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Discussion Starter · #1 ·
What governs the buy/rent decision on your operation? Are there situations where you'd rather rent than buy? Given margins/acre its tough for me to make any purchase pencil out.

I'm just curious what are some thoughts on this, surely we'd all love to own 10000 ac outright, but from where I'm sitting (starting out) I just can't see it happening from farm income, heck I can't hardly see it happening from farm income + two good full time jobs.

I don't remember where I heard/read it but as a teenager someone was talking about how in modern agriculture we will likely have to separate farming from landownership, that is to say that you don't have to be a landowner to be a farmer, and you don't have to be a farmer if you're a landowner. I see that a lot at home with the older guys not selling their land but not able or don't want to do the work anymore either.

Perhaps this is just to keep the clouds from squashing our farming dream but the fiancé and I have decided to look at land and operations as separate entities. Land purchases are investments that we will work and pay for from our jobs and that the operational side of our place will rent at market value. Profit (scarce as it may be) from operations will be earmarked for operational upgrades/expansion first, then the remainder will make extra land payments. As we're not married yet, and have a life to start and careers to maintain, our farm investment has intentionally been very liquid to date but Dad wants us to start buying him out (family rate, ie low end of market value) so he and Mum can go to town before long.

Just curious how you 10 year guys are getting on. Am I looking at it wrong?
 

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I've only been farming for 5 years now myself (part of a family farm), so I was able to rent land from my grandparents.

The only land I've seen purchased and can remember in my 25 years of life, by our farm, was bordered on 2 sides by land we farmed, 2 miles from home, with a 2 lane highway on one side (which we farm on the opposite side too), and a gravel road on the other. There was those reasons, as well as we don't want to see it developed in the future.

You also need the cashflow to be able to afford to buy the land, that is what makes the decision easy or not to buy a piece of land. If you can't afford to buy the land and make the payments, then it's a no brainer to rent pending the rent price.

Besides the above reason I see no reason to rent over buy unless land value is depreciating, at least in our area. Many other areas are different.
 

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No, we do not all wish for 10 000 acres. And we all start from a different point, so it is hard to answer, because everyone's situation is so different. The guy with an aggressive father, and 2000 acres to start farming with, and his first year of inputs paid for in full, (happens around here all the time), has a different perspective than the guy with no dad, and a single quarter to start out with.

It also depends on land prices vs. productivity. Some areas are 3 000 an acre and produce 30 bushel canola. Some areas grow 50 bushel canola, and have land prices under 1000 bucks.

Too many variables to count, those are just a few.
 

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Like uthinkyourwet mentioned, there are so many variables to look at. In my area land is going for 4-6000/ac, so I am not a buyer at those prices, even with full time job and the farm. It really depends on your financial situation. Some guys can afford those prices, and lets be honest, it's quite a mixture of people buying land out there. Some are farmers and some are not. We we offered a nice quarter about 6 years ago for 350K, we should have bought it but hey hindsight is always 20/20...lol. \

You can have a good farm with most of your land being rented, it happens all the time.
 

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Discussion Starter · #6 ·
No, we do not all wish for 10 000 acres. And we all start from a different point, so it is hard to answer, because everyone's situation is so different. The guy with an aggressive father, and 2000 acres to start farming with, and his first year of inputs paid for in full, (happens around here all the time), has a different perspective than the guy with no dad, and a single quarter to start out with.

It also depends on land prices vs. productivity. Some areas are 3 000 an acre and produce 30 bushel canola. Some areas grow 50 bushel canola, and have land prices under 1000 bucks.

Too many variables to count, those are just a few.
Yeah fair play, I didn't mean to tell you what you wanted, I didn't say I wanted to farm 10,000 ac, just that I'd be okay with owning 10,000 ac. Also not really looking for answers just to understand the decision making process that people use.

Something I know I'm guilty of is losing perspective when looking at the costs, $300k/quarter is pricey but given my wages is it any more difficult than what my grandfather faced starting out in the 30's, or Dad starting out in the 70's?

To your point about the son of a successfully aggressive father, I am not, but the pencil gets a whole lot blacker once things are paid for...
 

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Discussion Starter · #7 ·
Like uthinkyourwet mentioned, there are so many variables to look at. In my area land is going for 4-6000/ac, so I am not a buyer at those prices, even with full time job and the farm. It really depends on your financial situation. Some guys can afford those prices, and lets be honest, it's quite a mixture of people buying land out there. Some are farmers and some are not. We we offered a nice quarter about 6 years ago for 350K, we should have bought it but hey hindsight is always 20/20...lol. \

You can have a good farm with most of your land being rented, it happens all the time.
20 years ago Dad could have bought 5 quarters for about 25k each, similar quarters were trading for 250k in the last couple years...hindsight. Hey at least he doesn't have a capital gains tax problem!
 

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Do not be afraid to lease. I lease 100% of the 8000 acres I farm and seem to get a bit more every year. Not that I don't want to buy, just no one offers to sell yet. I don't mind, yet. It easier to buy equipment when starting and leasing. At the same time, I would love to buy.
 

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It's nice to have a mix of both if possible. If rent is the same as a payment toward it's purchase it's a no brainer. Kind of like renting or buying a house it's nice to have your money going towards something instead of giving it to someone else. When I retire I want to have something and be able to either pass it on to the next generation to farm or rent it out. Depends on your area and whether land even comes up for sale or when it does if it's even affordable. A lot of variables and if your farm is five years old vs. 100 years old makes a big difference.
 

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20 years ago Dad could have bought 5 quarters for about 25k each, similar quarters were trading for 250k in the last couple years...hindsight. Hey at least he doesn't have a capital gains tax problem!
what was the interest cost per acre at that time,
what's the interest cost per acre now?

yield then vs yield now. its always easy to say i should've, its harder to say what to do now.
 

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Something I know I'm guilty of is losing perspective when looking at the costs, $300k/quarter is pricey but given my wages is it any more difficult than what my grandfather faced starting out in the 30's, or Dad starting out in the 70's?

To your point about the son of a successfully aggressive father, I am not, but the pencil gets a whole lot blacker once things are paid for...[/QUOTE]


I bought my first 1/4 of land last year. Till than have just been renting. The problem with renting is it is not always a sure thing to keep farming the land. I won't say how much I farm. But in one years time I lost half of the rented land. Some by being out bid. Some by a death and kids got land and sold it on me.

The other thing when dad and I did some figures. What we learned that when grandpa bough his land in 1944. Bough three 1/4 sections. It was easier for him to buy all that land at that time than It is for me buying one 1/4 now. We did the math based on purchase price and what the wages for skilled labor were both than and now. In fact grandpa could have bought a full section before it was on the same level as buying one 1/4 here. By the way his land was good clay land(some say some of the best land in Alberta) My land is very sandy.
 

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....back then the chances were good, that interests could go down as well.

Now.....there is only one way, where interests could go ;)
good point but people just couldn't buy it because the interest would've made it impossible to pay for it, right now guys are taking loans with just interest, it makes it just an expensive rent, I don't understand why you wouldn't want to pay the money back but guess some guys are soly relying on appreciation of land.
 

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Renting is an excellent way to expand the farm and/or get land established into the operation that can be bought in the near future. However IMO I would not put all my eggs in that basket. It is best to have a good land base that is owned as well. There are too many ways to get screwed out of rented land, I suppose the more land you rent the less risk you have of having a substantial reduction of acres from losing the ability to rent that land, but still there is a lot of possible variation with rented land.

As I have been told, renting is just a special term for throwing away money.
 

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In my opinion....that's one of the dumbest sayings I have ever heard. I rarely see a "successful operation" own all of their land. If I was to replace all my rented land with purchased land...oh wait, I can't, because there isn't even that much land total for sale in my area, and I don't think I would win every auction. Hence some land is rented by smart individuals....
I know of some very successful farmers that fully own well over 10K...and that was 10 years ago, no idea where they stand now and I am in a competitive area. many famers knocking on the door or are over 10-20k acres. they just farm in a 80 mile radius.

Paid for land will likely provide you with the highest profit per acre, also known as low cost producer...which is what you need to whether a bear market cycle.
Rented land is good IMO but not all from one owner or to big of a % of your land. the all the eggs in one basket may bit you in the butt one day.

Also don't get caught up in leasing Equipment. It may pencil "better" vs buying in full, but in the math equation there is no risk accounted for. You just need to know where is right for your operation.

It sounds like you are mainly looking at land as an investment at this point... this comment may not be a big hit on this forum but there are plenty of other investments that make as much or more as a ROI with less risk. When farm land is providing the best opportunity to place your investment money then buy some, if not buy where is...might be the local gas station or apartment building. Placing investments outside of farming also provides diversification. Look at oil companies right now, many are only involved in drilling oil or oil services and their share prices currently reflect that. Same goes with your own portfolio. if your all ag and it goes into a bear market, you will feel the pain (Unless you know how to profit from a down turn, some do many don't).
 
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