Help determining value of Farm or Cash Rent

5 Replies

My siblings and I have inherited a small family farm.  The farm has been leased for a cash rent for the past several years.  The rent has not been adjusted for several years.  We have also had a some inquiries about selling the property (including from the current tenant).

From what I have been reading value of the land is based in part by how productive the land is.   We don't have any historical data, so our knowledge about how much the land is worth is limited. 

I think I need to write a letter to the current tenant requesting this information.  How do I politely obtain this information from the current tenant, and is there any specific documents (or proof) that I should request?

William : Not sure where the property you are discussing is at . There are a lot of variables that fall into the equation of the lands " WORTH " Some of the questions I have are you talking livestock or crops ? They each have their own little specialties .

I am going to guess it is crops you are asking about . Here in Shelbyville the most common crops are corn and soybeans . Generally they are rotated on the same plot of ground every other year . Then you have to know which seed mfg  is being used . Is the seed Hybrid . or Geniticly Modified Seed ? Again all Corn and Soybean are different and have different end uses . An example : Last year on the farm was dedicated 1,000 acres of Non Genitically Modified corn It was planted specifically for one of the liquor Mfg 's here in Ky . Reason for Non GMC it is not allowed in the european market .

Not sure if you have an understanding of the commodities market but you just can't say we are growing corn without knowing what corn you are talking about . another example 

Corn " basic  $3 .00 per bushel 

  GMO for greater yeild  $3.25 per bushel 

Non GMO specialty  $ 3.50 per bushel 

Other questions to ask are : 

       Are you renting the land at a flat rate per Tillable acre ?:

       Is your acreage rate based on a % yield of crops raised ?

      On your farm is there any CRP or Wetlands lands ?

It has the potential for a great rate of Passive income . Just because you may have say 100 acres  not all will be tillable . What has been the history of Pest control and Fertilization ?

If you have not already a good source at this point may be to get in touch with the County Agricultural Extension agent to get an update on the past history and the AG laws in effect for your area

 If I can help in any way let me know 

Thanks for the feedback Bob.    The farmland is all in Illinois. The land is 95% tillable land,  in which we alternate between corn and soy beans.   The land is currently rented on a year-year basis on a flat rate.  That rate has not varied in several years.

I have not contacted the county AG extension.  That sounds like a good place to start. Thanks.

Call up Farmers National and ask them for an estimate of what the land is worth and have them provide you with soil maps.  You don't have to sell but they'll be able to give you a good estimate on the value of the land.

Typical cash rent is 3-4% of the value.

This post has been removed.

I contacted the department of agricultural.   They suggested that I contact a local agriculture appraiser, which I think is a very good suggestion. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here