As a farmland owner, you are likely aware that it is one of the most valuable assets you own. Not only is rural land valuable in its own right, land that is actively farmed can make a profit for those that farm it and own it.
However, not every landowner is actively farming the land themselves. In fact, it’s quite common to be in a situation where the owner is seeking someone, often referred to as a tenant farmer, to work the land and split the profits based on any number of different farmland lease agreements.
But let’s not get ahead of ourselves. While those different types of leasing farmland are important, they all have one thing in common: The landowner still needs a trusted, reliable tenant farmer to manage the day-to-day operations of the farm itself.
That’s where the challenge of finding the right person to fill the role of tenant farmer presents itself. These are some of the best practices to consider when needing to find a tenant for your situation.
Know What your Land is Worth
Before you can go looking for someone to farm your land, you need to know what your land is worth – both to you and to someone you may hire to work it. Now, we’re not necessarily talking the value should you look to sell, although that’s important to know, too. Here, we mean what a good and fair market rent would be should you enter a cash lease or similar agreement.
Farmland owners should always be aware of current market rents in their area so they can know what is a fair asking rent in these situations. Ideally, a good tenant farmer will also be aware of market rents. Consult the USDA or a local university extension office for accurate figures.
Don’t Skip Due Diligence
Finding a tenant farmer is in many ways similar to any other business owner looking to hire an employee. It’s important to find the best possible tenant. This person will, after all, be responsible for many aspects of the farm operations and, most importantly, will make many decisions that make profit or incur loss for both parties.
Safe to say it’s not a decision to take lightly. So, putting in the work and due diligence and doing the required homework associated with any decision of this type is of the utmost importance.
That due diligence involves making sure you interview not just one, not just two, but a handful of potential farmers who may show interest in farming your land. You want to be sure you are comfortable with who will be farming your land as it is a decision that will affect your current and future goals related to your financial wellbeing.
And as with any interview process, it’s important to meet in person with farmers you think may be a good fit before you make a final decision. In-person interactions will always be one of the best ways to determine whether someone is a good fit for a job. Invite them to visit your farmland and lay eyes on it for themselves.
During the in-person interview, make sure to discuss specific lease details, their preferred and your preferred farming practices and all the details of what will be expected of them and you as the landowner.
Finally, be sure to ask for and call up references just to get other opinions and insight as to whether this potential tenant may be a good fit for your operation.
Good Communication Must be a Priority
A good fit as a tenant farmer will also understand why good communication is so important.
Farming involves many decisions, some macro and others more day-to-day micro. Many of those larger, macro decisions may be best discussed between a landlord and the tenant.
This is where communication plays a role. Priorities for making the farm more successful and the challenges that a farm may need to overcome are just two examples of topics that require an open, trusting communication style between both parties. If you can find a tenant who appreciates this, then you will be much further along on your way toward meeting goals and finding success.
Honesty and Integrity Should Never be Compromised
A reliable tenant will share many of the same values as the landlord. In farming, as with many other types of work, honesty and integrity are vital to each party’s success.
You will want to find a farmer who operates with integrity and will look out for your assets as much as they will their own success. Along those same lines, the tenant should be honest with you about issues that may come up. Of course, these character values go both ways toward establishing a healthy farmer and landlord relationship.
Make Sure Both parties Understands Lease Options
Farmland leases come in many forms. In many cases, certain leases will work better for one situation than others. It is critical that both the landlord and tenant farmer discus these options and come to an agreement, in writing, as to which they will adhere to.
Options include:
- Custom farming: Landowner covers crop input, costs of custom-hired machinery and receives 100% of the crop. A farm manager makes grain marketing decisions and provides on-site management. The operator receives a flat rate.
- Custom share: Owner receives 75% to 80% of the crop and pays 100% of the crop expenses minus machine hire. The operator receives 20% to 25% of the crop.
- Cash rent: This involves a fixed rate lease. Owner pays real estate taxes, farm liability, property insurance, land and building improvements, and repairs.
Not Sure Where to Begin?
If you aren’t quite sure where to start in your process of finding a tenant for your farmland, or need additional information on what type of lease might be best for you, then do not hesitate to contact Stalcup Ag Service.
Our team of farm management professionals can assist you with both of these decisions and many more that may come up as you seek to make the most of your land investment. Contact us today to start achieving your short and long term goals
