Attempting to purchase a farm

Has anyone done it successfully?

Reason I ask is that I would like to purchase a substantial amount of land, 50-100 acres, just out of town but still close enough that it's not a 30 min one way commute just for groceries. I did some looking on the real estate apps today and found one for 895k on 90-ish acres. There's no way of affording the app calculated mortgage of 8k/month. I know there is a program through the government but it caps out at 300k payable over 40 yrs. so where does one find another 600k? I don't intend to be a "for profit" farm, just want the land so I can hermit away from society. That's not to say I won't get a cow or 10, or chickens or hogs either. Or just let the fields grow for hay and cut twice a year.

FYI, an acre of land is 8-10k by itself unimproved.

What say ye GRM?

You will find it difficult to get a mortgage on raw land if you don't intend to raise crops in it.  Especially at the price you are looking at.  

You want someone else to buy you a farm? 

The only people I know who have recieved direct payements have recieved them as part of programs that pay to have previously productive fields lay fallow as part of soil reclimation or crop reduction. You don't just get to say "I have land give me money", you have to have land with a history of active farming and some sort of proof that you are willing and able to farm it. They were nearly always making less than they would have if farmed, but the difference was less when  you too into consideration crop insurance and all of that. 

I have a fruit farm. It has 0 production, and there won't be any production next 3.5 years. 

 The way I have been successful is, I purchased the land outright first with my own money. Created a  Corporation. I have two USDA loans I have received. One is a Microloan (cap is $50K), but I have taken out $40K from there. 

I also have a loan of $450k from USDA FSA 2001 Direct Loan Assistance. Be ready for a sea of paperwork. Have patience. Be diligent.  Make friends with your local USDA loan processor (mine is a Latina making $55k a year, who LOVES particular wine).

My farm has lots of expenses, trucks, fencing, water well, improvements etc. Its a great way to get away from it all. Corporation has trucks, section 179 write offs, home office.   The depreciation/deductions (my primary reason for creating the business), is a great offset from paying uncle sam elsewhere. 

Having 2000sq feet parking shed, and future passive income is a benefit, of course. 

Hold up. It's already a farm, so it's not raw land. It has a home on the property plus the out buildings for farming. So it's not attempting to start a new farm.

The USDA has a program for down payment assistance or capital expenditures that's what I referenced earlier. 
So again, how does one get the financing towards property that is well outside my price range but is the style of property I want?

I own a farm and lease some of the land out to a local farmer to plant cash crops

It pays my property taxes, electricity and heating for the year.

Ranger50 said:

So again, how does one get the financing towards property that is well outside my price range but is the style of property I want?

I'm making 35k/year and want a mansion, but no one will give me a loan. What gives?

I guess I'm not understanding your question here?

Land is an asset. You have to have money to buy it. If you want to use the land to make money, then you may be able to get a business-type loan. For a business loan, you've got to prove that you will make enough money with the asset to cover the payment, plus a large chunk. But it sounds like you don't want to use the land as an income stream. So that means you have to be able to prove you can make the payments with other money or income.

Find out what farmground rents for in your area. Around here I think it is around $250/acre per year. So if you have 75 tillable acres that's $18750 a year in income if you can find a renter.

Where do you live that land is $8-10k per acre?  Ouch!

In reply to Patientzero :

It's about $10k minimum here in this part of Ohio. How much is farm ground in MO?

I'm a little disappointed that the thread title does not say "I want to buy the farm" or "how to buy the farm" or some such.

I can't help with real answers here, although I know my grandfather sold his farm when he did the math and found he'd make as much money in interest if he sold it than he made working the land. It's not an easy life.

An acre of raw land is like 30k around here.  

Robbie (Forum Supporter) said:

Ranger50 said:

So again, how does one get the financing towards property that is well outside my price range but is the style of property I want?

I'm making 35k/year and want a mansion, but no one will give me a loan. What gives?

Ever hear of a mortgage company called Countrywide? 

There is a GreenStone Farm Credit business near us. I would look for something similar.

We had a helluva time buying 20 acres with an existing house. After the big bubble-bust, lenders are not willing to (or can't, by law?) write the loan unless the HOME is X% of the total purchase price. I went through our mortgage company, our local bank where our business account lives, and finally a *different* local bank, recommended by our real estate agent. It required a ton of hoops, a BIG down-payment, and a higher interest rate than I wanted, but we got it done. 
 

I'm definitely not an expert, but I'd ask around with local RE agents for a recommendation on a local lender who'd be willing to work with you. The "big bank" strung us along for WEEKS, with promises that everything would be fine, then denied us a week from closing.

My $.02, YMMV

PS: 20 acres requires a LOT OF WORK. I enjoy it. But figure 3X the work you *think* it'll take to maintain it.

PPS: Re-reading the original post, if you can't afford it, you can't afford it. I'd LOVE 50-100 acres. There's no way I could swing that without moving to Montana or some E36 M3.

yupididit said:

An acre of raw land is like 30k around here.

multiply by 10 here. It's crazy. 

I have a farm for sale in central NC. 8 miles from Sanford, 25 mi from Raleigh, 25 miles from Fayetteville.  Mostly in pine trees with house for less than $300K. Total of approx 25 acres. PM me if interested. If you're not interested in mine, good luck with what you are interested in.

In reply to M2Pilot :

Can I just pay you monthly for it until I retire in 7 years? Lol

In reply to gearheadmb :

I'm not sure about "farmland" for crops but just land to run cattle or hay is $3-5k an acre.

Here is a very nice 4 bed, 3 bath house with 3 car garage and 2 big new buildings sitting on 150 acres for $795k.  That comes out to $5300 per acre. This is 10 minutes from me.

https://www.zillow.com/homedetails/533-SW-County-Road-2487-Butler-MO-64730/87737644_zpid/

Starting with what you want and then trying to find ways to afford it seems like working the problem backwards and potentially ending up in a bad spot. Generally you should let your budget dictate your purchase and not the other way around. But you do you.

Also, $8k/mo for an $895k property seems off to me unless it's something like a 15 year loan with basically no down payment, or property taxes are insane and included in that 8k. Id try another mortgage calculator first to confirm what the app is telling you. And see if a longer term and/or larger downpayment might bring the monthly payment down. You'll end up paying tons more over the life of  the loan, but it might fit your monthly budget.

After you've confirmed what you can afford, and what that might actually buy you, I'd want a very good understanding of what kind of property taxes an acreage like that might incur where you're looking. In some places, taxes for a parcel like that might be 4-5k per year. In other locations it could probably eclipse 20 or 30k. If just affording to buy it is so much of a financial stretch that you have to get creative with financing, an unexpected property tax bill might be the straw that breaks the camel's back. Here, property taxes are based on the assessed value of the property. They were far lower than market value when we bought our current place, but the assessed value sure climbed to match what we paid very quickly, and the taxes have more than doubled in the 4 years we've lived here. Supposed to be capped at 1% of the assessed value in my state, but they can (and have) gone over that with special referendums, etc. So even if you think your taxes can't go above a certain point, you might be in for a rude and expensive awakening if the local schools need more money or something.

Steve_Jones said:

yupididit said:

An acre of raw land is like 30k around here.

 

multiply by 10 here. It's crazy. 

Well there's "an acre of build able home site" then there's "one acre out of a hundred in farm land" - those are two radically different value propositions. Around me a .2 acre home site can be $200,000+ or an hour out you can get 20 acres for your $200,000. 
 

heck here's 5 acres in your county for $125k:

https://m.landwatch.com/delaware/sussex-county/farms-and-ranches-for-sale/?id=337430786

In reply to Patientzero :

How's it living in that area? 

This is the problem with many realistate transactions that went bad in the late 2000's. 
 

So again, how does one get the financing towards property that is well outside my price range but is the style of property I want?

There are lending agencies that specialize in this.

I don't know how wide reaching they are, I think Farm Credit Services is a national organization and Ag Heritage is the regional lender that we used, they're part of FCS.  They're a lending cooperative, customer owned lender, all they do is rural and agricultural loans.

We bought 115 acres of raw land, wooded swap, in January of '19.  Property is a lot cheaper in central AR, it really varies, but I've seen stuff sell for <1K/acre and as much as 15K/acre depending on proximity to a population center, access, and a whole lot of other variables.  Ours averaged out to about $1,900/acre, we've got 1/4 mile of highway frontage, that was valued more than the back end of our property.

FCS was easy to work with, we got a good interest rate, then when the Fed dropped interest rates earlier this year, our agent called and asked us if we wanted a lower interest rate, we dropped 0.9% and the savings will pay for the refinancing penalty by the end of the year.

Since it's a customer owned co-op, we get paid back a "dividend" they call their Patronage Program based on our loan annually as well.

Farm Credit Service and USDA's FSA offer beginning and/or young farmer programs as well.

You've also hit on the estate tax problem that drives small family farms under all the time.

That million dollar farm probably has a million dollar mortgage and the owners make enough farming to pay the mortgage and expenses and give the family a decent life.  If the owner dies, though, the kids have to try and get another mortgage for the million dollar property plus their inheritance taxes, but with only the million dollar farm as collateral.  When they can't, they sell the farm and hopefully they aren't ruined by the taxes.  Everyone else sees that they inherited something worth a million and assumes they are set.

Then the only person who can afford to buy the million dollar farm is the guy who has a 10 million dollar farm to borrow against. 

That's why most of the fields around my house are listed with the county as owned by land trusts that represent a family.  They can add children to the trust, remove people who pass, vary ownership percentages, and the ownership never changes or triggers estate claims. An estate is only the percentage of the operation that belonged to the one member, and only of the net value instead of gross.

Which might also be an option for you.  Personally you may not be able to purchase the property, but create a trust and/or LLC that has new business credit and it might be able to secure the loan.