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

Advice Please

I have a  young nephew  who works for me, he also rents some ground that I used to farm. He is very frustrated about his prospects of getting land to rent. He told me this morning that he was going all in and he was gonna start paying high prices for land rent. I don't currently rent a lot of ground, I have 50/50, custom, and then rented ground as well as owned. So my operation is pretty diversified, but on the other hand I do have one farm that got raised to 275 dollars per acre this year. I am somewhat uncomfortable with that, and now my young nephew is talking about bidding 350. I understand his frustration completely, I told him that I rented ground and got a foothold in a completely different world, I was dealing with the WW2 generation not baby boomer land owners, and that they want different things then when I started. I have no clue what the best advice would be, my gut tells me that 350 dollar rent in our part of the world isn't smart, but he goes to town and sees the guy paying that in a brand new pickup and just assumes he is loaded. What do you all think. I am seriously considering retirement and selling to him so he doesn't get consumed with land rent debt.

0 Kudos
20 Replies
Contributor

Re: Advice Please

Materialism and youth, I remember being at that age. I wish I would have spent  my money buying land rather than buying machinery and showing off.

If he will listen to you, ask him to figure out how many bushels of corn/beans it takes to pay the rent, seed, fertilizer, fuel , crop ins. (you see where I'm going?) based on average yields in your area. Make sure he includes all of the costs involved, including that new pickup and machinery.

If he has any bushels left when he's done, that's his profit, which uncle sam wants a share of. If he has no bushels left, he'll have evaluate weather it's worth it to be the big shot.

Also, if he is a reader, I recommend " The Millionaire Next Door ". The book is getting a little dated, but the principals still apply.  It may give him a different perspective on how wealth is created and accumulated.

Veteran Contributor

Re: Advice Please

Boy, that is a tough one. I am in the same boat as him. I cannot compete with 6-7000 dollar land. Can't rent ground for $300 and make it bank roll. If he wants to run with the big dogs and is not flush with cash they will send him home with his tail in between his legs. I know this for a fact. It has happened to me I tried to rent some ground that a BTO was trying to get at the same time. Had the deal locked in and the next day he came and dropped big $$$$ for the ground and blew me out of the water. Then proceeded to let me have it over the phone to fully explain that I was messing with the wrong guy. My advice BE CAREFUL. Emotions tend to make bad business decisions. 

0 Kudos
Senior Contributor

Re: Advice Please

Farm and fire that is well said. My problem is I have been telling him for four years that things will change and I have been very wrong, and given him poor advice. Now these BTO's have so much cash that I don't see any way a young guy could get started. Had a friend tell me that the end of the family farm will be the end of America, I think we are starting to see that.

PS- I don't wanna sound like a meathead but if someone called and threatened me over farm ground, I think this old paratrooper would get **bleep** angry.

0 Kudos
Advisor

Re: Advice Please

You are nto respionsible for his inability to compete.  I woud really worry about sellgin my land, and then the kid turning around and getting in debt over his head for rent elsewhere, and losing it all - including your land, too - anyway. 

It is to me a case of delaying the inevitable if you buy him a few years...maybe a nice gesture, but will it really keep him in farming forever?  Hard to see how.  If you really think the trend is this strong, what ido you accomplish in selling to him now, only for that not to be enough in five years or ten? 

Maybe you could  rent him your land if you want to retire, and make it a lease-purchase agreemetn if you are determined for him to have the land you own now.  You can alwasy leave him the blaance in yoru will, if your other heirs do not need the money. 

 I'd think really hard, if the land is in any way part of your retirement planning - either for sale or for rent.  If he buys it, defautls on the loan, the lender will stand first to collect his debt, and you may end up lacking. 

There are a lot of things that go on that I do not like.  Some of them I can change, and some I have to learn to accept.  You've got to figure out which this is....

0 Kudos
Advisor

Re: Advice Please

I also recommned a book i just foudn on amazon , and it's a short but very effectivde read.  I'd add, a couple of things are pre-meltdown; however, anyone reading it would NEVER take a HELOC to pay down consumer debt, or cash in equity to buy a car (results in basically a 30-year car loan!)

Title: Debt is Slavery.  http://www.amazon.com/Debt-Slavery-Other-Things-Taught/dp/0978545702/ref=sr_1_1?ie=UTF8&qid=12991115...

Written by a very savvy young guy.  Well worth the tiny amount of time it takes to read it - not a long or cumbersome book at all.  Meant for young adults, but it did not hurt this old one to read it, either. 

0 Kudos
Senior Contributor

Re: Advice Please Kay NC

I should be more detailed. Im thinking about renting him the ground I own, and then I will keep farming the other ground I have. I own around 300 acres of row crop ground. I will let him use my equipment and rent to him at a fair price. He doesn't seem to high on the cow end of my operation, like a lot of kids his age he is much more interested in row crops. This will leave me with around 500 acres of crop ground and my cow herd and feeders to tend to. Right now I pay him wages 10.00 per hour and he uses my equipment for the ground he farms, if I rent him my ground should the pay structure be then. I have a son and a daughter and this is my nephew I'm talking about. Son and daughter are not interested in farming. But are very supportive of my nephew in the operation. Complex situation, and I want to help get a young man started. I'm 63 my run is dang near done.

0 Kudos
Veteran Advisor

Re: Advice Please Kay NC

Cowfarmer you need to remind your nephew that things aren't always what they seem. I have heard of big farmers in their brand new pickups struggling just to pay their help. Does your nephew have an off farm job? He may need one if he has a short year with high rents. I would be content with just my families ground to farm plus my own. In my area one has to be very careful with land rents with one field being some of the best ground in the country next to some of the poorest. At least with my families ground I know what to expect. The same could be said to your nephew, these big guys can loose money on a farm for years and never know the difference. Ask your nephew what his objective to farming is. If he says he just wants to be the biggest he will eventually get the raw end of the stick that may put him out of business. What Airborne unit did you serve with? I wasn't a paratrooper but I was an infantryman with the 10th Mountain Division so Im sure we could find some common ground. Good luck.

Senior Contributor

Re: Advice Please

This may sound like a rude suggestion, but rent him your ground for the going rate of the best ground. Didn't you say it was $350 per acre? Make certain you get your rent as if he was any other renter. Rent your machinery for the going rate to him. If he cries foul, tell him that's what everyone else does that drives brand new pickups. Pay him wages for his time with the cattle, not for the farming. Let him make his mistakes, for some that is the only way they can learn. The last few years have brought wide margins and many acting like it is a gold rush. Remember the ones who got rich were those who sold the supplies to the 49ers. He'll get a taste of farming without the land debt and you'll get your retirement.

0 Kudos
Advisor

Re: Advice Please Kay NC

I see what you are trying to do, but I have this concern:  He is not getting a realistic view of what it truly costs to operate as a crop producer, if he's got no equipment expense.  In that respect, you are giving him a leg up, which is fine; but, you are also not teaching him the real deal. 

There needs to be some way to address that in your succession strategy. 

Of course, he will have a preference for that which makes him the most money...but, he would make far less if he had the expense of buying, maintaining, operating, and replacing machinery.  

I think you guys need some professional afvice on how to structure the succession plan...that is really what you are talking about here.  They know better how to avoid pitfalls, how to calculate what is fiar to both parties.  You haven't formally called it that, but it is functioning in that manner. 

You two need some sort of protection from catastrophic illness on your part, disability on his part, etc., too.  Lots of factors come into play. 

You are fortunate to have each other, and a shared love of farming.  There are lots of options in finding a good way to do this, and lots of very bad ones.  Get advice, make a plan, and work towards it together. 

0 Kudos