Rent to Own Land

[Jagfarms]

Has any one had any experience renting to own land? I have heard of it done but I have not heard first hand on the details about it. How would something like this be done if it is possible?

Thanks in Advance.

Jason

[charliep]

The tools I have seen are agreements for sale (negotiated payments with the landlords name staying on the title until the loan is paid) and renting with an option to purchase.

Just curious if this is an actual deal or you are looking at alternatives? Would the land value be locked in at the time you enter into rent to own or would it float with market conditions? Is it a arms lenghth deal or one with family, a relative or a close friend?

My suspision (could be wrong) is that land prices in the non prime (and perhaps non Alberta) areas are going to be under preasure to come down. Banks and other lending institutions are likely to be more conservative lenders. Implication is more vendor financing.

[wedino]

Jason, I've never heard of rent to own, but anythings possible as long as seller & buyer can agree to terms. Have heard of deals where vendor holds the mortgage, of course a default in payment means vendor will(can) foreclose.

[wd9]

If you borrow money from the bank to buy land, you rent to own from the bank.
If the owner wants to be the bank, there is no difference.
If the landowner will not charge interest (rent) and allows the full payment to go to capital payment, call it a gift (no interest charges) - sounds like bank of dad though

[Jagfarms]

I have been renting some land now for 10 years from a relitive. I was thinking if the bank is charging prime plus 2% I could finance it through my relitive with the help of a lawyer and we both come out ahead.

For an example

If I was to buy 6 quarters of land financed or rent to own from my relitive with a price of $85,000/quarter $510,000 for all 6. Make agreament with a lawyer to pay 4% interest over 25 years. The payments would be $32,304/year for 25 years for a total of $807,591. Every 50 months 1 quarter of land would get it's title changed over to my name. If I decide to quit farming in 100 months 8.3 years two quarter are on my name and the landlord has the other 4. I am almost paying this much for cash rent now and If I would have started this 10 years ago I would own 2.5 quarters by now. The only thing is rent is 100% tax deductable and only the interest is on payments. That's why I was wondering about the rent to own thing but that would be bad for the landlord. How would it compare to paying capital gains if he sold the 6 quarters at one shot?

They lease to own grain bins and you buy them out in the end for a small fee and get the tax benifits. Is there any way this could work with land?

Like charliep said I think the land prices are going to come down in the future in some areas. I can see that may happen here as the average age of farmers in our area would be 50-60 years old and not many young farmers around who is going to buy all the land. I have heard in some places they can not even rent the land out for enough $$ to Pay the taxes.

If I buy the land through the bank I am committed to buy it. With an arangement like this it is like renting land and every 50 months I get another quarter and I decide to get out of farming the landlord still has title to the other 4 quarters. Less risk for the tenant but have to get the landlord to agree to it.

Jason

[caseman]

What would you grow to make it pay
when you are buying land for $85 000.00
per quarter. Where I farm $85000.00
would buy you two quarters easily.

[charliep]

Everything sounds good except the rent (100 % deductible) versus payment (some portion principle). Using the old income tax expresssion if it walks like a duck, swims like a duck and quacks like a duck, income tax department will treated it like a duck. Would also have ask questions about the capital gains implications when you sell. I would seek the advice of your accountant and lawyer.

[wd9]

Caseman, at 200,000 and up where I live per quarter you grow water trucks, service rigs and gravel pits. At 85,000 you can still grow crops.