This article is for anyone who is interested in leasing land – whether you’re looking to expand the land available for your use, or just starting your agricultural business.
One of the number one financial difficulties in agriculture today for new farmers/homesteaders is to purchase land.
This is understandable! Coming up with the capital to pay for the infrastructure and production essentials is already expensive enough. Independently purchasing a landbase in those early years makes it a whole level more difficult to survive.
Thankfully there are alternatives that could help you pinch some pennies, such as leasing land.
Allan Nation, the late editor of The Stockman Grass Farmer, said, “Livestock ownership should always come before land ownership.”
Photo and image taken/created by Isaiah Graves.
The Regenerative Farmer
If you’re short on capital for buying land, yet are looking to expand your land base, or are just looking into farming, leasing land may just be for you. It can be a good way to start your operation without coming up with the capital to buy it.
Leasing land can not only be beneficial to you, the tenant – but to the landowner as well. If it’s done right, you can build an admirable lifetime relationship between you and your landowner.
Greg Judy of Greener Pastures Farm is a guru when it comes to leasing land for a profitable business. Many of the ideas in this article were taken from his book, “No Risk Ranching.” I would HIGHLY recommend it for anyone interested in grazing livestock – I truly believe that anyone interested in leasing for any general niche will also find value from it.
Is Leasing Right for You?
What are some of the benefits of leasing land? For starters, you don’t have to pay property taxes, and the rate of leasing land will generally be cheaper than monthly payments for purchasing it.
It’s completely viable, but not always easy.
It requires a certain type of person in order to successfully lease; in order to be that person, you have to be willing to collaborate with others, understand and practice emotional intelligence, put hard work into building the infrastructure, and be willing to travel from your home/work to your operation.
(I’ll talk about emotional intelligence in a bit.)
Leasing property means travelling back and forth between your home and leased land for maintenance. To the novice, it may not sound like such a big deal; I have found from my personal experience that it really does have an effect on your quality of life. It’s just easier to have operations closer to home – the closer they are, the better.
(At the end of the day when you’re all sweaty, exhausted, and feel like doing nothing but hitting the hay, life is less complicated when home is closer.)
There are many different things to be watching for if you’re thinking about leasing property, such as:
- Identifying your land base (Proximity to your home, whether or not it has water or power, fencing [if raising livestock], the layout of the land, whether or not it is near a populated area, the fertility/soil quality of the land, forage quality)
- Understanding the land owner (Is he/she a drinker or drug addict? How is their demeanor? What do they expect from the lease? How long are they willing to lease it to you?)
These are all very important aspects to be considered when looking into leasing property, and ones that should be thoroughly evaluated.
Niches that Can Be Applied to Leased Land:
The possibilities of integrating a lucrative niche on a leased property are endless!
It’s best to have an enterprise that is not permanent; this way, you can protect yourself if your landlord dies, turns fickle on the deal, or some other unfortunate cause. Focus on keeping your infrastructure mobile.
(For example, if you were custom grazing livestock, you don’t want to put up permanent fencing all over the property, or build barns and sheds for shade/shelter; instead put up a perimeter fence that could be mobile, and look into portable shelters. This way, you can ensure that if something goes wrong with the lease, you won’t lose your investment in the buildings, fence, etc.)
Some niches that can be applied to leased land are:
- grain/vegetable/flower production
- custom grazing
- pastured poultry
- grass-finished/based meat products and,
- hay/forage production.
Unless you have an extremely concrete relationship with your landlord (if they are close friends or family), a niche based on perennial woody trees/shrub production (i.e. orchards, berry patches, food forests, etc.) would be risky.
Finding a Landbase/What to Look For
What should you look for in a leased property? That depends on what your niche is and what your goals for the land are.
You’re going to need to start with a satellite map and plat map of your county (you can request a plat map at your local extension office). Google Maps is helpful in identifying a land base.
Image taken/created by Isaiah Graves.
The Regenerative Farmer
Ideally, you want to look for idle land that is:
- Owned by wealthy owners
- Owned by people who live out of state
- Owned by elderly landowners
- Land that has an eyesore/problem spot
The are a few reasons behind this:
1) The wealthy landowners don’t really care about making money off of their land, yet they want to keep it maintained.
2) Landowners who live out of state usually have a more difficult time managing their property.
3) Elderly landowners aren’t as fit as they were in their prime, yet they still want to see their land in a productive state of agriculture.
4) Land that has an eyesore/problem spot gives you as a tenant an advantage, since you can offer to help solve the landowner’s problem.
Anyone who is a successful business veteran knows that your job as a businessperson is to solve your customer’s problem. The same thing is applicable to leasing. If you can find a problem spot and offer to help solve it, you have a better chance of leasing that property.
What you’re going to look for in a property is entirely dependant on what kind of niche you operate/are planning on operating.
For example, if you are looking to raise livestock on a piece of land, here are some things to look for:
- Majority of the plot in an open area suitable for grazing
- Water source and location (this includes testing the quality of the water)
- Power source (for electric fencing)
- Fencing (Is there a suitable perimeter fence?)
- Layout of the land (Is it in a flood zone? Can paddocks easily “flow” into each other?)
- Soil/forage quality (Are there any toxic plants that are growing in a number that would present risk to the species of livestock you are grazing? How are the water, mineral, and energy cycles functioning? Is there a diverse mixture of plants that could be grazed?)
Similarly, we could look at a piece of land for intended for producing cash crops:
- Majority of the plot open
- Water Source (again, testing the quality of the water)
- Fencing (if neighboring livestock could pose as a risk)
- Layout of the land (Is it in a flood zone? Can equipment easily access/operate on the property?)
- Soil Quality (How are the water, mineral, and energy cycles functioning? How high is the organic matter content? How effectively can the soil absorb/store moisture? How available are critical nutrients? Is there a thriving community of mycorrhizal fungi?)
These are just a couple of examples to give you an idea of what you should look for.
Again, I want to emphasize that what you want/need to lease a plot is entirely dependant on your niche. Before you walk the property, write up a list of points to watch out and be aware of specific to your enterprise.
Once you’ve identified a plot of interest, the next step is to contact the landowner and ask to walk the property. This is where you identify the land’s key points and traits. Be aware of any eyesores that you could help the landowner resolve.
(The one constant thing to look for in any kind of lease starts and ends with the landowner. You want to work with someone who will keep their word. I don’t care HOW nice the property is, it’s simply not worth the land if you’re working with someone who will change their mind willy-nilly. Beware of drunkards and drug addicts!)
It’s always good to know the history of the land that you’re considering leasing. Find out if it was cropped, grazed, hayed, etc. so you know what to expect as far as fertility and productivity are concerned.
Settling on A Property
By now, you’ve identified and walked the property. Your next step is to figure out if it’s worth its while.
Ask yourself: what do I need to put in to make this a functional system?
Are there fences that will need to be put up? Water locations/irrigation systems that need to be constructed? Is there brush that will need clearing?
Consider any eyesores that may be on the property – can you effectively manage to rectify them?
Another aspect to contemplate is the performance of the land; if the soil fertility/plant productivity, water, mineral, or energy cycles are poorly lacking, you may want to consider planting a primer crop to boost health.
(A primer crop is really a cover crop; it’s given the name “primer crop” since it is a diverse stand of plants [Ideally with at least 8 species] with the purpose to build and improve environmental health and performance. Gabe Brown coined the term in his book, “Dirt to Soil.”)
If you feel that you can effectively manage the issues on the property, then I’m rooting for you!
Let’s move on to the next step, which is to talk terms with the landowner.
Talking Terms
As I mentioned earlier, working with a landowner requires emotional intelligence. (An invaluable life skill that I’ve observed as near dead in American culture.)
No long term relationship will ever prove successful without the people involved utilizing the tool of emotional intelligence.
The definition of emotional intelligence is: “the capacity to be aware of, control, and express one’s emotions, and to handle interpersonal relationships judiciously and empathetically.”
This means seeking a “win-win” situation – a win for you and a win for the landlord.
(If you truly want to LEGITIMATELY seek the best out of everyday relationships with others, I would highly recommend Dale Carnegie’s “How to Win Friends and Influence People.” This is a GOLD MINE, and a tool that I would deem essential for everyone involved in relationships and communications with others!)
If both parties are going to get the best out of this arrangement, it starts by putting yourself in the other person’s shoes. Inquire about and write down any concerns that the landowner may have about leasing their property to you (For example, do they want cows kept out of the creek?). Ask him/her what their goals are for the property, and how long they would be willing to lease it to you for.*
(*It’s never a bad idea to do a one or two year trial when you’re leasing. This gives both you and the landowner some time to interact with each other under the lease, and decide if it’s worthwhile to continue with it.*)
As far as pricing is concerned, ask them what amount of money they’d be willing to lease it to you for (Don’t offer a price; let the landowner come up with what he/she thinks is reasonable. Otherwise, you could risk offending them if they thought yours was too low). When they’ve given you a price – whether it’s an annual or monthly payment – do the math, see if you can make a decent profit, and figure out if you will be able to pay them the rent.
If you are a practitioner of regenerative agricultural practices, you could offer to the prospecting landlord the benefits of implementing such practices on his/her own land. Make sure that you show them any other operations that you’re running; a picture is worth a thousand words (showing them in person is even better!)
If you and the landowner both like the idea of leasing the property, your next step is to offer to write out a lease contract.
Constructing a Lease Contract
I would HIGHLY recommend creating a lease contract. In the contract, you will cover both parties’ concerns, cover your areas of liability, and what the mutual expectations are of each party. Constructing your lease contract is perhaps one of the single most important actions you will ever take when leasing property.
It is critical to clearly identify the expectations and boundaries in the contract – this way, there is no good excuse for confusion on either side.
Image taken/created by Isaiah Graves.
The Regenerative Farmer
When you’re drafting it, you need to view it from both parties’ viewpoints. In it, you need to clearly state:
- How long the lease will last
- For which timeframe of the year the lease extends
- How much and how often you’ve agreed to pay
- How you will address the landowner’s concerns
- What you will be doing to/on the property
- Your ownership of your supplies on the property
- Your ownership and liability of your enterprise
- Your ownership of management decisions regarding your enterprise
- A set time or number of days you have to transition off of the property if you or the landowner decides to terminate the lease
When you think you’ve covered everything, submit it to the landowner for review. Ask them if they have any additional questions/concerns that they would like addressed in the contract.
Once the contract is signed and dated by both parties, congratulations! This is a big day, and hopefully the beginning of many good days.
Conclusion
Leasing property is a viable option for anyone who’s willing to put their due diligence into it.
If you want to LEGITIMATELY get the very best out of your lease, it starts and ends with your willingness to use emotional intelligence. Be honest, be genuine, be sincere.
There is truly so much opportunity to bite onto out in the world. Farming is so much easier if you don’t have to be swimming in debt. So instead of getting a big fat loan to buy a property, consider getting a slimmer loan to start your business on leased land.
If leasing is in line with your holistic context, then I say, “Why not?”
Thanks for reading!
Until the next time,
~Isaiah