o/t Purchasing Farm, I really need advice PLEASE!

To make a a long story short, my brother in law has the opportunity to buy the family farm (working 300 acre dairy farm, Washington County NY) and he asked my wife if we wanted to become partners. We are going to look into the loan since my wife is the manager of a bank currently. I am a teacher but I can't find work because NY is cutting funding to schools dramatically and schools are laying teachers off at an alarming rate! With that said, I am not afraid of work, people sometimes here "Masters Degree" and think this guy wouldnt know a hard days work if it ran him over, ABSOLUTLY not the case....

My brother in law and his uncle will be milking, they have done it a combined 50 years and if it isn't broke don't fix it. I'm thinking about raising beefers and selling topsoil since we have an unlimited supply of manure and the land.

My question is, what else would you recommend to raise revenue or what are you all doing help pay the bills that seems to be profitable? Im not trying to get rich obviously, i just want to offer my family a comfortable life. Thank you so much for the help guys.

You do realize that a high percentage of
partnerships fail, especially between family.
That's probably the biggest thing you need to
worry about. Will you have an agreement for him to
buy you out at fair market value within a specific
time frame should the partnership not work out? I
also think that if you're considering being a
partner, you need to look at how profitable it is
right now as a dairy farm. Trying to make up the
slack because the dairy doesn't bring in enough
income for everybody could be a recipe for
disaster. People that buy manure want old
decomposed manure, not 2 week old manure and there
could be a lot of red tape in selling topsoil
unless the land is being redeveloped for something
else. There's a lot of things that need to really
be considered before jumping in with both feet.

I am aware of the pros/cons of going into business with family and the details will be worked out later. The dairy farm can pay the bills, Im looking for supplimental income, income that could help buy new equipment, pay for improvements, make things more efficient, etc... But I absolutly understand what you are saying and I DO have a lot of things to look into in the very near future, thank you for the advice

That three hundred acre dairy farm WILL NOT generate enough income to support three families on it. The dairy business is going through a big consolidation right now. The starting point around here is 500 cows and then you go bigger. If you try it with fewer numbers then it just will not work. The net revenue is not going to be high enough. When the smaller guys are milking themselves they are just making the low wages the larger dairies are paying(illegal immigrants mostly)that is the competition.

Raising the steers out as beef will not really make you that much either as Holstein steers take much more feed to finish than a beef steer. Even beef breads would be hard to make it on in NY state. That state is a corn deficient area. They use more feed than they produce most years. So the local feed cost are higher. Then there is not any close beef processing plants. So your prices will be lower because of transportation cost.

If your wife is a manager of a bank then she will know about looking at cash flows from businesses. Farms today generate large gross revenues but not that high of net revenues. The livestock industry has had several bad years here with high feed cost. The dairy industry had several real bad years before that. Good friend spent 2008 and 2009 losing 100K a month. It took away most of his equity in his farming operation.

If the farm was profitable then the BIL would not have a problem financing the farm on his own. He has been in the business a long time and is having trouble making a profit. Your helping him buy the farm is just a short term band aid. He is having problems and is wanting outside money to help himself out. There are dairies quiting everyday because of the low profits.

With your education you need to look at switching careers away from teaching. It would be a much better investment to add to your current education so you have marketable skills in the private job market. Farming is not a high paying job. It sounds like you have been beat down and just are looking for an out. You could very easily end up financially bankrupting your family. Farming is not a very forgiving business to financial mistakes. So you would be out your money and not have good relations with your BIL. I would NOT recommend a family partnership.

The succesfull farm partnerships I have seen there is a clear division
of responsibility. One is the dairy expert the other is the crop
expert. You would be crazy to sell your topsoil. That is land rape
pure and simple.

When I say top soil, i do not mean stripping the fields, I would never do that. I am talking about making "topsoil," screened gravel, compost and manure that has decomposed for a year. I have used "top soil" like this for years while operating a lawn care company and have had fantastic results. I understand that this in not true topsoil by definition and i would never destroy the fields we have.

I agree. It could very easily become the ultimate bummer.

My sister and I each own an undivided half of our family farm. Right now, the tillable ground is leased out, and the farmhouse is rented, so we each have annual income from it. I live next to the farm, and my sister lives 75 miles away, so guess who gets all the responsibility for day to day operations.

NOW--looking into the future, in doing estate planning, our attorney has been after us to divide the farm, so my sister and I each own specific acres. Makes sense, except how do you divide a farm with a farmstead on one end, 30 acres of timber on the other, with a number of odd shaped fields in between?

Looking down the road to when my sister and I are both gone, if the farm weren't divided, that would leave our daughter and my sister's four kids owning the farm jointly. It would be a freaking nightmare.

Instead of dividing, I'm in favor of simply selling the farm, splitting the money with my sister, and moving on.

I apologize for injecting my personal situation into the discussion, but these farm deals can become complicated and partnerships can become nightmares that can go south in an instant.

You'd have an awful lot to determine, like who is responsible for what, etc. A friend of mine bought his out-of-state brother and sister out on the family farm that he operated, and he told me once it was the dumbest thing he ever did.

I remember when a friend told me his son wanted to come in to his dairy with him and he asked me what I thought. I told him they'd better make up there minds right from the start who the boss was going to be because there couldn't be two. He said yea,he knew,that was the problem.
I know two brothers too,who farmed in perfect harmony when their Dad was alive and riding herd on the whole thing,but after the old man passed away,crap hit the fan. Lawyers got involved,family Christmas's stopped happening,it was ugly.

Partnerships are something with a life of their own. To be
partners every detail needs to be addressed in detail. If 3
families are going to be involved in the operation of this farm,
do all 3 families bear the same amount of the work load, do
all 3 families have the same amount of capital outlay, do all 3
families own the same percentage of the whole operation,etc.
If not does everyone know what their risks, investments, and
responsibilities are??? It sounds like you don't have farm
background. Why does it take 3 families to make a 300 acre
farm work??? Are you needed for the cash??? I would be
Leary buying into a partnership with someone not knowing
what was mine. For instance, if this does not work out, it will
more than likely be divided in a court of law. I don't want to
sound all negative, but have walked this road before, and
there are a lot of obstacles in partnerships. I am sure you
have some savings, but if this doesn't work,more than likely
you will not have a job and NO savings also.

I am VERY wary of prtnerships. Especially with family. Tough to still be friends if things go bad, no matter who's fault it is.
That being said. Look into some of Joel Salatin's books, mainly "You Can Farm". He gives lots of really solid ideas for making small farms profitable. Yea, he does come across as a bit of a crackpot sometimes(which he is actually quite proud of). But he MAKES MONEY on a small farm. Lots of his concepts go against conventional wisdom, but conventional wisdom also tells you you cant make a living on a small farm.

Good luck.

Ben

Same kind of thing happened here with one of the largest, most successful farms in the county. As soon as Dad died the whole thing fell apart. Brothers couldn't get along, ended up splitting everything. My brother and I were more fortunate, neither of us could move to take over the farm, so we sold the buildings and a couple of acres, split the rest into equal halves in each of our names. Since we cash rent it is easy to keep it fair. Family partnerships are tough sometimes and I would encourage you to think of some aspect of farming you think you could succeed with and go it on your own. Dairying wouldn't be my choice, that's a 24/7 job.

Its been said, "THE ONLY SHIP THAT WONT FLOAT IS A PARTNERTSHIP"

Id consider an LLC or Corp with well defined duties and responsibilities and contingencies

John T

I would walk away from that deal. That's one one of the reasons I left the farm and went to work for the government. My late dad was milking about 40 cows in the early 1950's. My brother joined the Air Force in 1951 3 days after we graduated. After he paid the hired help he wasn't clearing much profit. After I was drafted he sold out and went to work for a chemical company. My nephew has the home they bought after selling the farm. That big rancher only cost $11000.00 back then. My dad had an Ag degree and also sold real estate. He put in 12 to 14 hours a day on the dairy farm. Your work is never finished. This was a 7 day a week job. Those cows need to be milked at least twice a day. The big milking herds have 1200 to 1500 cows milked 3 times daily. One of the men that post on here is a herdsman in WI. They have 3 shifts and each shift has to feed, clean and milk all those cows in 8 hours. That doesn't include keeping those cows bred and records kept. We weighed all the milk when on the farm and if a cow wasn't producing we got rid of her. Hal

This is why I love this site, no BS and you all give it straight. Let me clarify a bit, I will not be involved with the running of the farm, my BIL (30 yrs old and worked on farm for 20 years) and his uncle (50 yrs old and worked on the farm for 40 yrs) will continue what they have been doing. the farm has supported 4 familes until a couple recent deaths dropped it to two. When the deaths occured, the 7 children began to fight and selling is the only option left. The farm is in 2 deeds, I would have about 100 acres and my BIL 200 acres. I am not in this for the money, my wife and I have our own jobs and would retain them, I am looking for something to do on the property I would have and with the barns-pasture land that I could use, completly seperate from the farm. I will not be supported by the farm, all the farm will do is pay the property tax.

Please keep it coming, everything you all are saying is sound advice and I appreciate it

Be very careful, I think it would be a mistake and cause alot of arguments in the future.I would rather have all of mine then part of someone elses.

Every possible detail and situation that could
arise has to be dealt with first before you go any
further. When my dad passed away, his land was
equally divided among the 4 kids. The land would
be sold and the money divided equally. There was a
clause that I had first choice to buy out my
siblings if I wanted to purchase the land. This
was because I lived there and did the most work on
the land. The land purchase had to be based on
fair market value by two independent appraisers. I
exercised this option and of course my brother
disagreed with my getting first choice to purchase
the land and figured I should pay more.

You could rent your 100 acres out to a farmer, or grow your own crop. Or....divide it up and sell the lots to yuppies that want a piece of the rural life.

Big, Are milk prices that good, that you would buy into a dairy farm?
If you do buy some land in NY. will you be able to rent it for enough to pay the tax"s/
I no some guy in that area do very well selling good quility horse hay down state and in CT.
Even though the existing dairy is running good like a machine. If there were to be a brake down of the machine and the key people were not there any longer could you step in and take over?
You would loss your shirt with no income.
I would listen to what all these guys are telling you. oldiron29

all partnerships cant be as bad as everybody is making out. my dad & uncle have been farming together their whole lives. they are in a partnership. they each own their own land and buildings but split ownership of all of the cattle, crops and equipment. they both make decisions independantly and together if need be. they definitly communicate. that i know of they never argued about anything. although i think one wonders what the other is doing sometimes.

I think you should talk to the bank. Banks are very cautious about loaning money today. You will be applying for a commercial loan and need 25-35% down, and have documentation about how you are going to pay the loan back. With todays crop prices, and a good buy, you can cash flow land in some areas. But many areas you can not, and there is no guarantee that crop prices will stay high. That means land is a long term investment, and will not provide supplemental income until it is paid for. I don't know much about farming in new york state, but have heard that in some areas you will struggle to make enough profit to pay the property taxes.
Josh

How many cows? What type of facility? How many tillable of the 300? How many acres rented? As usual,other answers here reflect very little knowlege of dairy farming.

2 things:

Only pay cash, so don't think about it unless you have the
spare cash.

Never have 50/50 partnership, someone needs to make a
decision in a stalemate.

A corporation is best with very clearly written
(plain English)wording as to hours on task,
responsibilities, liabilities and consequences for
failure to perform. Expectations are not dreams,
they are reality. Discuss and write out all
expectations of the owners of the owners.
Write the disposition of property and ownership
upon death of owner/s. Make sure the documents
are reviewed by a lawyer for conformity with law,
and best practices. Do not commit to things you
will need to learn how to do. Jim

(quoted from post at 14:51:01 03/11/12) I agree. It could very easily become the ultimate bummer.

My sister and I each own an undivided half of our family farm. Right now, the tillable ground is leased out, and the farmhouse is rented, so we each have annual income from it. I live next to the farm, and my sister lives 75 miles away, so guess who gets all the responsibility for day to day operations.

NOW--looking into the future, in doing estate planning, our attorney has been after us to divide the farm, so my sister and I each own specific acres. Makes sense, except how do you divide a farm with a farmstead on one end, 30 acres of timber on the other, with a number of odd shaped fields in between?



Looking down the road to when my sister and I are both gone, if the farm weren't divided, that would leave our daughter and my sister's four kids owning the farm jointly. It would be a freaking nightmare.

Instead of dividing, I'm in favor of simply selling the farm, splitting the money with my sister, and moving on.

I apologize for injecting my personal situation into the discussion, but these farm deals can become complicated and partnerships can become nightmares that can go south in an instant.

You'd have an awful lot to determine, like who is responsible for what, etc. A friend of mine bought his out-of-state brother and sister out on the family farm that he operated, and he told me once it was the dumbest thing he ever did.

Click to expand...

Goose is right, it can turn into a big mess. A local lady left 300 acres to her 3 daughters. Was so bad that 1 of em had to buy out the 3rd when the 3rd one decided that she could sell the whole works without telling anyone. Then the other one of deeded her share to her 2 sons. So now it's still owned by 3 people. One of them who wants to farm but can't because the aunt who owns 2/3rds wants it in CRP. The wifes family had the same kinda thing go on with some cousins who inherited 160 acres. She had thought that they would rent it to their dad. They decided to sell. Got to fighting about it and wound up in court.

Rick

I think you answered your own question. You are going to borrow money to get into a business you know nothing about like "raise beefers or sell topsoil" to who? For how much? What are your expenses? Is that a realistic concept? Who else does it successfully?

I don't want to be a wet blanket but this is a big decision. It is like saying I want to be a "Rock Star" Oh? What instument do you play..."none yet, I just decided to be a rock star."

I agree, partnerships are not my favorite, but no business plan or rational business strategy is worse.

What does the land go for an acre there, it is about $10K here
in eastern iowa.

I'd not want you as a partner in my farm if your first thought is selling off the one good asset I have - topsoil! Yikes. Hope you talked that over with your partner before going too far with that idea.

Sounds like your partner will be the brains of the operation, you will be the money backing part of it?

It's a good life, but it's work, and you need someone - wife or you - to have a full time job for steady income and benifits - health insurance.

Dairy can be a more steady income than other farming, but it is more work and in down cycles you can spend a great deal of money with less coming back in which is not for everyone.

Any more, a 300 acre dairy farm is getting pretty small. The tide is becoming a 4000 head dairy farm. You and I can disagree with that trend, but that _is_ the trend, and milk buyers, govt regulations, and equipment suppliers will all gear up for tht 4000 head dairy, so if you are looking at this for the next 30 years - think out how profitable this farm will be, if there is enough income for 2 families, and so forth.

--->Paul

Some partnerships do work but overall there are a lot more that fail. It's a real slippery slope going into a partnership, especially with family. They can have the best intentions and start off great but a few years down the road go all to heck. One partner gets greedy or sick etc., etc. and then it's big mess. My dad went through it after having a heart attack but his partner never really appreciated that having a heart attack can change one's perspective of what's important.