Here's how to find a good tenant farmer for your land
When you own farmland, the land’s success directly translates to your success. If you are like many landowners, though, that also means ensuring the success of a tenant farmer who is responsible for working the land.
Now, exactly how much success we are talking about with leased farmland can come down to lease arrangements, which is another topic that we’ve covered before here. Farmland lease agreements are a whole other topic.
The truth of the matter is that if you aren’t signing the agreement with a good tenant for your land, then not much else matters. With that in mind, let’s go over a few pointers for how to find a good tenant farmer to trust with making your land produce income not only for themselves, but for you, too.
Many landowners lease farmland in the US
There is about 911 million acres of farmland here in the contiguous United States. Of that, 39% was rented as of 2016, according to the USDA.
Land that’s used for producing crops is leased more often than land that is used for pastures for livestock. The USDA reported in 2016 that 50% of cropland was rented, while 29% of pastureland was rented. For the most part, land that’s rented in the U.S. is typically found in areas where grain production dominates – think: corn, soybeans, wheat, etc.
On top of that, most rented land is owned by non-operator landlords, according to the USDA – 80%, as a matter of fact. The other 20% is owned by other farmers, which the USDA refers to as operator landlords.
However, no matter which type of landlord you are, a non-operator or operator, the success of your land – your investment – is tied directly to finding a tenant for the land who can help you realize that success and deliver strong results year after year.
Know your land – and how you want to use it
Before you begin any sort of tenant-finding or lease agreement discussion processes, you have to know your land and have a good sense of desired goals for its use and performance.
Those goals should align with any potential tenant’s goals for the land and its use. Do you require immediate returns on your investment? Then find a tenant farmer who is willing and able to plan and produce in a manner that will quickly generate those quick returns. If it’s more of a long-term play, then make sure both you and the tenant you eventually come to terms with have a plan in place that builds toward the most success possible in the future – whatever point that is.
Be sure to have this conversation with prospects right away. This is one area where it is an absolute necessity to be on the same page with anyone you might trust with your land.
Have a lease rate in mind for your land
Of course, before you head into signing any kind of agreement, you obviously need to know exactly what you will be asking for your land.
This can differ based on what type of farmland lease you plan to use, but you will need to have an idea of the land’s value and a basic rate idea at least as a starting point.
If you are not sure what your land might be worth or appraised at, then we suggest speaking with a professional that can help give you an accurate number.
For general purposes, though, land value, along with lease rate, can be determined with a few factors:
- Comparable lease rates for similar quality land in the area
- How much return on investment you want from the land
- Survey data showing other rental rates
- Gross income percentage from the land
Once you have a lease rate in mind that is soundly based on your land value, you can start negotiating with good potential tenants.
Pay attention to the little things
This advice is brief, but it’s important: Pay attention to those little things that may in fact be hints for how a potential tenant may behave.
Are they on time to initial meetings and interviews? Do your values – personal and business values – match up? What do they think about conservation and sustainability? Landlords and their tenants need to be lockstep in these areas.
Communicate from the start
A good landlord-tenant relationship starts with healthy communication. That communication should begin during the tenant interview process.
Ask potential tenants how they plan to manage the farming operations. This should be a comprehensive conversation that encompasses everything about an operation, including their farming processes, how they use technology in their operations, what types of conservation efforts they employ and how much they know the area or region the land is located in.
Additionally, you should make all of your expectations for how you would like the land to be used – and how you want to see it perform – as clear as absolutely possible. This way, everything is on the table, there are no surprises, and you and the right tenant can begin with knowledge of those expectations.
After you have expressed your goals and plans, address how any future communications will happen. This is not just for you, but also for the tenant. The best tenant will have a style of communication that works for you, one that shares results, addresses any problems that come up and builds trust.
Be realistic and show commitment
Finally, whenever you begin a search for a tenant, be realistic in your expectations and goals. A good tenant may walk away if you are not.
Landlords should also be prepared to demonstrate how they are committed to the success of the farming operation. It’s often important to have a little skin in the game yourself.
Let’s find the best tenant for your farmland
You don’t have to go out searching for the right tenant farmer by yourself. By working with an experienced farm management provider, you can make the search a lot quicker, less stressful and set up a better path toward success for all parties involved.
Call or email Midwest Land Management today and let’s start talking about finding the perfect tenant farmer for your land.