Buying a farm

The place to start if you are new!
User avatar
Dsth
Cowhand
Cowhand
Posts: 111
Joined: Wed Jan 02, 2019 1:33 pm
Location: eastern Iowa
Has thanked: 24 times
Been thanked: 44 times

Re: Buying a farm

Post by Dsth » Mon Feb 24, 2020 10:57 am

Cress27 wrote:
Mon Feb 24, 2020 8:54 am
Dsth wrote:
Mon Feb 24, 2020 8:00 am
The first thing that I would like to know is if your dad is thinking of retiring sometime in the near future and if you have other family interested in the farm. Many other factors should factor into your decision like what your personal family (wife, kids) would like to be doing in the next several years. In my case, I rented our 230 acre farm from my mom since she was getting up in age and needed help but wasn't ready to sell. ended up buying under land contract, paying off well before the end of the contract, now enjoying a small cow/calf herd and renting out most of the ground that we don't need for our herd. One comment in a previous post that I do not agree with is about not taking out a 40 year loan if available. My advise would be to take out the 40 year loan simply because it would lower your payments and help you through the not so good times. Pay your loan down as much as you can as early as you can. Hopefully you would have it paid off in the 15 year time frame. Good luck because I think we all would like to see younger farmers getting into the farm lifestyle.
Dad won’t be retiring any time soon I’m 24 years old and my wife is just as fired up about buying a farm as I am. I don’t have kids and I don’t think we plan on having kids. We both have other income I work as an equipment operator and she is a machinist we both make pretty decent money. Dad just got out of the dairy business about 5 years ago so we are just now getting started with the beef cows. He raises about 100 acres of soybeans too. And I’ve got 2 step brothers one Is 20 and the other is 7 the older brother don’t want nothing to do with the farm the other to young to tell he loves it know but who knows when he gets a little older. I’ve just always wanted to have my own little piece of dirt. My plans are to raise alfalfa hay in small squares on a portion of the farm and do round rolls for the rest. Hay is gold in our part of the world.
Based on your reply, sounds very doable. sounds like you could both continue to work off the farm and still manage your farm if that is what you both wish to do.



User avatar
Cress27
Cowhand
Cowhand
Posts: 51
Joined: Tue May 28, 2019 8:36 pm
Location: Eubank, ky
Has thanked: 9 times
Been thanked: 8 times

Re: Buying a farm

Post by Cress27 » Mon Feb 24, 2020 11:08 am

Dsth wrote:
Mon Feb 24, 2020 10:57 am
Cress27 wrote:
Mon Feb 24, 2020 8:54 am
Dsth wrote:
Mon Feb 24, 2020 8:00 am
The first thing that I would like to know is if your dad is thinking of retiring sometime in the near future and if you have other family interested in the farm. Many other factors should factor into your decision like what your personal family (wife, kids) would like to be doing in the next several years. In my case, I rented our 230 acre farm from my mom since she was getting up in age and needed help but wasn't ready to sell. ended up buying under land contract, paying off well before the end of the contract, now enjoying a small cow/calf herd and renting out most of the ground that we don't need for our herd. One comment in a previous post that I do not agree with is about not taking out a 40 year loan if available. My advise would be to take out the 40 year loan simply because it would lower your payments and help you through the not so good times. Pay your loan down as much as you can as early as you can. Hopefully you would have it paid off in the 15 year time frame. Good luck because I think we all would like to see younger farmers getting into the farm lifestyle.
Dad won’t be retiring any time soon I’m 24 years old and my wife is just as fired up about buying a farm as I am. I don’t have kids and I don’t think we plan on having kids. We both have other income I work as an equipment operator and she is a machinist we both make pretty decent money. Dad just got out of the dairy business about 5 years ago so we are just now getting started with the beef cows. He raises about 100 acres of soybeans too. And I’ve got 2 step brothers one Is 20 and the other is 7 the older brother don’t want nothing to do with the farm the other to young to tell he loves it know but who knows when he gets a little older. I’ve just always wanted to have my own little piece of dirt. My plans are to raise alfalfa hay in small squares on a portion of the farm and do round rolls for the rest. Hay is gold in our part of the world.
Based on your reply, sounds very doable. sounds like you could both continue to work off the farm and still manage your farm if that is what you both wish to do.
We are going to give it a try. The guy that’s selling it sold the house off the farm and I’ve been waiting for him to get a new deed so we can proceed to signing a contract.

User avatar
Bigfoot
Mentor
Mentor
Posts: 12511
Joined: Mon Jan 16, 2012 5:31 pm
Location: Kentucky
Has thanked: 192 times
Been thanked: 317 times

Re: Buying a farm

Post by Bigfoot » Mon Feb 24, 2020 11:16 am

What are the guidelines/restrictions on an FSA loan these days? It's probably the only government program I don't see as freeloading. At least the money is paid back with interest.
Your not a small business owner. Your a stay at home mom trapped in a pyramid scheme.

User avatar
1982vett
GURU
GURU
Posts: 8993
Joined: Sun Feb 03, 2008 7:57 pm
Location: Central Texas
Has thanked: 103 times
Been thanked: 168 times

Re: Buying a farm

Post by 1982vett » Mon Feb 24, 2020 11:28 am

Watch out.... he/they won’t want anything to do wit it till it’s time to divide it up. :2cents:
Aug 7, 2019 22:51GMT -5 the illustrious potentate said:
Because you have the freedom to say what you think, doesn't always mean that you should.

The right to speak freely is not free of consequences.

kilroy60
Trail Boss
Trail Boss
Posts: 278
Joined: Fri Nov 27, 2015 5:58 am
Has thanked: 55 times
Been thanked: 12 times

Re: Buying a farm

Post by kilroy60 » Tue Feb 25, 2020 9:37 am

I'm a little late reading your post. So, here's my advice for what it's worth.

First, there is no way that I would attempt to finance ANY loan for 40 years. The max I would go would be 15. If I couldn't afford a 15 year loan, then I wouldn't purchase this farm. Also, another thing to consider is what the payment would be. I wouldn't want a payment that would be 25% more than my take home pay.

Second, the idea of borrowing equipment is OK for a short period of time. I have a couple of farm friends that we help each other out periodically. However, when it comes to tractors and other equipment, I strongly suggest you have something that YOU can depend on. When it's hay season and you're having to depend on your neighbor to get finished with his equipment or even worse if his were to break down during his cutting, then it could be a bad hay season for you.

Lastly, whatever decision you make, have a budget prior to starting all this and STICK TO IT!! Know what your cost will be for insurance, fuel, repairs, taxes, fertilizer, chemicals, mortgage, etc., etc., and follow it as best you can. $400K for 40 years is a lot of worry for a young couple.

Good Luck.

User avatar
1982vett
GURU
GURU
Posts: 8993
Joined: Sun Feb 03, 2008 7:57 pm
Location: Central Texas
Has thanked: 103 times
Been thanked: 168 times

Re: Buying a farm

Post by 1982vett » Tue Feb 25, 2020 11:07 am

kilroy60 wrote:
Tue Feb 25, 2020 9:37 am
I'm a little late reading your post. So, here's my advice for what it's worth.

First, there is no way that I would attempt to finance ANY loan for 40 years. The max I would go would be 15. If I couldn't afford a 15 year loan, then I wouldn't purchase this farm. Also, another thing to consider is what the payment would be. I wouldn't want a payment that would be 25% more than my take home pay.

Second, the idea of borrowing equipment is OK for a short period of time. I have a couple of farm friends that we help each other out periodically. However, when it comes to tractors and other equipment, I strongly suggest you have something that YOU can depend on. When it's hay season and you're having to depend on your neighbor to get finished with his equipment or even worse if his were to break down during his cutting, then it could be a bad hay season for you.

Lastly, whatever decision you make, have a budget prior to starting all this and STICK TO IT!! Know what your cost will be for insurance, fuel, repairs, taxes, fertilizer, chemicals, mortgage, etc., etc., and follow it as best you can. $400K for 40 years is a lot of worry for a young couple.

Good Luck.
Certainly sound thinking.

However...

With today’s interest rates, if I could make a 15 year mortgage work I’d still look at a 30 year. Simply because the likelihood you won’t be able to use someone else’s money cheaper than you can now. Just because it’s a 30 year mortgage doesn’t mean you have to take 30 years to pay it. Double up your payment each month and the excess of interest payment applies to principal which will cut your 30 year loan to roughly 18 years. Should life throw some excessive amount of financial difficulties for a short time it allowed you an option to ease the loan obligation simply by paying the original loan payment.

I’ve had several term loans that I paid off early. Both were back in the day when a 14.5% loan was a good rate but still more than could be safely earned investing elsewhere.

I’ve actually have a 3.08% auto loan and a short term 3.18% credit card balance because drawing the funds out of our iras would trigger tax consequences substantially greater than the measly few dollars paid in interest. Another perspective of that is the net arbitrage if the $ last year was about 15%.

Just sayin.
Aug 7, 2019 22:51GMT -5 the illustrious potentate said:
Because you have the freedom to say what you think, doesn't always mean that you should.

The right to speak freely is not free of consequences.

User avatar
Brute 23
GURU
GURU
Posts: 8193
Joined: Thu Apr 19, 2007 7:59 pm
Location: Gulf Coast of South Texas
Has thanked: 301 times
Been thanked: 251 times

Re: Buying a farm

Post by Brute 23 » Tue Feb 25, 2020 12:25 pm

There is only one way I would do this deal.

1) you and your wife are completely debt free

2) both off yall are currectly maxing out your retirement funds (401ks, IRS, etc) and will continue to so after the purchase.

3) yall have at least 1 year worth of cash in savings that will not be used for this deal in any way shape or form as back up.

4) yall have a proper partnership agreement with who ever involved that addresses the "three Ds". It also needs to include insuance on the partners.

OR only yalls name is in the deed.

Some great advice was given about getting a 30 yr note and you can always pay it off faster, no more than 25% of income, borrowing equipment, etc.

I will add, dont let this property dictate your whole life. It can be a blessing or a curse. Dont skip on thing like retirement for it or let it become a financial burden. Property can be bought and sold and bought and sold at any time.

Finiacially what you do from age 20-30 years old can dictate your whole financial future. There is no replacing time.
Brimmer Pimpin Ain't Easy

"Don't let schooling interfere with your education" - Mark Twain

NonTypicalCPA
Rancher
Rancher
Posts: 526
Joined: Tue May 24, 2016 12:33 pm
Location: SW Michigan
Has thanked: 74 times
Been thanked: 38 times

Re: Buying a farm

Post by NonTypicalCPA » Tue Feb 25, 2020 6:48 pm

What have you got to lose? Seriously. Look at the worst case scenario that could rear it’s ugly head. Can you survive it? If so, do it. Big decisions get harder and more risky the older you get, and the more you have to lose. I went in debt almost $500k when I bought my CPA practice and office at the ripe old age of 26. I literally had almost nothing to lose, so the decision was pretty easy.

User avatar
Cress27
Cowhand
Cowhand
Posts: 51
Joined: Tue May 28, 2019 8:36 pm
Location: Eubank, ky
Has thanked: 9 times
Been thanked: 8 times

Re: Buying a farm

Post by Cress27 » Tue Feb 25, 2020 8:04 pm

NonTypicalCPA wrote:
Tue Feb 25, 2020 6:48 pm
What have you got to lose? Seriously. Look at the worst case scenario that could rear it’s ugly head. Can you survive it? If so, do it. Big decisions get harder and more risky the older you get, and the more you have to lose. I went in debt almost $500k when I bought my CPA practice and office at the ripe old age of 26. I literally had almost nothing to lose, so the decision was pretty easy.
Well that’s kinda what I’m thinking I’m not officially married yet we have a house that we just bought and we make a combined 75k a year and the farm was priced to me at 225k and that’s 70 acres and about 65 of it is all flat ground or rolling ground. I’ve done the numbers and from what I can tell the farm would about pay for itself theoretically I shouldn’t have to dip into my funds from my day job and make enough on the 15 head of cows I have on my dads and sell enough hay off the place I’m buying to pay for everything. Small square alfalfa is selling for 10 bucks a bale right now in our area and rolls of barn kept grass hay is selling for 50 to 60 bucks a bale.

User avatar
Cress27
Cowhand
Cowhand
Posts: 51
Joined: Tue May 28, 2019 8:36 pm
Location: Eubank, ky
Has thanked: 9 times
Been thanked: 8 times

Re: Buying a farm

Post by Cress27 » Tue Feb 25, 2020 8:12 pm

And just face the facts I’m 24 years old and I’m not getting any younger and they don’t make anymore land. The farm right next to this one just sold for 4000 an acre granted it had a nice feed pad and a nice work shop and a small house on it but it was only 63 acres and was about 15 acres of woods. And I’ve got about 1/2 mile of road frontage. I feel I could flip the farm if worse came to worse.

User avatar
kenny thomas
GURU
GURU
Posts: 9250
Joined: Sun Nov 16, 2008 6:16 pm
Location: SW tip of Virginia
Has thanked: 25 times
Been thanked: 413 times

Re: Buying a farm

Post by kenny thomas » Tue Feb 25, 2020 10:11 pm

Good luck with whatever you decide. But he prepared for weeks like this when it seems the bottom is dropping out of calf prices. Futures down 7 cents in 2 days. That's over $50 a head cheaper than Monday morning open. Some years $50 a head could be the profit.
Sounds like the hay business is the way to go
My thoughts only, don't bet the farm on them. KT

spartacus
Cowhand
Cowhand
Posts: 30
Joined: Mon Mar 11, 2019 1:34 pm
Has thanked: 7 times
Been thanked: 3 times

Re: Buying a farm

Post by spartacus » Wed Feb 26, 2020 1:40 pm

What about just leasing the land you need and buying as you grow and can afford it?

Or buying the small one and look at diversification of land (as you grow look at land in different areas to circumvent drought/storm issues hitting you 100%

Dave
GURU
GURU
Posts: 8244
Joined: Mon Jul 12, 2004 1:35 pm
Location: Baker County, Oregon
Been thanked: 590 times

Re: Buying a farm

Post by Dave » Thu Feb 27, 2020 9:11 am

If it is what you want to do in life and you can make it pencil, go for it. You only live once. There were people who thought I was crazy when at the age of 66 I bought a 1,200 acre ranch. I wish I had done it 40 years ago. The one down side is using an FSA loan can take a lot of time. I know that my closest neighbor used FSA when he bought his place. To keep from loosing it while in the process of getting the loan his parents bought it and he bought it from them when the loan came through. Stay on top of it with FSA and keep the seller informed.

Kingfisher
GURU
GURU
Posts: 5149
Joined: Tue Jan 05, 2010 7:02 pm
Location: Austin Texas
Has thanked: 34 times
Been thanked: 39 times

Re: Buying a farm

Post by Kingfisher » Thu Feb 27, 2020 9:34 am

I’d buy the 70 acres and pay it/make it pay it self off as quick as possible. By that time you will know more and you’ll have some leverage.
Green grass cures alot of ills.
The dream is free. The hustle is sold separate.

User avatar
FarmerShell
Rancher
Rancher
Posts: 643
Joined: Sun Aug 07, 2011 5:06 pm
Location: Kentucky
Has thanked: 383 times
Been thanked: 62 times

Re: Buying a farm

Post by FarmerShell » Thu Feb 27, 2020 9:54 am

Regardless I don't see land as a bad investment. They aren't making anymore and keep building more. I just see the value of land going up. I'd buy as much as you can and sit on it until your old has to be worth more than some stock market. I could be wrong but I could be right.
To me land is worth more than money but hey to each there own.
Listen to these older generation farmer they know. They can tell you what they would have could have should have done. I don't know much and don't claim to. 🙌🏾😁

Post Reply