In today’s seeming instantaneous world, buyers expect to have items at the click of a button. For farmland, and really all real estate, having land information ready will pay dividends. As a seller, you owe it to the asset to have this information documented.
Today, I want to share with you 3 ways to maximize your return and increase the marketability of your farmland.
1) Map out How Much Tillable Acreage You Have
We use software such as Mapright, OnX Maps, and the county GIS software to measure the amount of tillable acreage on a property. This can get us to within a 1,000th of an acre. Your local FSA office will also have this information. Have a solid understanding of how much land on your property is in production. The more money your property can generate, the more it could potentially be worth. This will come full circle as you’ll know how much to charge per year.
2) Charge Market Rates
One of the top questions we’ll ask a farmland owner is how much they get per tillable acre. Some say “I don’t know, I just get a check every year” or “I think I’m getting $80/acre.” These lease amounts will affect the value of your property. A general rule of thumb is to think in 3’s. For example, if you’re getting $200/acre, your farmland should be worth about $6,000/acre. Therefore, an increase in rent should equal an increase in land value.
Think of an apartment building. The value of an apartment building is based on the cash flow it produces. An increase in cash flow (most commonly an increase in rent) will/should increase the value of the building.
By not knowing the specifics of your land, you could be losing thousands of dollars.
3) Get Written Leases
Most leases I come across are verbal or handshake deals. Even though they’re not written, they’re still leases and enforceable. But I’m telling you how to maximize the value and increase the marketability of your land. These leases should be written and documented. This will take the guess work out of the equation. Make sure to put in the amount you are charging per acre as well as the total amount due during the lease term. Longer leases, typically 3-5 years, can add to the value as they’re longer term commitments.
Get Started Today
Are there other ways to increase the value? Sure. Anyone can do the 3 mentioned above. Just like the title, mortgage information, and insurance, these should be a part of any landowner’s documentation.
Get started today on reviewing the value of your farmland.
About Al Wisnefske: Al Wisnefske is the Broker/Owner of Land & Legacy Group LLC. He is a multi-million dollar producer specializing in land, home, and farm sales in Southern Wisconsin. His #1 philosophy is: “Relationships over Transactions.”