corn farmers, empty lots

31 Replies

is there anything i can do with empty lots? how do i know if one lot is better than another? on craiglist there are hundreds of people trying to sell lots and am wondering if it is anything special and how to wholesale them.  along with that,

one of my leads is a guy trying to sell a 3 acre farm and was wondering if anyone is a farmer and makes money off of corn? one of my mentors said that anyone who doesnt make money off of corn is a jack*** because of all the government subsidies and stuff. he explained the whole process of how to make money on it. so now i am wondering, how much land would one need to start making money off of a corn farm?

I grew up on a farm where we grew corn, among other crops and livestock.  Three acres is nowhere near enough.  Back in my hometown in rural MO we have ended up where ONE person operates many of the farms in our area.  Yes, he participates in those government programs.  You would be a fool not to if you want to farm.  He also runs a feed/seed/fertilizer business and a tire store.  And has a number of employees, or "hands" as they're called in this business.  I don't know an exact number, but I would guess he farms somewhere between 10,000 and 25,000 acres.  Out in the great plains a single field, with a single center pivot irrigation system is typically 640 acres.

A three acre plot might be profitable if you could grow some highly valued specialized crop.  Vegetables or fruit, perhaps.  Its way to small for a crop like corn.  This was actually how I got my start in real estate investing.  I was considering doing a "you pick" strawberry plot.  My great grandma did this when I was a kid.  Turned out our farm is too far away from a major city to have enough demand.  So, I looked at land closer to a big city and that led to real estate investing.

Realize this is also a VERY capital intensive business.  Tractors, implements, trucks, and other equipment is a big up front investment that has to be paid off over many years.

3 acre corn fields in New Hampshire are sweet corn, usually sold right from the lot or the back of someone's pickup.  There are no government subsidies that are going to apply (although there are some tax benefits.)  It is a lot of work, and not passive investment at all.  To the extent NH has decent farmland, it rents for less than $1000 an acre, a year.

Your mentor has no idea what he is talking about.

@Richard C.  

i know, hes so dumb that hes made millions and does whatever he wants whenever he wants.    what a life huh?

@Jon Holdman  

wow thats a lot of land. looks like it'll be something that i look into years down the line lol.

i would sure love to own my own farm someday though.

thanks

Hey Derek,

A totally different direction to go would be to put in a mobile home. Maybe you could find some well placed lots and market them as a potential trailer park? I used to know someone who did this quite successfully, again you would have up front costs of cement pads, water, sewer, and electric, but given how many trailer parks are around it seems like a valid investment. More work up front maybe but for sure less work than a farm once it's up and running.

Originally posted by @Derek LeBlanc:

@Richard C. 

i know, hes so dumb that hes made millions and does whatever he wants whenever he wants.    what a life huh?

 If he has millions, he didn't make it growing corn in New Hampshire.

Originally posted by @Derek LeBlanc:

  on craiglist there are hundreds of people trying to sell lots and am wondering 

Your answer. 

@Kate Stallmann  

yes that is actually a great idea .   i am going to look into that

thanks!

@Bob Bowling 

valid point i guess lol.  but im sure one lot is better than another, so how do i know when i cross upon that great prime location of a lot   .  i guess it has a lot to do with being creative? 

  @Kate Stallmann   just opened my eyes to the empty lot investment world

Nice!   I know there are some folks on here who specialize in trailer parks,  I'm  sure they can give you some valuable advice.   If you make millions,  just remember me,  ok?   :) 

Originally posted by @Derek LeBlanc:

@Bob Bowling 

valid point i guess lol.  but im sure one lot is better than another, so how do i know when i cross upon that great prime location of a lot   . 

It will have a "SOLD" sign.   Look at the last 10 lot sales and see what is special about them and what the buyer did with them.  Maybe the ten that sold ONLY sold because of price and someone is speculating on future value. 

Real estate is location, location. location.  Pretty much everything else can be changed.   If all lots have the same potential use then it will be location.

Your mentor knows nothing about farming.  Prime I-State farmland will produce about 180 bushels of corn and acre.  At the current price of $3.70 that is about $666 an acre in gross revenue.  Subtract plowing, planting, seed costs, fertilizer, herbicides, fungicides, harvesting, transport, and sales fees you might scrape $10-$50 an acre if you can find someone to take pity on you and not charge you a fortune to do the work.  Most carn equipment couldn't be turned around in 3 acres so you will have to find someone with small scale equipment like was used in the 20s-40s.  Even they farmed 20-180 acres to make it worthwhile.

At three acres you are too small to get a USDA Farm Number from the FSA so you will not be able to get into the system to get any government money.  You are also too small to get an agricultural exemption on my property taxes in most places so you will probably pay most of your gross income to the tax man. 

People can make three acre market garden farms work profitably, but are you ready to work 50-60 hours a week in the sun to make it happen?  Renting to someone that will do the work will bring you a hundred dollars an acre or so if you are lucky.

If he meant just renting it out to farmers, prime farmland rents for $100-$120 an acre in 40+ acre fields.  Smaller fields around me and non prime farmland rents for $10-$30 an acre.  This is per year not per month.

@Paul Ewing  he said there are ways to resell that corn 3 more times through silos and to feed farm animals and stuff

I just bought a small farm for kicks, it has a lot of well water, plus 4 apartments.

When my fellow investors ask WHY!!!!   I show them this ..... 

the way things are going it could be the next best LEGAL crop going for small farms !!!

I own 14 acres of nice farmland 30 minutes north of Seattle and have been thinking about how to make a happy buck with it for six years. Growing stuff and simply wholesaling it is a non-starter. There is no way that a small commodity farmer can economically compete with the economies of scale of the big factory farms.

But, if you can get 50 cents an ear for "field fresh" corn and the customers come to you, that's another story. If it's "heirloom" corn and it's grown organically, it's worth even more. 

What does work is the farm-to-table vertical integration business plan, where the consumer buys organically grown produce directly from the grower at nearly the same price, for better food, that they'd pay in the grocery store. This is the essence of the "Slow Food" movement that has so endeared the yuppies and hippies in the past decade. The typical customers know that they're doing more than just buying food, but also supporting a local food source that helps to save local farms. Today's customers want to make a positive difference in the world, beyond just obtaining something for themselves, so they often don't mind paying top dollar for top food. The "feelgood" of supporting local farms lasts even longer than the dinner.

In Washington, at least, annual sales of $60,000 per acre from this vertical integration strategy are considered fairly normal, with some operations, who do value-adding, hitting up to $90,000. That's per acre, per year. 

But, for this to work, the farm stand has to be located with great convenience to a dense city customer base. Or, with an easy access to a large commuter traffic flow, where a quick stop is indeed quick. They'll drive a little further for slow food, but not much. It's mostly a question of not having the time. 

So, the property needs to be close-in, ideally "peri-urban," where rural meets urban, without intervening suburbs. Some of the nicest food growing land that I've ever seen is considered to be "junk" land by the normal REI's. I don't believe in junk land: Just land that hasn't yet been put to its highest use. Figuring out what that use is is the fun part.

If the acreage is close-in, you can think of it as an "agricultural industrial park," where you can do both retail and manufacturing (such as making pickles from on-farm crops). Check out the local land use regulations for its zoning and then see what's already permitted for uses. That's where I start my business planning, based on what's already permitted.

Around here, retail farm stands and even farmer's markets are encouraged by local government, as is any kind of agritourism. Maybe open up a small private dog park for customers and/or make it a good, inexpensive, place for weekend parents to bring their kids. The more fun that customers, and their kids, have, the more likely they are to both return and tell their friends. 

If it's close-in land, this would be a great place for a co-op farm stand and/or regular farmer's market. Or both. There will be a lot of farmers whose land is too far out and they'll pay for space that's a lot closer in. Around here, they pay $25-$45 per day for a 10'X10' sliver of land. The more vendors, the more customers you'll attract, and vice versa. The classic challenge is getting the customer flow before the vendors. So, a companion activity, either on the land or nearby, that attracts the same customer base is a good idea.

For that matter, how common is it to find a 3 acre piece of farmland in your market? Around here, farmland is usually restricted to 10 acres or larger and such pieces of "small denomination farmland" are scarcer then hen's teeth. If 3 acres is common, how much smaller can you go before bumping into a lower limit? The demand for "kitchen garden" land that's big enough to feed a family, sort of like a 1/4 acre P-Patch, is growing fast. Some of the best crops, like fruit trees and berries take several seasons to produce, so ownership makes good sense. Things like raised beds also take a few seasons to amortize out.

If three acres is the minimum, can you set up an LLC for the land, then sell, say, 25% shares as a virtual subdivision, with the co-owners being "tenants in common?"

In Washington and Colorado, there's an exploding demand for good land to grow legal marijuana and these folks are paying five times the rental price of simple grazing. Most landlords don't want to touch them, despite full legal protection. So, that's something to consider in the future, as legalization continues to roll out across the nation. 

Rather than simply renting out my crop land, which is within about 30 minutes of more than a million customers, I plan to revisit share-cropping, on the owner's side of the deal. Half of gross sales from that same acre should well exceed what you'd make in rents, and without the hassles of active management. If I don't have a mortgage, I may go with a 40% cut for myself, which will give the grower even more incentive to be productive and proactive about building their farm business into something that will support a family.

Wikipedia has a good article on share cropping at http://en.wikipedia.org/wiki/Sharecropping Not much seems to have been done with a modern incarnation of it, though. But, it's a time-proven way of connecting idle capital with willing labor, for the benefit of both and if I can pull in $20,000/year or more from a $10,000 acre without picking up a shovel or dealing with late-paying tenants, I'll be happy. 

For the sharecropper, not having to come up with monthly rent before the harvest comes in is a huge boon. Even better is if local laws allow them to live in an RV there, at least for the summer season, which will save them the cost of housing. In my county, an occupied RV is permitted for up to 180 days per year, but this will vary everywhere. There are a ton of folks who want to break into commercial agriculture, but they are usually dirt poor and the barriers to entry are often too high to even get started. 

For myself, I'm going to look for sharecroppers among military veterans, through a local "veteran farmer's" program that supports returning combat veterans to transition into civilian life with a smooth fit. As it turns out, the same qualities that make for a good soldier are the same qualities that make for a good farmer, and the "dirt therapy" while learning how to farm within a group of fellow vets does a lot of healing. If you Google "veteran farmers," you should get some local results, if there are any groups in your area. I probably won't work with anyone who doesn't have a support organzation backing them up.

Eventually, when it's time for me to worry more about steady passive income than growth, the sharecropper should be in a position to buy the land on a long term contract, and I'll already have a good idea from their track record whether or not they're a good risk. 

One thing to ensure upfront with tenants is a high quality appearance for the operations. Not everyone has the same aesthetic standards as the customers and, if functional utility is the only consideration by the grower, things can get pretty ugly to look at. I once saw a 10,000' garlic field where the grower smothered the weeds between plants with old castoff clothing, creating the ugliest farm scene that I've ever seen. It didn't bother the growers at all. The customer wants a classic storybook farm appearance, but if you can't give them white picket fences, at least don't turn them off. This is marketing, along with everything else.

Something else to look into is whether or not you can sell the "development" or "density" rights from the land through some sort of local resource land preservation program. In my county, these are called "Transfer of Development Rights" (TDR) credits and they're sold to developers who can then cash them in with a density upgrade on a different piece of land. In essence, here, one farmland TDR credit will automatically convert a single family residence lot in a receiving area into 8-plex permitting, just perfect for that nice city lot with the burned down house that you've been eyeing. An 8-plex lot is worth a LOT more than an SFR. So, unless the land is worth a ton for a housing development, this is a great way to pull some cash out of the land without having to sell it and without restricting it from being used for agriculture.

One thing that seems clear is that very few real estate investors around the country are working the TDR angle. In general, investors seem to lean a little more to the right, so they don't pay much attention to what the left is doing. 

Not all states and/or communities have such land preservation programs in place. Nationwide, there have been about 200 TDR-type programs created over the past few decades. Some were well structured and worked out well and some had lousy plans and failed completely. I paid a lot less for my land than the value of the credits, so when I sell them (more likely use them to upzone urban land), I'll have a 100%+ rebate, plus 14 acres of paid-off land to play with and no huge pressure to succeed immediately. If you Google "TDR" and your state, you should come up with the program info for your area, if there is any. 

Fortunately, it appears that New Hampshire does have such a program. They call it a "Density Transfer Credit." I haven't studied this particular program, but you'll find the official info at http://des.nh.gov/organization/divisions/water/wmb...

I'll don't know if you'll strike gold or not, but it's worth a little digging to see if there is any. How much do these credits cost you as a part of the land price? What can you do with them or what do they give you (such as tax credits or density bonuses) in exchange? Can you find land for less than its credit's value, whether sold or used? What can you still do on the land after allowing the "conservation easement" restriction to be put on it? Can you buy the land, strip off the credits and then resell it for about what you paid?

In any event, the old saw about Location, Location, Location never applied more than it does for small pieces of farmland. 

Good luck!

Originally posted by @Richard C. :
Originally posted by @Derek LeBlanc:

@Richard C. 

i know, hes so dumb that hes made millions and does whatever he wants whenever he wants.    what a life huh?

 If he has millions, he didn't make it growing corn in New Hampshire.

 Absolutely true.  There's an old joke we always told when I was a kid.  Farmer dies and leaves the farm and cash to three sons.  First son says "I'm taking my cash and going to med school".  Second one says "I'm going to law school."  Third one says "Guess I'll stay here and work the farm until I run out of money."  Prices are high now and farmers can make money.  OTOH when we were kids we were expected to work on the farm and got a share of the profits.  One summer I got $100 for my entire summer and that was purely a gift from my grandpa.  There are so many factors that can result in a season being a complete loss.

The people who do manage to make some money are like my friend where they can spread their investment over a lot of acreage.  The guys who really make money are the big factory farmers who have hundreds of thousands of acres in the great plains.

Even this specialized business of local food and high value crops is a tough business.  If it was easy it would have lots of competitors.  I believe all the weed growing operations here are indoors.  The regulations regarding security and access would be difficult to meet out of doors.  It is a pretty big business for owners of industrial and warehouse space, from what's in the papers.

@Paul Ewing is exactly right. Both sides of my family are dairy farmers that sell extra soybeans, and corn. At $3.70, farmers will be hard pressed to make money especially if purchasing new land at $5k-$10k per acre. The trouble won't come from over leveraging land like the 1970's but over leveraging on equipment that is much more likely to be financing or leased now versus in the past. Most farmers can hold out a year or two with reserves from the high prices of the last two years, however if prices stay at this level, farming will be very difficult in the near term. Everything goes in cycles, this time is not different and farming and farm land have been hot lately. Wait 2-5 years for farm land and you will be rewarded.

I should also say that I don't understand the buy local, organic thing so I can't speak to how sustainable that trend is, what you can do with 3 acres, and where the prices are going. As for traditional farming, 3 acres is nothing just like everyone else said. Farm fields in our area start at 40 acres. Farmers look for more than 160 acre plots for irrigation pivots.

I have 4 acres that use to be a U Pick strawberry farm , It was my neighbors house , the old guy would be out there pulling weeds all day on Saturdays  , he was a very simple guy , worked a job , raised 4 kids in a 700 sq ft house , he made some money from it , but it was work .

I did investigate the u-pick strawberries pretty thoroughly back in 2006.  Really, strawberries in general.  These are now grown using a technique called "plasticulture".  You use implements that shape the tilled dirt into a flattened hill, cover it with plastic sheeting, add fertilizer herbicides and pesticides, add drip irrigation lines, and punch holes for the plants.  The final step has a platform for a person to lay on to stick the plants in the holes.  You do that in the fall.  Then you wait.  Or, in the case of the folks I talked to about this, you travel from Vancover to Arizona for the winter.  Then, in spring, the plants get serious about growing.  By June or July you're ready to pick.  That's when there is a problem.  Either you need to do u-pick or you need to find pickers.  To be successful with u-pick you need to be close enough to a big population center to get people out there.  After the crop is done, you rip everything out and start again in the fall.

There's sort of a perception that farming is this idyllic activity.  Its far from it.  It an industrial activity where the ground is one of your tools.  There's a lot of heavy equipment involved, expensive seeds, and a lot of nasty chemicals.   And you're still very much at the mercy of mother nature.  When we were growing corn, rain was our best friend and worst enemy.  Rain a few days after planting?  Those seeds will never break through that crust.  Hundreds or thousands of dollars of seed wasted and you have to replant.  No rain after the plants have popped up?  They wither and die and now it may be too late to replant.   Heavy rains and flooding late in the season?  A bumper crop can be wiped out in a day.  Happened to the guy I mentioned last year, in a number of his fields.  Don't plant in a flood prone area you say?  Not possible, at least in MO.  Those river bottoms are where the good soil is.

I continue to look into this at times. This "local food" thing may be an opportunity. For something like $100K you could acquire the equipment needed to set up a smallish farm, not including land costs. Somehow my "Flying Phoenix" LLC has been taken to be a ranch and I get catalogs, flyers and phone calls offering equipment and supplies. Sometimes I think thats the universe telling me to grow something. But I just can't find a path that yields clear returns.

on small acreage, you would have to focus on a diverse selection of fruits and vegetables, and planting a mix of early and late season crops.  Or someone could push for niche market items.  There are also other options that can potentially do well on limited acres, things such as flowers and willows for example. 

Modest profits can be earned, but there is much risk and expenses involved.  Also a lot of marketing.

This is my cup of tea!
First, I would make sure that the 3 acre lot is NOT irregular (square, rectangle, and trapezoid are best).
Secondly, does it have a good water well and electricity near the property?
Thirdly, make sure it is near a mayor metropolitan area within 10-45 minute drive.

I'm constantly looking for these types of properties to build a McMansion (2800-3900 sqr. ft.) with my pre-engineered panelized home system. In California, I can build it for $60-75 per sqr. ft. And sell to a gentleman farmer/horse lover for a retail price of $105-110 per sqr. ft.

One has to make sure that the property is buildable (RR-rural residential) is best.

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