corn farmers, empty lots
Real Estate Investor · boston, NH · Member since 2014 · 401 posts · 32 votes
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 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!
True Richard C.
Some states/counties have a minimum size requirement to build a SFR. In my area 2 acres will suffice.
i know, hes so dumb that hes made millions and does whatever he wants whenever he wants. what a life huh?
I grew up farming and I'll tell you its not an easy way to make a living unless you're a generational farmer. If anyone can tell me how to buy farm ground with no money down that cash flows, you'll have my undivided attention. I've been trying to find a way for years around here. You go to a sale ready for action, you look around and see numerous large farmers that are double digit millionaires standing around talking to each other, (because they don't seriously acknowledge any "little" guys in the room. Pretty soon the pissing match begins between two or three big dogs that were handed free and clear farms from parents and if the ground in question is close to where their other farms are or whatever justification that they can muster, they will pay whatever it takes to buy it, and that's saying something when testosterone and egos get fired up at an auction .
Once a farm gets its debt under control, and this could take three or four generations to get there, it gets hard to stop the money from pouring in, and I mean millions and millions of dollars. There are only so many boats, airplanes, motorcycles, fancy trucks and cars, trips, 2nd third and fourth houses, or whatever you have to buy to show the world that you're rich. After you've bought all the toys you want, and there is nothing left to buy that will impress anyone, you find that the money still floods in and if you don't spend it the government takes it. (there is almost no expense that can't be justified as a farmer,........think about it. )So this big dog farmer has no choice but to buy more ground, because "they're not making any more of it" So you go to the auction thinking that you can stretch a lot and maybe give 7 to 8 thousand per acre and hope nothing bad happens for ten or so years so you can get it paid down. Because if you don't have deep pockets, or lots of other ground to offset the loss of one piece , weather, drought, bugs, disease, market volatility, and increasing overhead prices can take you down fast and with no remorse.
You will probably never get a chance to raise your hand because before you know it, the price is well over 12 thousand dollars per acre that may bring in 300 dollars per year per acre for rent. Then you notice that these few men that show up with grimy hands, dirty clothes, and worn out hats and boots that many people make fun of as hicks and red necks have run the price up to 15 thousand dollars an acre and in thirty days write a check for 2.5 million dollars and buy a 160 acre field in corn country. And by the way some of the big boys do this every time a field comes open in their territory. Possibly three of four times a year, every year.
I just described a farm sale I attended less than a month ago. It was worse last year when grain prices were three times higher than they are this year. This all but guarantees that the rich get richer , and the little farmer has very little chance. Not an easy way to make money for new guys. It used to be that you'd see doctors and lawyer come to the sales to invest the cash they have in farm ground, but anymore they have a hard time competing.
I always wondered when I farmed with dad why anyone would invest over a million dollars just to bring home 50 thousand, especially with all the pitfalls that come with farming.
Since I've been relatively successful in real estate, these big farmers let me in their little groups at coffee and such and its crazy how they open up and reveal what kind of money they make. Its almost unbelievable. And I'm not saying this out of jealousy, because farming is a way of life , not a job, and every big farmer that I know gets up just as early and works just as hard as any little guy. When they say up before sunrise and down way past sunset, they mean it, and that's every day. (Unless you're religious, and almost all farmers are, then you get Sundays off.) Unless its supposed to rain on Monday and you don't have all your crop in yet, then you hope god undesrtands and do whatever you have to to try and beat mother nature.
Most farmers have earned their money, I found that renting properties was a hell of a lot easier than farming and is way more lucrative. That's why I embraced properties instead of land.
Sorry for the long post, I've been trying to buy raw farmland for years with no luck. I'd love a little insight. Funny thing is, most of the rich guys tell me " just put down a million dollars against it and it will cashflow pretty good. I just figure that these guys have been wealthy for too long and cannot relate to the average Joe.
Sean K
it has all of those things. it is 42 minutes out from boston mass.
it has all of those things. it is 42 minutes out from boston mass.
i have done this locally 5 times and netted $80k-210k per transaction.
Make sure you can build it $30 sqr. ft. below retail and you are golden!
@Pat L. I was thinking the same thing! @Account Closed's mentor was growing weed!