Anyone else own a farm?

[W2R]

I don't own a farm, and at my age I know I never will. But it's fascinating to read about!

 

[street]

I don’t own a farm, but I’d like to. 10-30 acres. No livestock, just garden vegetables.
I keep looking but haven’t found the ideal property yet.

When I bought my first land I raised squash, onions, melons, beets, gourds garlic for a guy that owned a roadside vegetable store. He raised many other produce and I raised these for him. I was working full time plus was on call 24/7/365 but managed to do it. I made some great money and had fun at the same time. It was flood irrigated also, so it was not really a problem to raise quality product.

When I sold, I wish I would have kept back 10 acres or so for a roadside vegetable store. But retirement means retirement and I'm too busy the way it is so not totally disappointed that I sold the whole works.

I hope someday you find that treasure and be able to enjoy that land.

 

[Markola]

I don't own a farm, and at my age I know I never will. But it's fascinating to read about!

Yes. Reading about it satisfies my curiosity 100%!

 

[W2R]

Yes. Reading about it satisfies my curiosity 100%!

 

[Stormy Kromer]

OP here. I don't know why I posted this thread in the first place.

Land is something special. Not everybody gets it, even family members.

I am fortunate, I held onto my family farm that was homesteaded by great grandparent immigrants. Other cousins and family members could care less.

Farming is much different that other family owned businesses. Much, much different. It owns you from the time you can pull a weed or pick a rock or work in the garden.

I loved it even though I didn't get to take it over.

Now, I'm coasting at almost 60 years age with my family farm finally debt free. I can't explain it. I gave it everything and it finally paid off.

I have two children and will split the land equally into two separate parcels in my will. From what I have seen it is absolute disaster to leave land undivided,,,,, somebody will want to sell ant the others can't afford to buy it out.

My great grand parents got to this country just in time for great grandpa to be a soldier in the civil war, then homestead on the prairie of Minnesota ( about 40 miles from Charles Ingalls and little house on the prairie). It hasn't been easy and not a lot of money has been made. But, we held it together.

I think the reason farm families accumulate wealth is that they don't spend it. They keep it invested and working.\

The problem with farm wealth is when it isn't divided out in an estate and somebody wants to cash out. This forces a sale.

Great thread everyone. Thank you.

Stormy.

 

[ivinsfan]

Well the term wealthy on paper was invented for farmers...


As an Army brat who never lived anywhere for more then 36 months until she came to this farm, it's hard to describe what it actually means to me.

 

[kgtest]

No I don't own a farm. I am fascinated by the amount of land the amish own, and the complexities of having too many children for the land to not go around like it did when they settled. Not enough pie to distribute a piece to all the children of the amish.

I always wondered why South Dakota had some of our largest corporate owned farms.

I have been learning about the 06 ranch recently. Knew a neighbor on the island of Maui who owns a pork farm and vineyard in Central Cali. They and their future generations are set for life. Provided Hollywood type lifestyles for 3 generations now and they are bringing up the fourth, with private schools, private planes for travel, and a good life for the folks, grandparents. None of them lift a finger beyond managing the family money at this point.

 

[ncbill]

Well, one acquaintance bought a 50+ acre farm about 5 miles outside the city limits around 20 years ago.

IIRC, in my state if the farm generates $1,000/year in agricultural income everything except the farmhouse is exempt from property tax...one can control a lot of land for little money that way.

AFAIK his estate still gets the "step-up" when he dies so if developers have come out that way by then his widow can sell the place for full market value with no capital gains taxes owed.

OTOH, had a co-worker back around the same time bemoaning the fact that his family homestead in the midwest was falling into ruin...couldn't compete with corporate farms so his family had essentially abandoned the property.

 

[ivinsfan]

Well, one acquaintance bought a 50+ acre farm about 5 miles outside the city limits around 20 years ago.

IIRC, in my state if the farm generates $1,000/year in agricultural income everything except the farmhouse is exempt from property tax...one can control a lot of land for little money that way.

AFAIK his estate still gets the "step-up" when he dies so if developers have come out that way by then his widow can sell the place for full market value with no capital gains taxes owed.

OTOH, had a co-worker back around the same time bemoaning the fact that his family homestead in the midwest was falling into ruin...couldn't compete with corporate farms so his family had essentially abandoned the property.

Until fairly recently a lot of farmers retirement dream was to get enough money to move to nearest small town and relax. Now they are just as likely to raze the old house and build a new one. But as you age it become more burdensome to maintain a multiacre farmsite.

 

[ERD50]

OP here. I don't know why I posted this thread in the first place.

Land is something special. Not everybody gets it, even family members.

...

Farming is much different that other family owned businesses. Much, much different. It owns you from the time you can pull a weed or pick a rock or work in the garden.
....

Great thread everyone. Thank you.

Stormy.

There are many family businesses where the family members are totally involved, and identify themselves with the business. Some are passed down through generations, and they have generations of customers, that consider themselves as 'family'. And when those businesses close for whatever reason, the customers seem to get as emotional as the family.

I don't know how you can say it's so different.

But whatever, just different viewpoints I guess.

-ERD50

 

[latexman]

My 3 siblings and I inherited a 41 acre farm when Dad passed in 2017. It took us a couple years to realize that 2 wanted to keep it, and 2 wanted nothing to do with it. So, we are currently under contract, since Jan. 2021, with the developer of the next door subdivision to buy it. We hope to close about end-2022. It's been a long journey, and my 3 siblings and I are still good friends, which was our #1 prime objective. #2 was to make enough $ so everyone comes out ahead once the dust settles, which we did.

 

[all4j]

This has been a better than your average thread on farmland. “Farmland” is such a broad term that it is not surprising to hear so many varied angles & anything said in general might not fit a specific angle someone has in mind. That being said, I have several points in general & a specific near the end.

I agree with Stormy that farming is not just another family business. Granted, there are a few family businesses that bear some resemblance to a few farms…but I’m not here to sway the minds of those who, in Stormy’s words, “don’t get it”. Not sure there are words to convey it. But, it does highlight the emotion that the term packs at times & that can really affect investing mindsets.

Seems to me that most comments have not delved into farmland as a financial investment. I would like to own farmland even if not a sound investment. If your exposure to farmland is from the past, you need to do some research before investing. The demographics of US farmers is staggering; less than 1.5% of labor force is in farming. Average age of farmers is over 57; meaning great turnover in upcoming years. About 2000 acres of farmland a day are converted to other uses than farming. List goes on. Skill set needed to thrive now bears little resemblance to that of grandpa’s era. Technology is amazing & will be even more so if US ever gets broadband where it can be used more. Those entering farming as a profession will need much training, but also ample capital.

So, what of farmland as an investment? I’m too lazy to dig for some of the studies showing how farmland stacks up as an asset class (be careful to understand how a study scopes that term). Over longer periods of time, farmland has some unique characteristics. Total return is ‘near’ that of equities, but the correlation is lower that between equities and other asset classes. It does correlate strongly with CPI. Standard deviation for farmland is lower. Where else will you get that combination? (Trivial to find a time period where farmland underperforms one on one with another asset. Point is a long term view & looking at overall portfolio performance). Farmland is illiquid & many investors are not familiar with the differences (good & bad) that brings.

So, now for the specific. I agree with what Stormy said about estate planning, but I’ll add a twist. Consider the situation in which it seems clear that there is no interest on the part of the heirs to own the land. Sure, at death there will be a step-up in basis. But, there is an emotional aspect of being the one who sells (Yes, I know some have no problem being the one & that may even be the majority of heirs) & the passing of time it can take to get a fair price.

Consider the possibility of perhaps using a conservation easement/trust approach. This can ensure land stays as farmland while giving tax breaks before death. Haven’t explored enough to know real $ impact. Added wrinkle: recently there was a commercial development announced that, if it comes to fruition as expected, would greatly increase value of land several years from now. Might tilt scales toward retaining land & selling post-death…Anyone else look into something similar?

 

[Markola]

My 3 siblings and I inherited a 41 acre farm when Dad passed in 2017. It took us a couple years to realize that 2 wanted to keep it, and 2 wanted nothing to do with it.

FWIW, here’s a little true personal tale about inherited land wealth.

The OP is wise to understand the importance of proactively subdividing his land across his children, because, latexman, your situation inevitably develops and people need to be be bought out. Pain can be avoided this way. Otherwise, loggerheads are likely. Here in Minnesota there are thriving law practices that specialize in untangling families from lake cabins they inherited, for example.

This is exactly what happened in my family when my mother and her brother inherited around 6,000 acres of timberland, which my great grandfather had assembled. The following generational phases might sound so familiar as to be cliche to anyone with an historic family business or property of any kind.

The Classic “Shirtsleeves to Shirtsleeves in Three Generations.”

Phase 1: The Patriarch (or Matriarch): My workaholic great grandfather built businesses and assembled all the land. He was even an influential mayor at one time. As a workaholic, he sometimes neglected to change the oil in his new cars, much less dedicate time to raising his two sons. I never knew him but his spirit continues to loom large over what’s left of our family.

Phase 2: The Neglected Second Generation: I did know my grandfather and his brother. They were kind, gentle people. There was also alcoholism and other dysfunction, enough so that my great grandfather put his properties into a generation-skipping trust for the Third Generation.

Phase 3: After my grandfather’s death, my mother and her brother could not get along, neither was committed to managing timberland, nor living in our rural area, and they had differing levels of business competence. So, they split the land 50/50 and then, eventually, sold off the land. When my grandmother died, the two siblings stopped talking to each other. Perhaps they could have retained their relationship had the property been divided for them, as the OP plans to do.

All that said, I did not grow up super-rich. We were relatively comfortable and I benefitted from a great education, as did my brother, so we are grateful and have nothing to complain about. My brother and I inherited less than $100,000 each, we both developed professional careers, and we remain close with each other and my mother, who managed enough of her inheritance well enough to continue to support herself today. Her brother died penniless in Costa Rica after losing all of his money in a scam that a lot of expats got sucked into down there in the late 1990s.

I guess this thread struck a nerve for me. The biggest lesson I’ve taken from this major life experience is to be responsible and self-reliant. Inheritances have a way of not working out as expected.

 

[ivinsfan]

There are many family businesses where the family members are totally involved, and identify themselves with the business. Some are passed down through generations, and they have generations of customers, that consider themselves as 'family'. And when those businesses close for whatever reason, the customers seem to get as emotional as the family.

I don't know how you can say it's so different.

But whatever, just different viewpoints I guess.

-ERD50

I don't speak for Stormy..he and I both in our 60's and in the small world category our farms are separated by one county. Our era would have included smaller farms often many within one township. Small dairies or hog farms and the like. Very often everyone goes to church in the same small town. We live where we work so the farm is "home". There is ever vigilant watchfulness it is 24/7 not working of course but on alert for issues. It's inevitable that you want to look like a good successful steward of what you have. A lot of things that make farming different are the internal standards and pressure we apply to ourselves. In fact these issues make a lot of farmers have tunnel vision. Any business that deals with the public is going to be more open to change then your average family farm.



I would say you'd be hard pressed to find a family owned business not ag related that has gone thru multiple generations say 100 years. And in fact a century farm today would be very very different from a century farm of even 20 years ago. With very few exceptions our active local farmers are either like us, older and just farming out the string or the younger ones realizing that with todays margins you can't stay the same or you will fall behind. As far as adding another generation...forget it.



And you are right it's just a different viewpoint.

 

[Winemaker]

Most or all of the small farms here in SW PA and northern WV, were/are not money makers. Many of the men who w*rked for me over the years, had small farms and raised some cattle/hogs and had small gardens to feed their families. Any other useable land was planted for feed corn, hay, or pasture land. Only recently, with the Shale gas boom, did these farms make money. And boy are they ever making money now and for the past 10 years.

 

[Bamaman]

We have some family friends that are pretty large farmers.

They went together with another farmer and planted sweet corn on some acreage that was lying fallow. The planting was no big effort with their computerized planters and huge tractors.

Two weeks ago, they put the word out through local churches that the sweet corn was ready to be picked, and come get all you want for free. They did ask for 120 ears maximum per person.

That was a really nice thing to do for the community.

 

[ncbill]

Yeah, "working for free" sounds like the normal case for most small farmers.

Great uncle who died age 90 (5 years ago) farmed his whole life...mostly sweet taters.

Also had a full-time job with the small city where he lived to be able to do the above.

Even though most of his kids settled nearby, none was willing to keep the "hobby farm" going.

 

[Car-Guy]

I have enough acreage to "farm" but the land around here doesn't seem to grow anything very well except grass (no not that kind of grass) and trees. There are a few folks that grow some corn but I expect they had do a lot of extra work to get the soil prepared and there are some tree farms in the area.

The area where I live is well known as horse and cattle county and most of my neighbors have both. Having cattle brings your property taxes down to almost nothing around here.

Anyway, at this point in my life, I don't want to do any farming of any kind. I spend enough time (10 to 12 hours a month) on the tractor now just keeping some of the land nearest the house cleared and mowed. That's the one good thing about these high temperatures right now in Texas, the grass ain't growing, "at all".

 

[luckydude]

This has been a better than your average thread on farmland. “Farmland” is such a broad term that it is not surprising to hear so many varied angles & anything said in general might not fit a specific angle someone has in mind. That being said, I have several points in general & a specific near the end.

I agree with Stormy that farming is not just another family business. Granted, there are a few family businesses that bear some resemblance to a few farms…but I’m not here to sway the minds of those who, in Stormy’s words, “don’t get it”. Not sure there are words to convey it. But, it does highlight the emotion that the term packs at times & that can really affect investing mindsets.

Seems to me that most comments have not delved into farmland as a financial investment. I would like to own farmland even if not a sound investment. If your exposure to farmland is from the past, you need to do some research before investing. The demographics of US farmers is staggering; less than 1.5% of labor force is in farming. Average age of farmers is over 57; meaning great turnover in upcoming years. About 2000 acres of farmland a day are converted to other uses than farming. List goes on. Skill set needed to thrive now bears little resemblance to that of grandpa’s era. Technology is amazing & will be even more so if US ever gets broadband where it can be used more. Those entering farming as a profession will need much training, but also ample capital.

So, what of farmland as an investment? I’m too lazy to dig for some of the studies showing how farmland stacks up as an asset class (be careful to understand how a study scopes that term). Over longer periods of time, farmland has some unique characteristics. Total return is ‘near’ that of equities, but the correlation is lower that between equities and other asset classes. It does correlate strongly with CPI. Standard deviation for farmland is lower. Where else will you get that combination? (Trivial to find a time period where farmland underperforms one on one with another asset. Point is a long term view & looking at overall portfolio performance). Farmland is illiquid & many investors are not familiar with the differences (good & bad) that brings.

So, now for the specific. I agree with what Stormy said about estate planning, but I’ll add a twist. Consider the situation in which it seems clear that there is no interest on the part of the heirs to own the land. Sure, at death there will be a step-up in basis. But, there is an emotional aspect of being the one who sells (Yes, I know some have no problem being the one & that may even be the majority of heirs) & the passing of time it can take to get a fair price.

Consider the possibility of perhaps using a conservation easement/trust approach. This can ensure land stays as farmland while giving tax breaks before death. Haven’t explored enough to know real $ impact. Added wrinkle: recently there was a commercial development announced that, if it comes to fruition as expected, would greatly increase value of land several years from now. Might tilt scales toward retaining land & selling post-death…Anyone else look into something similar?

My observations on farmland investments based on 15 years of experience:

Investing in farmland strictly for returns based on farming activities alone is not really a financially rewarding exercise for most people. It really only makes sense for those who are farmers by trade, have farming experience or have some sort of emotional/sentimental attachment due to family legacy that override pure financial considerations.

The big payoff from farmland investment is almost always due to converting farmland to some other use (i.e. development). Obviously, this is very location dependent, and really only applies to farmland in the path of urban or suburban growth. Yes, farmland value can and does appreciate over time, but the big payoff is always due to the land being converted to other, more lucrative use.

There are other ways to monetize farmland such as minerals, wind/solar energy, granting easements, etc., but these are hit and miss and can't really be counted on or planned ahead.

For DW and me, our farmland investment philosophy is this:

-We always pay cash and never finance.
-We maintain a core financial (i.e. non-real estate) portfolio that provides us with a FATFIRE lifestyle. All money that we use to investment in farmland is money that we won't need for our retirement. This ensures that if our investment goes sideways for whatever reason, we can still comfortably FATFIRE.
-We only buy farmland that (we think) are in the path of suburban growth with future development potential.
-We have a long investment horizon (20+ years) and are looking to pass our farmland investment down as legacy to our kids. However, we will opportunistically sell/subdivide our farmland investment if returns are good.
-We generally stick to one geographical area in our farmland investment; this is to leverage the local infrastructure (e.g. contractors, community and government contacts, knowledge of local RE market, etc.) that we've built up over the years.

I'll admit that our investment approach is hardly scientific and not based on any real-life data or stats. But our approach is based on years of investment experience and it has really worked well for us. Also, we've had some really lucky breaks along way (e.g. outsized compensation for easements).

In general, I would say that farmland investment doesn't sense for the vast majority of people. One has to have a lot of capital, a long investment time horizon, a willingness to build up what we call an investment infrastructure, and the time/patience to deal with the mundane and often times tedious management stuff (e.g. filing/renewing ag exemptions, dealing with wildlife management requirements, negotiating easement compensation, handling contracts with tenant farmers, dealing with illegal dumping or hunting, dealing with stock intrusion, fixing broken fences and fixing pond damages because of beavers---the list goes on and on). Otherwise, give it a hard pass.

 

[street]

My observations on farmland investments based on 15 years of experience:

Investing in farmland strictly for returns based on farming activities alone is not really a financially rewarding exercise for most people. It really only makes sense for those who are farmers by trade, have farming experience or have some sort of emotional/sentimental attachment due to family legacy that override pure financial considerations.

The big payoff from farmland investment is almost always due to converting farmland to some other use (i.e. development). Obviously, this is very location dependent, and really only applies to farmland in the path of urban or suburban growth. Yes, farmland value can and does appreciate over time, but the big payoff is always due to the land being converted to other, more lucrative use.

There are other ways to monetize farmland such as minerals, wind/solar energy, granting easements, etc., but these are hit and miss and can't really be counted on or planned ahead.

For DW and me, our farmland investment philosophy is this:

-We always pay cash and never finance.
-We maintain a core financial (i.e. non-real estate) portfolio that provides us with a FATFIRE lifestyle. All money that we use to investment in farmland is money that we won't need for our retirement. This ensures that if our investment goes sideways for whatever reason, we can still comfortably FATFIRE.
-We only buy farmland that (we think) are in the path of suburban growth with future development potential.
-We have a long investment horizon (20+ years) and are looking to pass our farmland investment down as legacy to our kids. However, we will opportunistically sell/subdivide our farmland investment if returns are good.
-We generally stick to one geographical area in our farmland investment; this is to leverage the local infrastructure (e.g. contractors, community and government contacts, knowledge of local RE market, etc.) that we've built up over the years.

I'll admit that our investment approach is hardly scientific and not based on any real-life data or stats. But our approach is based on years of investment experience and it has really worked well for us. Also, we've had some really lucky breaks along way (e.g. outsized compensation for easements).

In general, I would say that farmland investment doesn't sense for the vast majority of people. One has to have a lot of capital, a long investment time horizon, a willingness to build up what we call an investment infrastructure, and the time/patience to deal with the mundane and often times tedious management stuff (e.g. filing/renewing ag exemptions, dealing with wildlife management requirements, negotiating easement compensation, handling contracts with tenant farmers, dealing with illegal dumping or hunting, dealing with stock intrusion, fixing broken fences and fixing pond damages because of beavers---the list goes on and on). Otherwise, give it a hard pass.

You have a personal but interesting take on owning land. I don't agree with some of you views and question some of your other thoughts and experiences. Not sure if all your holds are in CA but that may be why some of your views are what they are.

Thanks for sharing your experience on owning land.

 

[Stormy Kromer]

There are many family businesses where the family members are totally involved, and identify themselves with the business. Some are passed down through generations, and they have generations of customers, that consider themselves as 'family'. And when those businesses close for whatever reason, the customers seem to get as emotional as the family.

I don't know how you can say it's so different.

But whatever, just different viewpoints I guess.

-ERD50

How many of them woke up there 10 year old children and pulled a calf at 2 am...

Who else stood on a state highway as the cattle were on the road dodging semis?

Who picked his dad off the road when he got hit by a drunk driver ?

I did it all before I was 10. Then it got serious.

 

[ivinsfan]

How many of them woke up there 10 year old children and pulled a calf at 2 am...

Who else stood on a state highway as the cattle were on the road dodging semis?

Who picked his dad off the road when he got hit by a drunk driver ?

I did it all before I was 10. Then it got serious.

Stormy these examples you posted aren't the best I don't think any of those you listed are the purview of a kid that isn't even double digits. It's my opinion that even a farm kid needs to be a kid until they hit 13. Yes you can have a pet horse or a 4H animal but it's not a kids job to farm. Farming is a dangerous profession and its for adults...hope we are still friends!

 

[ivinsfan]

luckydude 20 years is a long timeline....traditional farmland will perform very in that timeframe, paying cash would be a key....we cashed out all but one of our farms and that owner asked for payments and not a lump sum. only 3 years so it wasn't an issue.

 

[Stormy Kromer]

Sorry, I didn't mean to be sarcastic in my last post. But, being a child on a farm is a whole lot different than being a child of any business owner.

You have to be there to know it. I can't explain it.

 

[Stormy Kromer]

Stormy these examples you posted aren't the best I don't think any of those you listed are the purview of a kid that isn't even double digits. It's my opinion that even a farm kid needs to be a kid until they hit 13. Yes you can have a pet horse or a 4H animal but it's not a kids job to farm. Farming is a dangerous profession and its for adults...hope we are still friends!

We're still friends. I am only pointing out the realities I grew up with. We didn't have a choice, we were told "if you want a farm someday you have to work now". I went to a school with 35 kids per class. 2 lost limbs in farm accidents before we got to high school. Another died. I went to the hospital in an ambulance twice to farm accidents before I was 18. I can count more than a few families who lost children in farm accidents within 10 miles. I don't know of other business owners who lost children at work.

I wouldn't let my child drive two gravity boxes of grain down Highway 59 when they were 10 years old like my dad did. But, he asked me to and for a farm kid in the 70's you'd walk through hell on Sunday if your dad told you to.