Need some help with land rental, Regina region.

[Oliver88]

Yeah so back to the original thread.
If its good dirt and not a big slough , 30 bucks an acre is way to low in the Regina Moose Jaw plains area.
I just re-signed a three year lease agreement with my tenant for $120 an acre.
This is not me being greedy or shopping my dirt around , it was the offered price and the same offered price as the last three years.

What crops are grown on this land that is rented out for $120/acre?

[blackpowder]

That's top s in our area.
Canola, wheat, peas, barley.
And not the highest yielding area of the province by any means.

Just stating fact. Not commenting.

[Rareearth]

Should be buying more land to rent out.

[Guest]

Yeah so back to the original thread.
If its good dirt and not a big slough , 30 bucks an acre is way to low in the Regina Moose Jaw plains area.
I just re-signed a three year lease agreement with my tenant for $120 an acre.
This is not me being greedy or shopping my dirt around , it was the offered price and the same offered price as the last three years.

And 120 is way to high
Enjoy while it lasts
From a farmer

[blackpowder]

Should be buying more land to rent out.

Not at $4500-$5000/ac.
That's why there's no investor buyers here. Never have been.
We never had a mandated resident only buyer law to create a vacuum.
Plus it's a stable production area.
If your rented to owned ratio is too high, your not making money long term at that rent no matter where you are.

[WiltonRanch]

Not at $4500-$5000/ac.
That's why there's no investor buyers here. Never have been.
We never had a mandated resident only buyer law to create a vacuum.
Plus it's a stable production area.
If your rented to owned ratio is too high, your not making money long term at that rent no matter where you are.

Hit the nail there. I wonder how guys can finance like they do on majority rented ground. Yet go and buy land and they want your left nut and first born. Wished I bought more when I did.

[brs]

Just a thought on purchasing a large chunk of land with land as collateral. So until half way through the amortization a big chunk of the payment is interest which is tax deductible. In the last half or so the principal is larger which is non tax deductible, could it not cash strap a ooeration. Payments are the same start to finish. Guess hope the value of the property keeps gaining value.

[farmaholic]

Just a thought on purchasing a large chunk of land with land as collateral. So until half way through the amortization a big chunk of the payment is interest which is tax deductible. In the last half or so the principal is larger which is non tax deductible, could it not cash strap a ooeration. Payments are the same start to finish. Guess hope the value of the property keeps gaining value.

Those principal payments, whether made in the first half or last half of the loan term, are made with after tax dollars. If you bought the land corporately, your tax savings on the interest portion is nominal in my opinion. If 9 to 12%(or whatever) tax savings on the interest portion of the mortgage is going to be the difference between sinking and swimming....geezus that's operating too tight.

Totally different story if you bought the land personally and you have alot of income in the higher tax brackets. But who wants to pay land off with small personal after tax dollars compared to larger corporate after tax dollars. Just have to "manage" the corporate model when and if you or your beneficiaries want to wind out.

Incorporation is a form of tax deferral.

Wouldn't paying off your land mortgage as fast as possible save you way more in interest costs than any income tax savings the interest costs provide?

[brs]

Those principal payments, whether made in the first half or last half of the loan term, are made with after tax dollars. If you bought the land corporately, your tax savings on the interest portion is nominal in my opinion. If 9 to 12%(or whatever) tax savings on the interest portion of the mortgage is going to be the difference between sinking and swimming....geezus that's operating too tight.

Totally different story if you bought the land personally and you have alot of income in the higher tax brackets. But who wants to pay land off with small personal after tax dollars compared to larger corporate after tax dollars. Just have to "manage" the corporate model when and if you or your beneficiaries want to wind out.

Incorporation is a form of tax deferral.

Wouldn't paying off your land mortgage as fast as possible save you way more in interest costs than any income tax savings the interest costs provide?

Yes understood but u have people saying buy at whatever cost but could hurt in the future for cashflow, renting 100% tax deductible. Hear this lots interest only is cheaper then rent but principle has to be pd back also or am I missing something.

[farmaholic]

Yes understood but u have people saying buy at whatever cost but could hurt in the future for cashflow, renting 100% tax deductible. Hear this lots interest only is cheaper then rent but principle has to be pd back also or am I missing something.

Maybe I tend to look at things differently.

The interest expense on the corporate tax return saves you about 10 % income tax...but 90% of that dollar is gone to the lender.
If you pay it off or down with the lowest corporate tax rate dollars....you give up 10% to corporate income tax but 90% of that dollar is in your equity in the land. Huge difference.

Renting versus buying, "up to a certain point" it is cheaper to rent land than buy it. But as everyone knows you will never own the land... only ever renting it. At the end of your career, you better have something to show for all your work and risk of paying rent on land....other than a line of depreciated wore out equipment or no equity and payments on leased equipment.


If you built a nice house, put money in the bank, have a cottage at the lake, have a high equity position in a newer line of equipment, helped pay for bought land, etc....that that rented land helped pay for...then it was worth it. If your stepping off the treadmill without any of that......???

[brs]

Maybe I tend to look at things differently.

The interest expense on the corporate tax return saves you about 10 % income tax...but 90% of that dollar is gone to the lender.
If you pay it off or down with the lowest corporate tax rate dollars....you give up 10% to corporate income tax but 90% of that dollar is in your equity in the land. Huge difference.

Renting versus buying, "up to a certain point" it is cheaper to rent land than buy it. But as everyone knows you will never own the land... only ever renting it. At the end of your career, you better have something to show for all your work and risk of paying rent on land....other than a line of depreciated wore out equipment or no equity and payments on leased equipment.


If you built a nice house, put money in the bank, have a cottage at the lake, have a high equity position in a newer line of equipment, helped pay for bought land, etc....that that rented land helped pay for...then it was worth it. If your stepping off the treadmill without any of that......???

Your last paragraph is my approach right now, till hopefully the next time in future if there is a retraction to add more land to the portfolio.

[Richard5]

Totally agree with you saskfarmer. But even with land ownership, at our commodity prices today, our cost on that land with land payments and inputs would equal nearly $300 an acre, if not more. And that's on a pretty modest input and equipment budget. That's 45 bushels an acre of number 1 wheat, or 40 bushel an acre of durum. Those would be 5 or 10 year average yield around here.

I'm not looking to farm just to break even.

I would never farm to break even but when I hear stories of these farms with incredible amounts of debt, refinancing at another bank because they hit the cap for total lending at FCC (30 mill), flipping total lines of equipment each year I really wonder if they are aware that "that's not what we farm for"

S3 makes the comment on buying if rent is 140. This can work if you have some cash reserve or maybe if you have some paid for land to leverage against but many don't realize that payments on at $140 rented quarter now become well over $200 assuming the purchase price is relative to the rent.

Where I farm 70-80 per acre rent is the high and if borrowing for most of the purchase of one of these qtrs my principle and interest pmt plus taxes gets over $160. If i am tight on cash flow before purchase I am going to be in bigger trouble if I buy more than 10% of my land base

I don't know how of why some just keep grabbing more and more and why banks are lending more and more. Sooner or later the crap will be stuck in the fan after it hits it