatever terms you and he agree on. The second is a first right of refusal. That is where you make a one time payment to him now. It can be for any amount you both agree on. Then in the future, when he decides to sell his land, he puts it on the market. What every formal legally binding offer he is willing to accept, you get an opportunity to match and he must sell it to you if you match it. This way the price is not locked in for either of you and it varies with the market. He will get whatever it is worth when he goes to sell it. You will have the first opportunity to buy it at that price, but you are not committed to buying it. So, if things take a financial turn for the worse for you, you simply don't match the offer when it sells.
Thanks,
Jack
These are great answers. Thanks. I'm chomping at the bit to get to work. I have three boys who are to the point they can help with the workload. And I'm a big fan of trees and Every year that goes by waiting is another year of growth gone. I'm going to save up until he decides to sell. We have a good relationship. He might even let me plant some trees now.
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