My family has a farm that has been in the family for a very long time. It’s income is minimal right now, but the timber value is great with roughly 120 acres of timber, 100 acres of fields, a fee simple deed and has frontage on two roads. I wouldlike to restore it back to a working farm again with many concepts on raising animals in a natural way. Many figures worked out on the returns with the animals. I know I can subdivide this land and either sell easements to conservation or sell some of the land itself to pay off any loan needed to purchase the property from them.
I am looking for advice on the best way to approach this with the owners who really just want their money and be done with the property.
Also what would be the best way to approach the lending needed.
I could have at least 10% to put down, but not sure if it would be enough.
If I were to sell some land to conservation, in the first year, I would have enough to pay off the loan needed to purchase it.
As I would be just starting out with the animals and any farming, I would not be able to cover large monthly payments.
What is the family actually willing to sell you the property for?
Take that number and either take the property “Subject To” or “Wrap” the existing loans on the property for 2 to 3 years if you can. In other words you would make a monthly payment with interest and be on title.
This way your able to be considered legal owner and you control the property!
After you make an agreement with your family, do up the documents and have them signed and notorized so you have the legal ownership rights.
Call a timber logging company and ask one of there guys to come out and do what is called a “Timber Cruise”. Make sure you do not tell any family members you might take some timber out for cash!
Now do not clear cut your land as the asset is over if you do that or even re-planting can take 30 to 50 years to regenerate an asset. Do what is called selective harvesting of certain tree’s, hopefully you have some hard woods which are worth a lot more money. By selective harvesting you only take the largest 10% or so of the trees leaving the balance to continue to grow.
This way every 5 to 10 years you can have someone come in and harvest and use the funds for capital improvements on the farm.
Try to avoid selling any of the property as this is also a asset as they are not making land anymore!
If you can try to lease out 50 acres or something like that to a fellow farmer or rancher to and make a deal that includes a monthly payment and a royalty on the crop or livestock raised there.
Then a lot of sweat and making your payment and save the timber money and you should be able to refinance it in 2 to 3 years.
Make sure what you choose to do is a big cash maker, it may even be something you raise or grow that you would not do long term but do it to make enough capital to get the refinance and infrastructure back in shape.
Try this, if you can’t make a deal to take the farm over on payments for a few years I have other idea’s so PM me back at that point.
Since you are looking to run a farm the “natural way” then I’m taking it that you are not in this for the money.
I agree with Gold River in most of the comments. Keep the land. If you are looking to be a rancher the more land the better.
The timber is a great asset to you. But 10% on 120 acres is going to cost you more than it is worth. To farm the natural way you need to have no mortgage and minimal extra expenses. Also you need the extra capital for the animals. Figure out how much capital you need to pay off any purchase costs and how much you will need in investment capital to purchase the animals, winter feed, etc. You are running a business.
The timber is not a key piece of the “natural farming” business so use it as an asset. The closer you are to clearcut the larger the margin of profit will be. 100 acres is nothing on a working ranch and 220 acres is still small but workable. The timber is not helping you unless it is sold. The land freed up becomes land that you grow your winter supply of hay bales. That reduces you costs of winter food supply. Plus if there is excess then you sell the bales to your neighbors.
You are running a business. Figure out your costs and adjust to them.