When to Turn a Farmland Rental Agreement into a Farmland Purchase

If you’re renting the land you farm on, the decision of whether to continue renting or purchase farm land is likely never too far from your mind.

But how do you know when the time is right to make the change?

When to Turn a Farmland Rental Agreement into a Farmland Purchase

While every operation is unique, there are several factors to consider when deciding whether to rent or buy land for your operation:

• Long-term Operational Decision: If you know you and future generations of your family will be farming the land it may make sense to purchase the property.

• Familiarity with the Land: After farming the same land for several years, you will develop an understanding of what that land is capable of producing. If the land fulfills your production expectations, it may be smart to purchase that property for future production. This understanding and familiarity with the land will also help you determine if the proposed sale price is fair.

• Operational Fit: Land closer to home is worth more than an outlier farm. If you have the option, purchasing land that fits within your existing operation geographically is often worth exploring.

• Financial Position: Take stock of your current financial position. If your liquidity, equity, and cash flow positions are strong, a purchase may make sense. Keep in mind that purchasing farmland requires significant capital.

• Control and Stability: Owning land eliminates the risk of land availability surprises that can arise with year-to-year land leases. Additionally, owning land allows for investment in property and soil improvements that will continue to benefit your operation in future seasons. If these dynamics appeal to you, exploring a purchase makes sense.

• Opportunity: Not all people get the opportunity to buy the ground they rent. Being able to purchase the land is about timing and opportunity. It is important to have a good relationship with your landlord to get the opportunity to continue renting the ground until you get a chance to purchase it.

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