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Can it be done? Farm purchase

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wanttofarm

04-22-2008 21:39:10

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Hello,

Got an o/t for you.

Is there any way to make it purchasing 150ac farm at auction at an expected price for 5,000 an acre for a total of $750,000.

It has aprox 75 ac tillable. 50 pasture 25 wooded.

Am i crazy to consider this?

by the way this is a forclosure auction wich means someone eslse didn't make it.....

Thoughts/input????

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JMS/.MN

04-23-2008 16:01:01

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

No sarcasm intended, but if you can"t do the math, you can"t afford the farm. Same with any business venture. You don"t say what you have for a down payment, what the interest on a loan will be, can you get a loan for the purchase? What crops/income can you generate? Operating expenses? Living expenses? Off-farm income? Even if you had the cash to buy it, there is an "opportunity" cost- what else could you do with that money, make more somewhere else? Only you know all of those factors.

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LenND

04-23-2008 13:03:55

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

You will never be able to make the first payment unless you have a $100,000 in your pocket right now. This is not adding any expenses for farming or machinery. It can never pay for itself on its own. It can't even pay the interest itself. The finance company will own it after the first year. Sorry!

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davpal

04-23-2008 08:46:25

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Kind of hard to give you advice on this one. We really don't know your financial situation. Honestly to some people $750,000 dollars is nothing and to some it is all the money in the world. For me it is pretty much all the money in the world so I wouldn't even think about it or lose sleep over it. I see people paying over a million dollars for a car on Barrett Jackson auctions all the time which also seems crazy. To the new owner it was a drop in the bucket. If you have a substantial amount of money and you want to go play on some crops and enjoy the woods and maybe put up a house then go for it. If you are just thinking about trying to pay back $750,000 dollars on a whim run as fast as you can. You better be making upwards of $200,000 dollars a year to even be at the auction. Good luck.

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MSM

04-23-2008 06:32:57

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Maybe try another state.That amount of money will buy you 7-1000 acres in North Dakota,with house sheds and bins on the property.$275,000 will buy you a 1/4 section or more
The only way the ground you are looking at will cash flow out is if you plant houses or have $375,000 as down payment.

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glennster

04-23-2008 05:41:34

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

i dont see any way to cash flow the property. i use the 1 percent rule when investing in real estate, ie you need 1 % of the purchase price per mont to cash flow the property. so at 750k x"s 1% you will need 7500.00 per month to "crack the nut". if you put the pasture ground into grain production and cash rent the 125 acres at say 160/acre you will get 20k per year. if it has a house and barns on it, you may be able to rent it out to horse people for 1k/month. that will get you another 12k per year. so you got 32k now, you need to get 90k per year, so your gonna need another 58k per year. you are going to need to do something with the timber ground to try and generate income, maybe cut some trails in there and open up an atv park, or rent it out for paintball games. gonna be tough to cash flow that.

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TomTex

04-23-2008 05:30:42

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Folks buying small farms around here all have the money already, from current or past day jobs, mostly professionals such as doctors or lawyers or executives. The farm is bought to build on and semi-retire or retire, hobby farming or just enjoying their horses. If you have a good steady day job with Fortune 500 company that pays at least 100,000, located near the farm, and only requires 40 hours, you can make it. Otherwise deaam on. Tom

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Mathias NY

04-23-2008 04:22:44

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

How bad do you want it? If your day job will pay for the farm and you keep that day job, it's definately worth it (in my mind). I agree with the others though, the farm will probably not pay for itself.

Might consider renting out the land for a few years to offset the mortgage. After a few years of paying it down, refinance, then when the monthly amount is lower you could consider farming it.

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jose bagge

04-23-2008 04:00:48

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Where are you?
Timber off the wooded parcel- then sell it to developers as an entire parcel (they will be able to grease the wheels to get the zoning to bust it up into small lots- you never will).

If you are near anything metropolitan, consider 'AGRITAINMENT'- agricultural entertainment. Folks pay a prime for the "experience", so consider a "you pick it"...
strawberries, pumpkins, etc- possibly fruit trees down the road. Board a few horses, raise some goats/ emus/ petting zoo type stuff. MARKET MARKET MARKET- church groups, YMCA, boy/girl scouts- they will bus whole groups in. Hayride, bon fire, etc a mandatory part of the experience.

If you are in the boonies, all bets are off.

Get a good REAL job, cause all of this won't pay for it- it AT BEST will break even after year 5.

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VADAVE

04-23-2008 03:40:57

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

What are building lots going for in the county? The real estate agent will know if she/he is any good. While I'm thinking about it, what is the minimium size for a building lot? Also look around what are farms selling for in the county? and what happened to them?--did they get broken up for houses? While you're looking notice if the price/ac changes when the acreage goes up.
Around here land over 25 acres carries a lower per acre price. We had some sell last year, 25 acres for $5800/acre, the guy immediately put up one house with a second planned. Oh yeah they had broken up a 75 acre piece into 3 25 acre lots. Minimium building lot is 1 acre.
Can you do it? Well if building lots are $7500+/acre and you're willing to sell the woods and or pasture off, maybe. At least that way the land is paid for.

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36 coupe

04-23-2008 03:38:02

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

A good dairy farm sold for 100 grand here 2 years after the owner died.No interest, I wouldnt take a farm as a gift now.Rent some land and try it.Machine,fuel and fertilizer inputs will put many farms under this year.My real estate taxes are almost 10 times what they were 40 years ago.Check the taxes on that farm...

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farmallbee

04-23-2008 03:12:20

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

it will never cash flow and the payments will kill you-as said below that is a price to be paid for development and not agriculture land. The day of the farmer is pretty much over.

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MarkB_MI

04-23-2008 02:54:01

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

I suppose you might be able to pull it off, depending on your crop. 75 acres all planted to wacky tabacky should give you a decent cash flow.

Do the math: Assuming you finance 100 percent and get a loan at 6 percent annual interest, that's $45,000 per year just in interest. Tack on insurance, taxes, utilities and repairs and you're pushing 100 grand. Hmm, I may have to retract my first statement; I'm not so sure it will cash flow with cannibis.

Anyway, this is all a moot point because in the current climate it will be next to impossible to get a loan unless you have at least ten percent of the purchase price in cash and a job that pays well enough to make the mortgage payments without any farm income.

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kyplowboy

04-23-2008 00:17:12

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

I just got a farm last year with a FHA first time farmer loan, the only way you can realy start with nothing. Yes, you can buy a $200,000 home on a 2 acre lot with a $40,000 year job and no down payment, but I could not find a deal like that for farm ground. Any way, my FHA loan is set up on 5.25% for 40 years (no prepay penalties) 5.25 for 40 years and $750,000 your payment would be $45,214.78/year (intrest over life of the loan would be $1,058,591.05!!). If you figure BOTH the crop and pasture ground that would be $301.43acre/year just to make the paymenets.

Now you have some real numbers to go on. What do you think?

Good luck,
Dave

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thurlow

04-23-2008 00:03:05

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

My experience has been that if you can't make it 'work' with a pencil, you sure can't do it on the ground.

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paul

04-22-2008 23:11:38

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Yes.

You are crazy.

Most of us farming are.

Can you buy it from your bank account? You can probably make things work.

Need to borrow over 40% of it???? It will never pay for itself.

Good farmland goes for that, 180bu corn land. So if it were all good farm land, you could rent it out & make payments - for now. Someday inm a couple years crop prices will sink again & then you will be losing money.

With only 1/2 of it good farm land..... .

Can't pay for itself, no way.

If I talked you out of it, good, you weren't meant for it. If you ignore me & find a way to make it work - good for you.

But - it won't pay for itelf, not ever. You are buying high, will be selling low in a few years....

--->Paul

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kyhayman

04-22-2008 23:00:26

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Not unless you can pay for it, or at least half or better. From what I've been reading, most of the farmers who are buying land today are paying for it rather than financing it.

The interest alone on 750,000 would be in the ballpark of 50,000 a year. At best I see your gross farm income off 150 acres not quite bringing that. Owning land is an investment, and investments rarely cash flow the purchase price.

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cowman1

04-22-2008 22:43:53

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Leave your Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Leave your day job!! Be sure to get a ARM at 1% for the first year too. Then you can make it to the list! That would be the Foreclosed list!

Just remember to buy retail sell wholesale and make up the difference in volume! Yeh Right!

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Sid

04-22-2008 22:42:50

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

How bad do you want to do it? What are you willing to do without? How much are you willing to work? Just because somebody didn't make it does not mean nobody else will make it. One thing for sure is you won't make it if you don't try. "Am i crazy to consider this?" I don't know but I have seen lots of crazy folk do very well with ideas that everybody else said was crazy.

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Jerry/MT

04-22-2008 22:29:29

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Those are subdivision land prices not ag land prices. There is no way to make that pay unless you stocked it with cows that had golden calves.

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Too Far Gone

04-22-2008 22:04:19

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Re: Can it be done? Farm purchase in reply to wanttofarm, 04-22-2008 21:39:10

Theres not a chance in hell you'd ever make it,unless theres a gold mine hidden on it somewhere.

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davediehl@hotmail.com

04-22-2008 22:09:10

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Re: Can it be done? Farm purchase in reply to Too Far Gone, 04-22-2008 22:04:19

Or oil under it. Then you got er made.

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Too Far Gone

04-22-2008 22:36:56

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Re: Can it be done? Farm purchase in reply to davediehl@hotmail.com, 04-22-2008 22:09:10

Well with my luck crude would drop to $5 per barrell if I struck oil

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T-Rev

04-23-2008 05:31:31

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Re: Can it be done? Farm purchase in reply to Too Far Gone, 04-22-2008 22:36:56

Can you buy just the tillable, with a few acres of the pasture, and a high down payment? And sell some lots, I don't like it anymore than the rest, but you could end up with 80 good acres to farm. Is there a house and barns there already? If no house, are there good barns and bins, good cattle fence? Purchase sounds tricky, it won't be simple, not impossible. Rent out the ground for a few years while you gradually acquire cheap 1970's equipment? Rent the ground to a guy that will pay you little to help farm your acres as a learing experience? Farm some cattle on 15 acres of the pasture and rent out the rest? That'd be easier to start up.

If you could be creative and get to the point where you outright own a big chunk, you could make a little money, plus enough to pay for your hobby. Owning all of the tools, barns, and equipment is a reward from part time farming that most people forget. Just some ideas.

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