cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Senior Contributor

1200 dollar rent

Hello heard to day that there is a crew that will give landlords 1200 dollars an acre up front for three year lease. Meaning 400 dollar an acre per year. I bet this will become very popular if this is true and gets around. Your thoughts.

0 Kudos
20 Replies
Highlighted
Senior Contributor

Re: 1200 dollar rent

I've heard of 400/acre rent in nw Iowa, but can't put a reference on it.

0 Kudos
Veteran Contributor

Re: 1200 dollar rent

As a landlord I would want an irrevocable letter of credit or escrow entire amount or be prepared to be disappointed. Integrity isn't as common as it used to be.

0 Kudos
Highlighted
Senior Contributor

It's upfront.

the old standard was $1000 upfront for three years. That was $333 per year, plus interest.

 

The frightening thing is that the numbers actually work on 200 bushel plus land.

0 Kudos
Highlighted
Senior Contributor

Re: It's upfront.

Red steele you are right it probably does work. With a little luck probably even makes money. But man I feel bad for a young guy trying to get started, younger farmer couldn't come up with that kind of credit. Feel bad for the young in this industry.

0 Kudos
Highlighted
Veteran Advisor

Re: 1200 dollar rent

If the landlord went for this they would ave a huge tax bill in that year. Why would ou do that?  I have heard 1000/acre around here.

I hope the guys used a fixed interest loan for this!

0 Kudos
Highlighted
Advisor

Re: 1200 dollar rent

If you think about this...this may not be such a bad deal..even if you do have a big tax bill. If a guy owns over 320 acres of land and is already renting it for 300 per acre..he's probably already in the highest tax bracket. Now..if he gets paid another 100 per acre..he's still in the highest bracket..but he gets his money now...can invest it, and not pay anything but capital gains tax on it unless he just banks it in CD's and he wouldn't pay any tax next year at all on the original payment.

0 Kudos
Highlighted
Advisor

Re: 1200 dollar rent

Rental income is not subject to FICA and Medicare (self-employment) taxes, but otherwise, I thought it was classified as "unearned income."  That is not a capital gains tax issue, is it? 

0 Kudos
Highlighted
Advisor

Re: 1200 dollar rent

Sorry Kay..I probably was about as clear as mud there. I meant to say..the additional income (that $32,000) that he would make...could be invested in something like buying call options..or even stocks...and if he made a profit by selling them in the next year..all he would pay on it would be capital gains tax. But if he put all of his rental money in CD's..he would pay income tax on the interest he received...(However little that might be...these darn banks don't like to part with their money..LOL)

0 Kudos
Highlighted
Contributor

Re: 1200 dollar rent

Why would you need a non revocable letter of credit or an escrow of funds when it is all paid to you up front?

0 Kudos