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Jermanator
Posts: 16,244 Senior Member
Income Producing Rural Property: How?
Jermanator
Posts: 16,244 Senior Member
This is from a drift on a thread in the Hunting forum...
Other than a place to live, I see owning property as something that should be making me money in some shape or form. I don't have the cash sitting around to pay taxes on something just for the sake of owning it. How would I go about owning rural property that could generate enough income with very little work involved? It don't have to be a ton of money, but at least something that could help justify the tax bill.
Jermanator wrote:One of these days I want to build a cabin/vacation home north of me (I got to finish building the regular house first). It needs to be no more than a 2 hour drive away, (preferably 90 minutes) and within 30 minutes of Lake Michigan or Huron (preferably Michigan). I will need to use one of two strategies. The first one is to go with a couple of acres and make sure that it butts up against federal or state land so I pay taxes on a smaller plot but get to play on the public's land, or I get some real acreage--at least 40, but 80 or more is preferable. If I go with plan B, I would want to make sure that it generates some income from either crops or timber to help offset the taxes. Obviously, I wouldn't be leasing the hunting rights because I would want reserve that access for me and my family, but there has to be a way for it to make me some cash without a ton of effort.
Other than a place to live, I see owning property as something that should be making me money in some shape or form. I don't have the cash sitting around to pay taxes on something just for the sake of owning it. How would I go about owning rural property that could generate enough income with very little work involved? It don't have to be a ton of money, but at least something that could help justify the tax bill.
Reason obeys itself; and ignorance submits to whatever is dictated to it.
-Thomas Paine
Replies
Farmland might be $3000 to $4000 per acre depending on location and ability to produce, achording to a Michigan State University 2011 report.
https://www.msu.edu/~steind/2011%20MI%20Land%20Values%20%20Leasing%20Rates.pdf
If you can afford a 50 acre spread without a house barn etc, you are at $200,000. The average lower peninsula lease rate is $126 per acre for tillable land. So 50 acres would lease for $7300.00, or about 3.65% of its sell value. Taxes would eat up a lot of that.
D
Alcohol, Tobacco, Firearms and Explosives.... now who's bringing the hot wings? :jester:
Hard to have your cake and eat it too...
As far as the house we plan on... It is very humble so the taxes should be modest. The first floor is essentially a one bedroom, barrier free, open floor plan thing (for when I am an old fart), and the upstairs is a big open bunkhouse room for the kids and friends to visit and come hunting. I can shut down the upstairs so I don't have to heat it in the winter. I can frame, roof, and side the shell in a 3 day weekend. I can build the whole thing for well less than $30k in materials.
I really want to hear what Woodsrunner has to say. That ole' boy knows enough about timber management to fill a few encyclopedias. That could be the answer, or part of the answer.
― Douglas Adams
^This, or you could fence off one corner of the property to be used as an "organic" cemetery. Your investment in hardware would be practically non-existant, and the greenies would love it.
Mike
N454casull
Best way I've seen is how the Amish do it around here. Buy 300 acres, timber the whole thing, sell any road frontage as 5 acre home sites....... Exactly what happened to the farm our family lived on when I was 2-9 years old. We rented the house, the owner kept cattle on 20 acres, maybe another 50 was hay fields, the rest woods. My oldest brother killed his first few deer there.
Another way I've seen is a guy one of my other brothers graduated with. Bought 200 acres and built the houses on the road frontage himself and sold the houses.
If it's pasture you're best bet is to lease it out for summer grazing to cow/calf pairs. If there are folks that run yearlings then you can also lease for the summer graze, but do it on a per head rate, not on a cost per lb of gain.
Best bang for your buck right there.
Rank does not concur privileges. It imposes responsibility. Author unknow
I never thought leasing out the grazing. Not a bad idea if there is a lot of pasture.
If it is in timber and you get a good consultant that can set you up with a management plan, you can log some one year and wait to log more in 10 or so. Will you make enough to pay the taxes over the years? Depends on price of timber and what you have. 100 ac of white pine will net you a case of beer, where as cherry will put a large downpayment on a nice house. Managing a woodlot is pretty easy, you just do whatever you plan says.
If you own the land fee simple and you can lease the mineral/gas rights, you have income every year.
If it is in pasture or just grass, around here you lease the use of the land for whetever the taxes are to whoever wants to build and maintain the fence.
If you think a orchard is something you can do from 2 hours away once a week, I have a friend you can call who will chuckle loudly at the notion. Sure, when they are dormant, after you trimmed them all, but they take work like anything else.
Land is a investment, if you get a lease or timber that is great, but dirt is a commodity that is finite. You have to have real bad luck or government involvment to lose money on land.
BTW, With the floods, drought, and govt, beef will be giong up soon. If you were close, running a feeder calf operation would likely pay off as long as the vet bills don't get bad and you can gut out the time and cash for fencing and shed.
Mineral leases are 5 yr paid up things, the government takes about 1/2 for taxes..... if you get the rights when you buy the property, and if there's any interest in leasing from the mineral industry.
Your confidence in my thoughts is honestly appreciated, and I'm sitting here trying to think of how I did things in buying/selling land that could be suggested and made workable for you. It's a little difficult to formulate plans or suggestions, though. Remember, I was a forest/wildlife manager on the ground every day working in a rural forest/farm land environment with my own consulting firm for 30+ years.(With about 25-30% of my time allocated to the Navy's special projects).I don't know what your profession is, or what contact you have with rural real estate, but here are a few thoughts that might get you off to a start. I'll try to keep it short:
Decide on the geographic area you like--maybe 100 miles by 100 miles or some such area.
Contact the Farm Credit office in that area and introduce yourself to them and ask for information on rural land availability, etc. You will need the Farm Credit most probably for financing anyhow, none better for what you're looking for, and this outfit will know farmers who might rent farm/pasture land if any is involved.Can't say too much good about the Farm Credit.
Don't waste a lot of time with real estate agents. Sorry if I offend anyone, but you don't need 'em to do what you want. These are middlemen/women who will usually cloud the issue as much as they'll help. Sorry.
Get a list of landowners and their mailing addressess in the area that you select. The county(s) property appraisor/tax collector is your source for this, and it may be available on your computer. Might cost you a thousand bucks for postage, envelopes, etc, but write a form letter simply stating what you're looking for in the way of land, acreage, farm, forest etc and mail these out to every landowner having the minimum acreage that you want! For every 1,000 letters you mail, you'll probably get 50-60 replies, and from these you will probably have 8-10 that are basically what you're looking for. Contact these and look! You will probably end up with 2,3,4 tracts that really are desirable for your purposes that you can initiate negotiations on. Recent land sales recorded in local county courthouses will give you an excellent index to gauge land values, etc. You may consider getting a MAI Appraisor to value the final property you are successful in negotiating on if it makes you feel more comfortable about not overpaying.
Managing for timber production is a possibility, but this is a very broad subject area, and the forest practices/incomes are going to be significantly different in different parts of the country. What I do here in pine forests of the Lower Coastal Plain of the Deep South is totally different from what will be done elsewhere with different forest types. I suggest a plan to improve the aesthetic value of the tract over and above any major forest management objectives. Usually these go hand in hand, but not always. Renting farm and pasture land will bring in a little extra $$ to pay taxes, etc, but don't count on these as being major sources of income. In the long run, improving the aesthetics will return you more money, probably, but you won't realize this increase in value 'till you sell! Maybe this will give you an idea or two that you can get started on. Its-the land-out there and waiting, and now is the best time since about 1982 or so to be buying land! Wish I were younger or could get my son interested, but no way!
EDIT: I'll quickly add this one thought/suggestion:
Whatever you do in buying land, running cattle, farming, forest management, etc, HAVE A DARN GOOD UNDERSTANDING OF WHAT COMPOUND INTEREST IS! Without this understanding, you are almost guaranteed to fail!
Don't know maybe you are. I paid for college this way and my dad still does it. Is he getting rich nope does he make a little bit extra sure are some years better than others sure.
I started out with pigs raised then sold them bought a bunch and I mean a bunch of bull calves from the dairy down the road raised them, sold them bought more and 1 Pregnant Angus cow. Kept doing that till I had a small herd of Angus cows them stopped buying the Holstein bull calves. They were a lot of work. When I was done and sold all my cows I sold a herd of 30 cows.
I'm thinking you should combine CPJ and Linefinder's suggestions - an organic funeral home that processes the corpses of environmentalists to fertilize marijuana plants that you can then sell to their hippy friends to help ease them through their mourning period.
It's probably a longer term investment than you have time for, but using environmentalist's remains to kick-start tree-seedlings that your heirs can log for timber in a hundred years has a certain poetry. Even more poetic, grow walnut trees out of 'em, which allows you to say that you're growing nuts from nuts. When the trees stop producing you can turn them into gun stocks. Then, your great grandson will be able to look at his AAA exhibition-grade stock and say, "While she and Grandpa Jerm had a lot of disagreements, you can't deny that Miss Sunshine Flying Squirrel had great figure"
"Nothing is safe from stupid." - Zee
I am surprised you havent thought of building an all weather shooting range and then charging a yearly membership.
Not to spook you off Jerm, you can get property that is self sustaining as far as taxes go. Income producing with no work won't happen though. IMHO, your best bet if you are planning to be a absentee landowner is finding grass or pasture land. You might have to make a investment in lime and fertilizer to get someone in, but the land would be looked after and you just cash the check. If there is timber, let it alone, OR get a consulting forester (fee) or a state forester (free) to help you get a plan. then cut when you want to finance your new house. I am a big fan of consulting foresters when you are selling. I got more than my neighbor did and she had a lot of real nice cherry, and her property looks like a tornado hit it, after a year when people came into my land they didnt believe it was logged. A guy from church helped her out.....
FYI, I am current landowner, with saleable timber and a gas lease. I have done cow/calf and helped out with orchards and lived next to a Christmas tree farm, crop farmer, and have seen DEA take care of weed farmers. This summer in fact, >1 mi south.
A consulting forester IS going to charge you a fee. He has to live, feed his kids and survive, also, remember. On timber sales, at least in the Southern States, the fee is normally 10% of the best price the timber brings. On management recommendations he'll charge a daily rate, and again, here where I am it will be 2-3 hundred dollars. Is the consultant worth it? I say absolutely without question! (But remember, I'm biased) Here's an example, and something like this will happen more frequently than you think:
In the morning, at daylight, 10/29/12, I will meet a large logging outfit to open gates and move them in to start logging a 120 acre tract of pine timber. The landowner was offered $19.42 per ton for the timber, clearcut. The landowner contacted me since I had originally planted these trees 24 years ago and had selectively marked the stand twice for thinning. It was/is a beautiful stand of timber and should not be thinned or cut at this time, but..... The landowner has developed very serious medical problems suddnly becoming totally paralyzed from the waste down and 100% wheelchair bound. He desperately needs the money the timber will bring. (Sound financial planning on his part in the past along with my help as a consulting forester, has made a source of income off rural land available to cover this emergency).I negotiated with 3 other forest products companies, and successfully traded on $32.00 per ton or $12.58 per ton more than the landowner's offer. A knowledgable consulting forester is well worth what you pay him!
This is all just food for thought. I am not running out to buy anything in the near future. You guys were talking about hunting land in the other thread, so this had me thinking.