Any benefit to an older farmer if they finance a younger guy on their equipment?

[AC man]

Got a call from a family friend who knows that I sell a fair bit of oats to people in tote bags. Said to come over and pick up some empty bags he had from some product he bought in the spring. Low and behold, he had empty bags for me, but also used the opportunity to ask if I wanted to rent more land.

Started out by saying that he had one more year left to farm, and then he would be packing it in. Asked if I would want to take on his rented land this year, and then his own land the following year. I was awe struck, and kinda froze for a bit. A befuddled "Of course" came out of my mouth after a small pause, but I couldn't help but think how I was going to manage this. This would be adding 50% to our grain land base.

It ended that he would put in a good word with his landlords, and that his favorite time of year is seeding and watching the crops come up. He was hinting that he would like to come and help run the equipment spring and fall. This settled my fears, as it would help immensely to have a seasoned veteran at the helm of a seeder in spring, and a combine in the fall.

After having the time to think about it for a few evenings, I thought back to our conversation and he had mentioned how he was working on some of his equipment to get it ready for his auction after this year, and I started thinking. Is an auction really necessary? I could use the extra equipment to take on that much extra land, and he wouldn't have to go through the stress of an auction.

My question is, would he benefit by financing me on his line of equipment? Spread it out over a few years instead of one lump sum? Or maybe he could lease it to me instead to gain a tax advantage? Just spit balling, trying to come up with a situation advantageous for both of us. What I can come up with is that he would still have the same amount of recapture whether he had an auction, or financed me over a period of time. Am I right in thinking that there is no benefit to him to finance me?

Another thing bothering me is a good friend separate from all of this had made it known to me if this guy was to retire, he would like to take on the land he was renting. I don't want to lose a friend over a land deal. But when someone says they are going to pull some strings to get you some land, it is very hard to pass up. What would you do in that situation?

The renting to own the machinery is a good idea that will benefit both of you. He can spread the value over more years for tax purposes and will also get away from having auction sale commissions. You have a expense deduction. You will have to ask yourself if you can handle all that extra land? If not then let your friend take some. Be aware that you may have some land greedy neighbours that will get wind of this. The land that he rents, he has no control over so you may only be renting his. I bet his landlords will be putting it up for tenders. I assume you are a young farmer so he wants to help you out.

[jazz]

flea, you have heard about the $150 an acre being tossed around.

Does it pencil.

And most of all, a 50% increase in acres would say you need some more bodies.

[wade]

Instead of bouncing ideas off of the internet, it might be better to have coffee with him and discuss options. You make him sound like a reasonable person and he might come up with a solution that is even better than what you come up with. Also, equipment maybe not even an option and sheds a whole new light on takeover.

[Herc]

Are you paying ritchies prices for his equipment?

[Sheepwheat]

First off, I have farmed for thirty years, and hoped and waited for an opportunity like this. Even a single quarter would here or there, would have been nice. Never came. So good for you!

I wonder if he would be open to the idea of easing out of farming rather than cold Turkey. What I’m thinking is farm his land together. Sounds like he is a grand guy, maybe it would benefit you both and solve some of the machinery issues and manpower issues if you shared his land for a few years?

Less for you to bite off all at once. Give you a chance to work his machinery into your fleet over time.

What an opportunity. Good luck!

[flea beetle]

flea, you have heard about the $150 an acre being tossed around.

Does it pencil.

And most of all, a 50% increase in acres would say you need some more bodies.

Yes I have heard of the high rent numbers flying around. Not quite $150 here. More like $90-$130. Not gonna worry about the numbers until we actually talk about them. This was initial contact to see if I was interested first and foremost. I believe he will be more than fair with his land. Can’t speak for his landlords, but I suppose I will find out soon.

My only apprehension with having bodies was having an experienced enough guy on another drill in spring. We have lots of help at the moment, but 3 of the 4 hired guys just started this last year. Having my neighbour who is retiring wanting to run a drill in spring seals the deal. Adding the acres, means needing a second drill at seeding time. And I couldn’t run both!🤣

[flea beetle]

Instead of bouncing ideas off of the internet, it might be better to have coffee with him and discuss options. You make him sound like a reasonable person and he might come up with a solution that is even better than what you come up with. Also, equipment maybe not even an option and sheds a whole new light on takeover.

Yes I understand his situation dictates the direction that must be taken. And I know it is ultimately up to him to pick that direction. Was just wanting to know if there was a general direction we should be looking in that someone who has been here before could point us in, as this forum is a wealth of knowledge and experience. Maybe save a heartache or two by asking.

[flea beetle]

Are you paying ritchies prices for his equipment?

Prices not talked about at this point. Was just trying to come up with a situation advantageous to both of us.

[flea beetle]

First off, I have farmed for thirty years, and hoped and waited for an opportunity like this. Even a single quarter would here or there, would have been nice. Never came. So good for you!

I wonder if he would be open to the idea of easing out of farming rather than cold Turkey. What I’m thinking is farm his land together. Sounds like he is a grand guy, maybe it would benefit you both and solve some of the machinery issues and manpower issues if you shared his land for a few years?

Less for you to bite off all at once. Give you a chance to work his machinery into your fleet over time.

What an opportunity. Good luck!

Oh believe me, I fully understand and appreciate the opportunity he is presenting me. This is a once, possibly twice in a lifetime chance if you are lucky.

I definitely will run farming together, and slowly easing out, by him. That is an excellent idea, and allows him to tax plan a bit better. And of course it allows me more time to get my ducks in a row. The only downside is he may miss out on the current high priced sale of his equipment.

Thank you for wishing me well.

[LEP]

I have a friend who has bought many many quarters of land vendor financed. Most over 3 to 5 years, many with no interest.

So it isn't always about getting top dollar. There are many reasons for people offering favorable terms.

Think about a scenario that you can realistically make happen and use that as your fall back position.

I think having a conversation and finding out what he has in mind can be quite enlightening and it may surprise you what he is willing to do. Most likely 50 cents of every dollar that he gets for his equipment goes to the government. So he may be willing to trade partial payment on equipment for a reasonable custom rate for a few acres.

It sounds like you have a good opportunity. I think it reflects well on you, that he thinks highly enough of you, to make the offer.