Recently our neighbor has decided to sell a little over 40 acres of tillable ground. CSR averages 88 and is relatively flat with just a few water ways. Being 18 and not knowing where I'll end up in life other than Iowa Agriculture, I have the ability to buy the land through a 40 year loan through the FSA (Government) I don't know if I should or not. Price per acre he's asking is 5,000. You do the math and its a big chunk of change. Just seeking some advice on what to do and if it has potential....
sounds like a good deal to me! Im not familiar with Iowa farm land but the price sounds right and neighboring farm land only comes up for sale maybe once a generation.
I would go for it. Like James said your nbeighbors farmland don't come for sale that often. If you want to be in agriculture go for it or you may regret it later. Thats a great price for land, speaking some has gone for double if not more. good luck with your choice.
Ross, If you've been following farmland sales in Iowa during the last year, you will know that most land has sold for 10-13000 on auction with one sale bringing 20.000 recently. On another ag discussion website there is a farmer from Iowa who has kept track of land sales for the past 30 years. Good quality land today is bringing $100-125 per CSR point. At that value this land should bring between $8800-11000 on an auction.
few more pieces of information needed:
1. what is the total acres of the parcel? You mentioned there is 40 tillable and he's asking 5000/acre. When you're buying land always look at the price per tillable acre.
2. are there many big time operators in your area? being that this is a smaller parcel with a few waterways splitting the piece it may not be as attractive for the bigger operators.
3. does the neighbor have more land to sell?
4. is the land tiled?
5. what part of iowa are you located? just a general area.
6. is this a private sale or will it go on the auction block?
7. what will the land be used for? crop production, hay or pasture? If for crop production do you have the potential to raise 200+ bu corn in your area?
like matt has said and I have been told this before. The neighbors farm only comes up for sale once.
Dan, The total Acres I would be buying is 43. Of that 43 acres about 40 is tillable. There are a few big timers around our area however My Neighbor has only offered to myself and another farmer. Currently I have the bid for the land. Originally he was asking 8,500 an acre I think. It only has a few water ways and they are small and able to drive through them. He had more land to sell but it was 30 acres of timber my father bought and he is keeping some tillable ground for his sheep, but i may be able to rent that for a few years for crops. the land is not tiled and we are located in the South Central Part of Iowa. I would use the land for whatever would make the most money. We thought about continous corn so we have stalks to run our cows on. but if times got tough for money I would do small square bales. The ground should have potential for 200 bu. corn but the previous farmer never did so well, mainly because he never soil tested or fertilized.
Ross, the price per tillable acre would be 5,375. You can figure about another 500-1000/a for pattern tiling. Get the land tiled right away if you buy it, it will pay BIG dividends! Work with a good agronomist to help you maximize the potential of the land for whatever crop you will be growing. Corn pencils out really good for 2012 but corn seed is getting hard to come by at this time, so you might want to get some locked in if you can find any. Buying this piece of ground would give you a good "foot in the door" on renting the other land that your neighbor has in the future. If I had first bid on a piece of land like that, I would have bought it yesterday. Especially if you're getting the young farmer loan!! Good luck and let us know how it works out for you.
Not to tell you what to do but you should buy that. Around Carroll Co that parcel would go for around ten or higher with the CSR that high and that would help the input costs. If you were to go to college down the road you could rent it out and still make money to pay the loan off. Don't forget to mention the tax incentive for beginner farmer too-nobody stated that yet. With that asking price there is also room to improve the land-fertilizer,tile,etc,etc.
I'm in southeast Iowa and if I had a chance at ground that has a CSR of 88 and the price was $5,000/acre I'd jump on that in a heartbeat. I just bought 30 bred heifers with an FSA loan and the paperwork is a nightmare but the savings on interest will be well worth it when your buying ground, are they willing to provide 45% of the financing for 2% interest?
Yeah the FSA paperwork is overwhelming. I just about have all the packets done. They are basically going to pay for it all. I've got to pay around 12,000 a year in land payments/taxes for it. I believe the Interest is 2-4% I'm not for sure though.
Ross, at 12,000/year in payments that's only 300/acre. I don't know what the going rate for rent is in the area but even if you had to rent it out while you attend college you could probably have the renters pay for your land!!
I'll give you the phrase I use:
You only regret the land you do not buy.
As someone who has bought land in 2003, 2004, 2006, 2007, 2008, 2010, 2011, and Now 2012 (signed the purchase agreement yesterday night) I speak from experience.
Your next step after buying it - build up a savings base to cover most of the payments for a full year, then work on paying it off early. I've already paid off the pieces I bought in 03, 04, 06, and 08, and they are now helping me pay off the other pieces. Just because your loan says 40 years, doesn't mean you have to take that long.....
Craig, you chose to buy land at the right time. Commodity prices have been excellent and land values have increased since you've started buying. Good move.