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What to Consider When Leasing Farmland

photograph of a row of corn on farmland with a sunset in the background

Leasing farmland to farmers is a great way to make money on your land while keeping it in your family for generations to come.  However, there are several factors to consider before entering into a farmland lease agreement with a farmer. In this guide, we will discuss the key considerations for landowners when leasing farmland.

Know Your Land

When selling a car, it's common knowledge that factors such as make, model, and condition significantly influence the price you can receive. The same principle applies to land: understanding the condition of the soil, the overall topography, and the risk of flooding are crucial in assessing its value. These considerations, which may have been overlooked in the past, can have a substantial impact on the value of the land and the lease rate that you can charge.

LandGate provides free property reports for landowners containing detailed information about your land. Explore topography, soil types, presence of floodplains, water stress levels, and more to help you learn more about your land and its value:

Know How to Take Care of Your Land

During farmland leases, it is important that you monitor the health of your land to ensure that its fertility is being maintained. Evaluating soil fertility is of utmost importance, making it crucial to ensure that your tenant is properly tending to the land. As a non-farming landowner, you have to think about the health of your land differently than as an active farmer. Your renter should be the one following a soil management plan to replenish the nutrients crops leech from the soil.

As the landowner, you must verify that this is being done. Similarly, you can't evaluate the health of your soil just by looking. If a farmer fails to fertilize properly, the consequences may not be immediately apparent. It is only when one is not present every day that the true impact becomes evident. However, over time, these effects can be catastrophic. Remember that all farmland leases are negotiable, so you have the ability to include specifications in the lease agreement regarding what the tenant can and cannot do with the land during the lease.

Research Farmland Lease Types

There are two main types of farmland leases that landowners can leverage when choosing to lease their land to a farmer- a cash rent and crop share lease. Each type of lease comes with pros and cons that landowners should research and consider before making any decisions. In a cash rent lease, the landowner receives a fixed amount of money from the farmer each year for use of the land. In a crop share lease, the landowner receives a percentage of the profits from the crops grown on their land. Consider which type of lease would be most beneficial  for you and your land.

Understand Tax Implications

Before entering into a farmland lease, it may be beneficial to consult with a tax professional to understand the potential tax implications. Depending on the state and local laws, leasing farmland may result in reduced property taxes due to agricultural use. Additionally, the type of lease that you engage in will have different tax implications. However, this may also mean that the land is not eligible for certain tax exemptions or deductions. It is important to fully understand the tax implications of leasing your land before entering into an agreement.

Consider Who You Lease To

As a landowner, you should be able to trust that the farmer working your land is taking care of it. When you seek a tenant, it's best to:

  • Interview Multiple Farmers: Talk to multiple farmers to get an idea of who you're comfortable with and to make sure you trust the person you ultimately choose to lease your farmland. If the farmers have references, ensure that you review those as well.

  • Don't Associate High Price with High Value: Knowing the value of your land is crucial because the highest rent offer may not always be the best deal. Some farmers may offer more by cutting corners on expenses, like fertilizer. While this may yield short-term gains, it can severely impact your long-term earning potential, especially during retirement. Conversely, farmers with large-scale operations can provide better prices due to economies of scale. The key takeaway is that you must understand what you're offering and to whom you're offering it.

Listing your farmland for lease on LandGate is completely free- we do not charge any fees or commissions, and you are not obligated to accept any offers that you receive through your listing. It starts by generating your free property report on our map:


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