Making land more affordable

[Freeborn]

One thing that helps is to buy your land at the right price. The old saying you make your money on land when you buy is correct. Ag commodity prices are low right now so prices should be at least stable to lower.

My place is a 50/50 split between Ag and woods and the income is a difference maker particularly when you look at it over time. Look at the income over 10-20 years compared to no income and the numbers are revealing.

 

[Tree Spud]

I am casually looking for a larger piece of land for hunting and habitat improvements. If I found the right piece, that I could make some income off to offset the cost, I'd buy it. So I'm wonderig if anyone is willing to share how they have made income off their property? I'm looking for things that you can do yearly, unlike logging. If you're willing to share what you have done and a general income you get thatd be appreciated too. Any info you share is to help me run the numbers when I look at properties. Some ideas I have are below. Thanks in advance for any input.

CRP - Get paid for CRP plantings. Cost per acre is unknown to me. I am in Wisconsin. Pros and cons?

Rent Ag Land - Western Wisconsin cost per acre?

Tapping Maple Trees - I know a few that do that in my area. People are getting paid 25 cents per gallon for just the sap and with the right piece you can make a lot on a good year.

Selling pumpkins or sweet corn - Some work involved here, but it would kind of be a hobby and hope to make a profit to put back into the land. \

Wetland Mitigation - There is a program in WI to get paid to reestablish wetlands that have been drained. As far as I know it takes a lot of legwork to get approved to do this though and there are costs for construction/seeding etc.

I have tried a number of the ideas you have thrown out. They all sound good in theory, but most cause you to give up some control of your land and the payback is never that much.

Your local AG office can help you with average per acre lease rate, all based on your soil. Local farmers who pay the lease late, or pay less than agreed to, or not at all.

I had acreage in WRP. Worst program I have ever experienced. PM me if you want details.

 

[H20fwler]

I agree with the timber value being looked into on your decision to buy. In my area oak/walnut/cherry pay very good with hickory and hard maple being secondary, having some type of timber cruiser take a look at what you have is a very good idea. We have a couple local logging companies that offer very competitive pricing and are excellent working with land owners as to select harvesting so timber can be cut every twenty years. If you do go with cutting get it in writing exactly what your expectations are as far as what time of year logging is to take place, what is to be done with tops and filling of any ruts created.

 

[j-bird]

Keep in mind with considering timber to pay for your land is that the cash flow of it all is tricky. The money you make is considered income.....so uncle sam takes his ~30%. Timber tends to be cut on a 10 or 20 year rotation depending on the size of the parcel and the types of trees. In my opinion timber is "gravy" money as it comes in a lump sum on rare occasion. You spread that money out over time and per acre and it won't be as much as you may hope for. Timber prices change and something like a disease can hit you hard and fast as well.

I am going from my memory so I am sure the numbers are not exact, but I have roughly 30 acres of trees on my place and we cut roughly $20k in timber the first time..... Uncle Sam took his cut at roughly 30% and considering those same species trees will not be cut again for another 20 years..... the math isn't that impressive. $20K - after taxes is $14K.....over 30 acres is $467/acre. Now considering it will be another 20 years....that is $23/acre/year. Now that wasn't my prime timber of oak and walnut....so those numbers are low. But I think you can quickly see that timber as a finance tool isn't something to really count on. A property with timber value at the time of purchase can help with recovering from down payment and closing costs and the like, or even allow you to purchase equipment, but as a means to pay fro the property - I just don't see it.

Something I would recommend you do is when you do buy a property - have the timber value appraised and talk to a tax adviser. I was told that IF we would of had the timber value appraised when we bought our place that you can then argue the timber was a purchased investment and as such when you do harvest the timber the taxes you pay on that are only on the "growth" of that investment. Now I am not 100% sure that is true, but it might be well worth the time to investigate if timbering is in the plan.

 

[Doohop65]

In Wisconsin it really depends on location. Many of the things mentioned all sound good in theory but as a guy looking for the same thing it isn’t easy to find.

Ag land- I live in the fox valley and work with farmers. Even in this depressed market you won’t find value on a decent property. I was meeting with a guy yesterday who just spent 11k per acre on tillable ground.

The lumber companies around here have everybody trained on the value of wood. Unfortunately many tracts get the timber pillaged and they still want a mint. I looked at a piece to the north of the valley the other day that had an extensive cut recently and they still wanted 3500 an acre.

I have come to the conclusion I need to find a job that pays better so I can afford this land. When the economy eventually tanks I hope to be in a position to buy some land at a discount.

 

[SwampCat]

I own 200 acres that I have bought in four different purchases and am currently buying another forty. With the exception of 60 acres, the rest is contiguous. I am also partial owner in another 140 acres that joins my main block of land. The 140 was also bought with my son and his friend. I will caution you right up front about buying with a partner for obvious reasons - but if you can make it work, it can greatly ease the pain of purchasing land as compared to buying on your own. Also, dont think the only land you can buy is that with a sign on it. I have only made one purchase where the owner was actually trying to sell. The rest, I contacted the owner and asked if they would sell. Usually, that just plants a seed. My first purchase was in 2004. I first approached the owner about selling in 1992. I will admit, that method usually does not result in getting the best price.

 

[SoInHunter]

I didn't mean that the timber would pay for the ground (I think those days are behind us). I meant it would simply help offset my out of pocket expense. I went into buying ground fully knowing that it was going to cost me every month. I have budgeted for the full monthly loan payment. Any timber money will simply reduce (or eliminate temporarily) my payment for period of time. If I were to get just $36k after taxes for my timber I could put it in the bank and supplement my payment $300 a month for 10 years.

 

[jackpine]

The lumber companies around here have everybody trained on the value of wood. Unfortunately many tracts get the timber pillaged and they still want a mint. .

Agree..many of the land listings I look at online you can tell from the pics that they logged it before putting it up for sale..some look to be practically clear cut.

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[Boll Weevil]

I don't mean to hijack the thread but since there have been some comments regarding income tax, thought I'd add this resource. In the interest of being assessed lower income taxes / capital gains tax at harvest, be sure to establish what's know as a timber tax basis at purchase. I've invested a lot of time understanding the tax aspects of land ownership. If you're not careful, you can fork over a LOT more to the govt. than required.

https://timbertax.org/

 

[yoderjac]

In my area we have land use programs. Land in planted pines is taxed at a significantly lower rate than land used for many other purposes.

 

[yoderjac]

I don't mean to hijack the thread but since there have been some comments regarding income tax, thought I'd add this resource. In the interest of being assessed lower income taxes / capital gains tax at harvest, be sure to establish what's know as a timber tax basis at purchase. I've invested a lot of time understanding the tax aspects of land ownership. If you're not careful, you can fork over a LOT more to the govt. than required.

https://timbertax.org/

I think most of the comments were related to property tax, but it is a good link and an important consideration.

 

[bwoods11]

Crop prices will come back. I look at hunting parcels with crop land on it, especially now that the local farmers cannot afford to buy it (in most cases). When that recovers, as long as interest rates are not too high, crop land will be in demand again.

 

[Northbound]

Crop prices will come back. I look at hunting parcels with crop land on it, especially now that the local farmers cannot afford to buy it (in most cases). When that recovers, as long as interest rates are not too high, crop land will be in demand again.

Where are you guys that ag land is low demand? 35 acres up the road just sold for $460k... then again big farms here could care less about growing crops, just need acreage to dump manure.

 

[Mortenson]

Manure will surely always run the price of land up. Went to an auction today. The prime piece sold for 11.2K/ac and the rougher piece (still had decent dirt) went for 9.5K which I thought made the good piece seem like more of a bargain.

On a combo farm, you can always try to grow some hay on it, or share rent to a hay farmer. Hay always seems to be in demand. Get crafty and grow some snobby horse hay like orchard grass where they pay like $15/bale for it. And don't overlook the market for pumpkins and sweetcorn if you can handle the labor aspect. Find a niche.

 

[westonwhitetail]

Lease it out to hunters. :)

Ha I can’t do that! Unless they paid me enough to buy another chunk of land for me to hunt!


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[westonwhitetail]

I put a chunk of mine into the Wetland Reserve Program. It involved a lot of legwork but in the end was in line with exactly what I wanted to do with the property anyway and was very profitable.

Is this a program to establish wetlands or preserve existing? Would ponds be part of it?


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[Tree Spud]

Crop prices will come back. I look at hunting parcels with crop land on it, especially now that the local farmers cannot afford to buy it (in most cases). When that recovers, as long as interest rates are not too high, crop land will be in demand again.

Every business has failed business people who cannot run the operation, farmers no different. Better more efficient producers step in. That's why WRP land is popular. Farmers can't make it profitable so the govt subsidizes farmers to get out of it.

Farm acreage around here never gets smaller, crop land never in low demand. There is a difference between "food plot" land and real quantifiable ag land.

In our area, real income AG property never gets on the open market ...

 

[westonwhitetail]

What I have seen and you need to consider is that land you can make some decent income off of tends to be taxed accordingly. At least in my area. Ground that can be farmed or rented to a farmer will receive a higher assessment value by the local assessor's office. So, that being said - keep that in mind when you start looking. In my case the land was purchased with hunting as an after thought. As such of my 150 acres......I currently have about 100 tillable. I have implemented some CRP areas where it makes sense and I receive payments that will rival my rental rate I receive for the tillable land. Right now on my place I am getting roughly $200/acre in land rental for the tillable acres. The CRP acres are a nice way to build habitat while not giving up the $ to do it.....however it is limited in what you can enroll AND there are rules! There are some government programs as well (here they call it a classified forest program) where again the state government has rules and the like with what you can do to the area enrolled, but they also reduce your "habitat" ground to a tax rate of 1$ an acre. Also keep in mind that these programs stay with the land so it can reduce potential buyers if you are to ever try to sell AND getting out of those programs tends to carry heavy fines and the like as well. Many of these programs change from state to state so your area may be VERY different.

Trying to make money off a property to help put the property purchase in reach is great, but nothing is free and the government has figured out a way to tax everything and those that are not taxed are illegal! You want to make a few bucks then leasing it for someone to hunt a species you don't you could consider. Farming - grazing or row crops - takes valuable acres out of your control and may if your lucky cover your property taxes and then a bit more....maybe. Timbering is a 20 year event if you have something decent to start with and your not going to get rich cutting firewood or tapping maple trees for the most part. You want to get a property to pay for itself.....you better find oil, coal or gold or the like and then sell high and run like hell!

Good luck in your search, but many folks are out there looking for a way to turn a buck off of property.

Thanks J bird, I get ya. I know I won’t be able to make it pay for itself but trying to get a thorough list of options to help pay for it is all. We have MFL in Wisconsin for the logging and I’m not sure I’d want to do it as it might limit a lot of what you might want to do in the future with clearing out plots, cutting bedding areas etc. hopefully I’ll strike it rich with a gold mine!


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[westonwhitetail]

I think you are overlooking the cash flow available from logging.
I met with a private forester at my ground before I made an offer. He gave me an estimate a few days later. My part on logging was estimated to be 30-40% of the amount I was planning on offering. Made my decision easy. I purchased about a year ago and plan to log next year. That log money will make my payment and all expenses for years. I may end up only logging 25% of it every couple years to help with cash flow over an extended period of time. Honestly I would not have purchased without the timber value.

Very good point. I was thinking it as a one time payment, but it if could be significant enough to pay for the mortgage or part of it over many years I’ll have to consider it.


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[westonwhitetail]

What I did was by accident sort of I had bought a triplex for a good rate and then a farmer that owned some timber along the river decided he would sell so I combined the 65 acres and triplex on one loan and triplex made payment plus insurance and taxes on both and has been that way for 20 years and now I am up to 260 acres and it cost me about 1000 out of pocket plus repairs I have to do.Your local USDA office should be able to give you average CRP rates and state forester should be able to walk your land and give value.In Kansas our ag land taxes are cheap but if you have timber that has no cropping history they can hang you for recreational land which is thousands you can change this by selling timber or firewood and it gives it cropping history.Don't know if all states are the same

Good idea with renting. If the land has an old farm house or something


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