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Eldon (WA)

Well-known Member
Just curious, I have been renting 120 acres dryland in SD to my brother for the last 20+ years. It runs 80-100 bpa corn in a good year, possibly down to 40 in a dry year (but he takes out crop insurance). We started out on shares and I didn't make much...went to $35 an acre till about 3 years ago when he started paying me a bonus. This year he upped it to $55. Would you rent for less to family? Your thoughts?
 
no. that's like saying if you went to work for your family would you work for less than everybody else is making. doesn't seem fair to you.I could see the first year or so if just getting started, but no sense in him making all the money while you possibly struggle.
 
Too much depends on the relationship, i.e. cooperative maintenance, attitude, financial reality of external jobs, kids, and distance in the family. The relative's gain should not be your loss. Jim
 
Here in ohio the rents are around 200-350 per acre,that"s not the best ground either.
 

I'm with MAB, he should pay you more because he is your brother. He apparently wants to do right by you so he paid more when he made more.
 
Having trouble following this: "went to $35 an acre till about 3 years ago when he started paying me a bonus. This year he upped it to $55. Would you rent for less to family?".

He started paying you more without being asked? Is that what you're saying? Are you asking if you maybe shouldn't accept that much?

I'm confused,again.
 
Yes I rent to my brother for less than the going rate but I do get enough to pay the taxes on all the ground and buildings and I get use of any thing he has. I also help him in the fall when I get off work for free. Theraphy. Now I have a son that works off farm for my brother's wife's family business and helps my brother also. He wants to farm on his own and has bought some older equipment. He is renting any land that no one else wants (small tracts etc) for 1/3-2/3. That way the landlord does not have any respondsibilities and he doesn't have as much outlay until he gets it all figured out even though we try to tell him.
 
(quoted from post at 10:43:17 03/23/14) Doing business with relatives is a no-win situation.
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You got that right...when he started out I sold him 40 acres with a 10 yr old 3000 sq ft house, 100' loafing barn W/ milking parlor and 80' silo/unloader for $50k on contract. My sister later sold him acreage on contract w/ no interest. Other siblings were critical of me for charging interest....
He has worked hard to build a multi-million dollar operation starting from scratch, so I have to give him credit.

My wife and I live a comfortable life, we have no kids, so that is one of the reasons I have been content with the situation. Part of our estate will probably go to his kids anyway. I suppose it would be different if we were struggling and really needed the $$$
 
(quoted from post at 10:52:24 03/23/14) Having trouble following this: "went to $35 an acre till about 3 years ago when he started paying me a bonus. This year he upped it to $55. Would you rent for less to family?".

He started paying you more without being asked? Is that what you're saying? Are you asking if you maybe shouldn't accept that much?

I'm confused,again.
Click to expand...

No...I'm sure he is getting a deal. Like Showcrop said, he wants to be fair. Just wondering what is fair, and if others give a better deal to family, that's all....
 
Just my 2¢ worth,so take it for what it's worth,but with those kind of yields,I think he's being generous.
 
At 100 bpa in a good year, and with current input prices, those are some slim margins to operate on. If he has now gotten established and can afford to pay you more rent, I sure wouldn't turn it down.
 
(quoted from post at 11:35:24 03/23/14) At 100 bpa in a good year, and with current input prices, those are some slim margins to operate on. If he has now gotten established and can afford to pay you more rent, I sure wouldn't turn it down.
Click to expand...

I guess the guys paying $350 to $500 an acre for 180 bpa ground are really screwed, then.....

One thing he has going for him is my ground is attached to his home place, so he injects all his dairy manure on this land. He also rotates beans, corn, and alfalfa so his inputs should be less than average.
 
Depends on the family member. My sisters husband? Yea I'd let him farm it for less, maybe just enough to cover property taxes. One of the wife's brothers I won't let him hunt here, no way I would rent him crop land.

You have to do what you feel is right by yourself and your brother.

Rick
 
RAY ,dont know what part of ohio you are from but centeral ohio rent is from 50.00 to 150.00 per ac. some ground wouldnt raise a umbrella in a wind storm, others is ok....40 to 60 in beans and 100 to 140 in corn.cant pay any more for ground rent
 
sounds like he is taking care of your land, keeping
a farm working, covering the taxes and you get farm
or tractor therapy when needed. Don't think you
would help him at it if you didn't like him.
Sometime you get more out of the deal than just
cash!
 
Eldon: It would seem your brother is being fair to you. If the ground will only grow 100 BPA in a good year it is not the type of ground that we are writing about that is getting the $300-500 an acre rents. The high rent ground around here had a rolling ten year average of over 180 BPA. In a real good year I have seen 250-275 BPA averages on some of it. On some real good spots some 300 BPA.

Also the fertilizer required to grow these good crops is less than many have to use for 50 BPA less in yields.

I have friends in Southern Ohio. They have a 150 BPA average and use more P and K then we do to get that lower yield. Their rents are in the $75-125 range.

So your not comparing apples to apples.

Also your correct in that the high rent guys are in trouble with the lower prices.
 
Doing business with family can be difficult. Or very rewarding...

If everyone is happy then don't worry about it.

I take this as a casual question, just to see if things are up to
snuff.
Farming has gone through a big bubble of increased grain
value, like triple what it was, followed by all the inputs of seed,
iron, fertilizer, fuel, part has doubled in price.

Now grain prices have dropped of to 1/2 or so of their highs,
still good prices compared to 5 years ago, but our costs are up
so much we almost lose money at 'good' grain prices.

And we are one good crop around the world from grain prices
really falling back to where they were. Which is a disaster for
all the high costs of what we have to pay.

This has played havoc with land costs, as there were really big
operating ties for huge profits for a year to 2, and nice
numbers other years, but always the other shoe is ready to
drop and crush us all. Is corn going to be worth $3 or $7 next
winter, will I personally have a good crop or a disaster this
summer with the unpredictable weather. One fella will gamble
it all, one fella with play it conservative, who is left farming next
year..... The game has gotten to be such a big stakes game.....

A visit with the local extension office would let you know local
rental rates, often good to throw out the goofy high rates som
big time operators pay and be a nice steady little bit below
average for family - if you wish.

$35 to 55 sounds crazy low for me, but we are over $200,
some at $400 an acre around here. Different ground, different
yields tho, so its hard for me to really say what 75-100bu land
is worth. As it sounds dry makes a big loss and a wetter
summer gives pretty good yields there, a flex lease or the
bonus as your family paid in good years is a good way for
everyone to share a bit of the rewards without having a bad
year putting someone out of business.

We are in such unpredictable times.

Paul
 
(quoted from post at 12:04:57 03/23/14) sounds like he is taking care of your land, keeping
a farm working, covering the taxes and you get farm
or tractor therapy when needed. Don't think you
would help him at it if you didn't like him.
Sometime you get more out of the deal than just
cash!
Click to expand...

I used to get my tractor therapy out there 2 weeks in the spring for planting and 2 weeks in the fall for harvest. About 10 years ago I was there and saw a local auction with a tractor I was interested in...so asked brother if I could borrow a check since I had none with with me. He gave me one, never got the tractor, but a couple of days later my 6 year old nephew comes up to me and tells me his mom says I need to use my own money. I thought that was a great "thank you" for all the help I had given them. That kinda put an end to me helping out. Now I have my own farm to keep me busy...
 
For the ground there it sounds fair. You are the one that counts though. If you're happy with it and he is happy with it that is all that matters.
It is like when I load the truck people ask me about things like fuel surcharge and such. If I am happy with the rate and it is profitable who cares what it pays.
 
A little feedback on the land rent situation is good. The yields you mention indicate a lot of variability. There is land down the road from me that is on its 3rd renter in 15 years. Hard to work ground. The rent is $50/acre. It is late, heavy ground. I rented it until we stopped milking cows. It is a hundred acre field. The only reason it rents now is because the farmer renting it is a dairy farmer and needs it for CAFO rules(need 1 acre per each cow). It also gives him a little more land to spread his manure. Also, with cows you can almost always have something for a crop(usually corn or hay silage).
With this kind of land, it is hard to figure a fair rent. A lot of the comments remind of and old saying. It is a lot easier to figure fair rent when you farm with a pencil instead of a plow.
 
when I took over managing dads farm a nephew thought that I should let him have some hay ground for nothing. set him straight rite away he paid the same amount of rent that the renter was paying, he refused to pay and did not get any hay ground either. still tells people how I screwed him over on the hay ground.
 
Here's something to ask yourself:

Let's say he's paying ten bucks an acre below market. On 120 acres that's $1200 a year. Over a five year lease that's 6 grand. So you would have given him $6000 over five years. Question: If you were hard up, would your brother gladly hand over six grand to help you out of a bind? If the answer is "no", then maybe you should consider finding another renter.

Renting to family is ticklish. Family members often feel entitled to farm land that's been in the family. But speaking from experience, you should treat your transactions with family members as business.
 
Face it its costing you thousands$ to keep the piece of land and let him use it and you're getting nothing in return that I can see.If having a good relationship with your family means it only happens when you are giving them a great financial deal then the "Goodwill" isn't really genuine.Of course you've already figured that out.
Right?Personally I'd sell the property to the highest bidder and buy land where I lived.And then you'll really see what their feeling are about you and I know which way I'll bet my Hundred.
 
i think your doing the right thing, keeping it in the family. your giving him a good price and he turns around and says thank you the best way he knows how. i bet your ancestors are smiling down on you.
 
(quoted from post at 15:57:28 03/23/14)
(quoted from post at 12:04:57 03/23/14) sounds like he is taking care of your land, keeping
a farm working, covering the taxes and you get farm
or tractor therapy when needed. Don't think you
would help him at it if you didn't like him.
Sometime you get more out of the deal than just
cash!
Click to expand...

I used to get my tractor therapy out there 2 weeks in the spring for planting and 2 weeks in the fall for harvest. About 10 years ago I was there and saw a local auction with a tractor I was interested in...so asked brother if I could borrow a check since I had none with with me. He gave me one, never got the tractor, but a couple of days later my 6 year old nephew comes up to me and tells me his mom says I need to use my own money. I thought that was a great "thank you" for all the help I had given them. That kinda put an end to me helping out. Now I have my own farm to keep me busy...
Click to expand...

I wouldn't get too jumpy about that, unless it came from his mouth. I was in partnership with my Nephew a long time ago, and his wife couldn't keep her mouth shut either. A little too greedy.
 
(quoted from post at 05:39:13 03/24/14) Face it its costing you thousands$ to keep the piece of land and let him use it and you're getting nothing in return that I can see.If having a good relationship with your family means it only happens when you are giving them a great financial deal then the "Goodwill" isn't really genuine.Of course you've already figured that out.
Right?Personally I'd sell the property to the highest bidder and buy land where I lived.And then you'll really see what their feeling are about you and I know which way I'll bet my Hundred.
Click to expand...

I have thought of selling, but by renting I can write off two trips back to the farm a year which helps on my taxes. Also, the capital gains taxes would eat up a bunch, so we probably won't sell unless we have to.
BTW, this is not what I would consider family land. We bought it from a neighbor in 1990, my sister bought the other chunk a little later as an investment, then sold it to my brother. My parents still live on the home farm 4 miles down the road. Dad raised 14 kids on a quarter of land he owned, and 3-4 quarters that he rented. We all got a set of luggage for graduation...2 brothers returned home after college to farm.
 
1. Federal capital gains tax is currently capped at 15 percent. Nobody knows if this will change.

2. Farmland prices are at an all-time high. Nobody knows if they will continue to rise or if they've already peaked.

So you've got two VERY BIG unknowns to weigh against the certainty of selling today. I suggest you talk to a real estate agent who specializes in farmland in the locale of your land.
 
I would look at what land is renting for in that area and go accordingly. I rent most of my ground in Central KS for $55.00 per acre, or 1/3 and 2/3rds. Some ground just isn't worth much more, it depends on the area and the soil. Where your ground is, I'm guessing $55 might be a fair price, maybe just a little on the low side. But if it is family, and you want to give him a break, why shouldn't you. I would with my brother. Good luck - Bob
 
You can look at it a different way. You are getting around 18-20% ROI. Anything else you got paying that good?

That is rough country down there. Without 20 years of dairy manure would that soil be in the condition it is today to command a higher rent?

To me it looks like yeah he is getting a bit of a deal but you aren't getting robbed. I would push him to $70 over time. The average between 100 bpa and 40 bpa is 70 bpa. We have land like that up here also that has guys paying more but it is not sustainable at current prices. I see alot of it going back to pasture with current pasture rates.


Being from a big family just makes it that much harder. Too many opinions between people that when strung out that far in age aren't that well connected.
 
Nathan, how are you calculating that 18-20 percent ROI? The ROI should be calculated against the PRESENT value of his investment. Let's say you had put $1000 into an account many years ago and it grew to to $2000. If that account is earning 2 percent interest annually, you wouldn't say you're getting a 4 percent ROI, would you? No, two percent is two percent.

With today's crazy farmland prices, Eldon's dryland is likely worth around $2000/acre. Let's say after paying real estate commissions and capital gains taxes, he would end up with $1500/acre. With a cash rent of $55/acre, the return on his investment is 55/1500 = 3.7 percent. That's better than bank interest (barely), but it sure ain't 18 percent.
 
Yes I would claim a 4% ROI.
I figure return on investment this way. Yearly income divided by money spent to aquire asset.

If he didn't pay cash, No it won't be that high. I think in a post a few years ago I think he did say he bought it outright.

Interset or APR is the yearly income divided by value of asset.

2 different values, 2 different calculations.

Like I said in my original post. Another way to look at it. Maybe not the best way, but another way.
 
Nathan, I'm glad you're not my accountant or investment counselor.

What Eldon actually paid for his property is mostly irrelevant. (I have to say "mostly", because the purchase price affects his capital gains tax should he sell the property.) Likewise it doesn't make much difference if he paid cash or not. (If the property isn't paid off, then the interest he's paying on the note becomes a factor.) Another thing that isn't relevant is how much he's received in rent from his brother. That's all in the past and can't be changed.

What does matter is the net value of his property should he sell it, and potential income of that money reinvested. It also matters what the future rent will be if he keeps the property. A less tangible thing is how much he wants to maintain peace and harmony in the family.
 
(quoted from post at 22:23:57 03/24/14) Yes I would claim a 4% ROI.
I figure return on investment this way. Yearly income divided by money spent to aquire asset.

If he didn't pay cash, No it won't be that high. I think in a post a few years ago I think he did say he bought it outright.

Interset or APR is the yearly income divided by value of asset.

2 different values, 2 different calculations.

Like I said in my original post. Another way to look at it. Maybe not the best way, but another way.
Click to expand...

Nathan, you are correct, there are different ways to calculate your investment. The second way that you mentioned is commonly called "cap rate". Its just a quick and dirty way to place a value on investments. I can quickly and easily place a value on an apartment, restaurant or even farm land. Once I buy one of those investments, depending on how I structure and pay for things, it changes my investments actual return. When looking at loopnet, cap rate is used simply because return changes based on how you structure things.

After I own something, a common way to figure ROI is like your first example, called "cash on cash". Just like you said, your actual cash investment is divided by the cash it returns.

http://en.wikipedia.org/wiki/Capitalization_rate

http://en.wikipedia.org/wiki/Cash_on_cash_return

I find it odd, but funny, that somebody is so dumb as to criticize you by saying you should not be an investment advisor yet they dont know simple, first year of college terms like above. In fact, I think this stuff is being taught in AP classes now days. Odd I say, but still funny....
 
OK Rich,

Nathan has been unable to explain how a $55/acre gross rent on land worth upwards of $1000/acre represents an 18 percent ROI. Perhaps you'd like to give it a shot. Please show your math.
 
(quoted from post at 20:00:31 03/25/14) OK Rich,

Nathan has been unable to explain how a $55/acre gross rent on land worth upwards of $1000/acre represents an 18 percent ROI. Perhaps you'd like to give it a shot. Please show your math.
Click to expand...

Sorry Charlie, it dont work that way, Im just here to laugh at you, not figure out problems you are not smart enough to do. You tried calling Nathan out by saying he didnt know what he was talking about when in fact, he did. He gave text book explanations, all be it they were shortened versions but still 100% correct. I confirmed he was correct and even showed my work and provided links. Now Im just laughing at you because you have no clue...

And I got $10 that says you cant get the right answer in 24 hours (I will donate my winnings to charity). Maybe in that amount of time, you can call your "accountant or investment counselor". hahaha. But seriously, you wont get the answer. You are in over your head and you dont even know it... thats part of what makes this so funny for me.
 
In other words, you can't figure out how Nathan came up with his absurd 18-20 percent ROI, either. Not so much because you can't calculate ROI, but because he pulled those numbers out of the air.

If Eldon wants to lease his farmland to family at a below-market rent, that's his business. But don't try to convince him he's getting rich in the process.
 
(quoted from post at 04:14:50 03/26/14) In other words, you can't figure out how Nathan came up with his absurd 18-20 percent ROI, either. Not so much because you can't calculate ROI, but because he pulled those numbers out of the air.

If Eldon wants to lease his farmland to family at a below-market rent, that's his business. But don't try to convince him he's getting rich in the process.
Click to expand...


Ya, its not a surprise that you wont try to post the answer... because you are not smart enough to figure it out. You are also a poor guy talking like you are wealthy too because if you really did have a "accountant or investment counselor" all you would have had to do was email them and they would have emailed you an answer toot sweet.

So you dont have any money invested,
You dont have an education,
And you dont have a clue. Got it...

But you can still take a stab at the answer, my offer is good for the full 24 hours. As a matter of fact, I am doubling it too untill closing time (God I hope I dont have to explain to you what "doubling" means and how much that will be) so if you want to help out the VFW, take your best shot.
 
(quoted from post at 18:10:56 03/26/14)

Ya, its not a surprise that you wont try to post the answer... because you are not smart enough to figure it out. You are also a poor guy talking like you are wealthy too because if you really did have a "accountant or investment counselor" all you would have had to do was email them and they would have emailed you an answer toot sweet.

So you dont have any money invested,
You dont have an education,
And you dont have a clue. Got it...

But you can still take a stab at the answer, my offer is good for the full 24 hours. As a matter of fact, I am doubling it too untill closing time (God I hope I dont have to explain to you what "doubling" means and how much that will be) so if you want to help out the VFW, take your best shot.
Click to expand...

And it looks like the betting is closed for today. I have no idea what Mark has against veterans but this would have been a good opportunity to both show the board how smart he is (isnt) and get some money to the VFW at the same time. Instead, he just proved my point. He is just playing internet millionaire, internet "accountant or investment counselor", and what he is best at, internet a$$.

No matter, dispite Mark being MIA this entire day when he should be showing us how smart he is (isnt), I got a crisp 20 that says he will be back soon enough, with a mouth bigger than ever. Thats the way these internet guys are.
 
For the record, Rich, you didn't actually ask a question. I assume your twenty bucks is just as fictional as your question.
 
(quoted from post at 04:42:30 03/27/14) For the record, Rich, you didn't actually ask a question. I assume your twenty bucks is just as fictional as your question.
Click to expand...

Nope, I didnt ask a question, I made a statement. My statement said, I had $10 that you were unable to properly provide the answer to the question that was on the table. Remember, you tried belittling Nathan and in the mean time, stuck your foot so deep in your mouth you are still able to walk? Ya, after that, I fully explained that Nathan was right, provided links to prove myself and you started spouting off (again). Thats when I made my statement that I have $10 against you being smart enough to provide the correct answer. I was right because almost 2 days later, you still havent posted the correct answer (or any answer for that matter) dispite me doubling the money I had on it and stating where the money would be going. So, you got something against the VFW? Or just not smart enough? Maybe you can call your fictional "accountant or investment counselor".... snicker...
 
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