5 Tips to Rent or Lease More Farm Ground
Negotiating a farm lease can be easier than you might think. Whether you are looking to expand with a cash lease, 50-50, 2/3 – 1/3 or prefer a flex lease, there are several important factors that will help you grow your farm operation. Ultimately, you want to build a great landlord / tenant relationship that is fair, equitable and results in long term success for you both.
Communication = Trust
No matter if you are a landlord or tenant of a farm in Indiana, one of the best ways to negotiate a mutually beneficial lease and long term success in farming is regular communication. Address concerns when they happen, learn what the landowner values in a tenant and in the health or productivity of their soils and you’re putting together a recipe for great returns to both parties.
Values & Goals
If a landowner values good agronomics, no-till or cover crops, it’s best to address these needs up front. If you can help improve soil quality during the term of a lease or cash rent agreement, this is a great way to negotiate longer terms that are mutually beneficial. Think Win-Win, no matter who your landlord is or what they believe is most important to their land assets.
References & Resumes
With more and more absentee landowners in Indiana, having a great resume and set of references can mean the difference in your bottom line. Take the time to prepare a resume that includes your experience, education/degrees, how you approach soil health & fertility and what makes you a sound choice as a tenant and producer. It’s been said that the devil is in the details.
Land is Your Greatest Asset
For both the landowner and the tenant, it’s vital to think long-term about productivity, soil health and nutrients. Best practices = great profits for both parties. Take a look at the most successful farmers & producers in your area and think about why they are leasing more ground. Are they using variable rate technology? Do they practices good crop rotation? How have they improve the soil? Your answers to these questions can help you build a great landlord/tenant relationship that results in higher profits for both parties.
What’s the Going Rent Rate?
Avoid the coffee shop talk. The ground you own or lease has its own unique characteristics in both soil type, history and current or planned investments. Just because a farm in the same county gets $500 / acre does not mean your farmland is worth the same. Factor in the size, shape, ease of use & ability to get large equipment there, travel time, location, point rows, drainage, commodity prices, input costs….just to name a few!
No matter what type of lease you prefer, from cash rent leases to more complex flexible leases, sharecropping or 50/50, it’s really about understanding landowner and tenant needs and goals. If you aren’t able to meet each other’s expectations, then chances are the relationship may suffer and the lease will expire. On the other hand, if you have share common values , you’re most likely on the right track to helping each other be successful and profitable this year and many more.
In today’s farm and land leases it is becoming more common to include provisions for the ownership of farm data. Landlords should take this into consideration to get a better handle on the productivity and fertility of their land. Long term, it is always best to improve soil health as many leases include provisions for “flex bonus payments” when bumper crops or prices are favorable.
Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms, recreational property and development land in West Central Indiana. Born and raised on a local farm, his commentary on issues that are important to the farming and real estate community can be found at www.PrairieFarmland.com/blog