Custom farming usually provides the highest and best return on investment and maximizes control of the land. The landowner pays all crop input and custom-hired machinery costs and receives 100% of the crop. This alternative requires intensive on-site management and thorough knowledge of farming practices which a professional farm manager provides.
The owner receives 75% to 85% of the crop depending on the yield potential of the farm and pays 100% of the crop expenses except machine hire. The farm operator receives 15% to 25% of the crop for their contribution of equipment and labor. Since this is a crop-share lease, it may be considered passive income.
Fixed rate leases provide a stable and predictable income. Flexible rent leases will adjust based on yields and prices each year. The only expenses paid by the owner are real estate taxes, farm liability and property insurance, land and building improvements, and repairs. Finding a tenant who is financially capable and uses good land stewardship practices are major considerations when cash renting a farm.
Farm Leasing Analysis
Each operating alternative is analyzed using realistic income and expenses to assist the owners in selecting the appropriate method to meet their goals.