Farming the Land
Holding the Land as an Investment
LeasingLeasing your land to others is a popular option. According to the Census of Agriculture, 54% of farmland was released in 2007. The great thing about this option is that you have a number of different arrangements available to you. One of the most common leasing arrangements is cash rent or crop share. When cash is involved, the tenant bears the majority of the risk. If you choose crop share management, production and price risk will be shared between you and the tenant. The biggest issue with leasing is determining a fair rental rate. You may consider consulting with a professional to determine a fair leasing price for your farmland.
Professional ManagementYou also have the option of hiring a professional manager to run the farm for you. This is a great choice for anyone that wants to keep the farm for investment purposes, but does not want to make any business decisions related to the farming operations. This type of arrangement will vary from one farm to the next, but more often than not, a professional farm manager will run the farm and the owner will make no business decisions. The farm management firm will receive a percentage of the gross income, and the owner, you, receives a check. This option is about as hands-off as you can get.
Custom FarmingIf you prefer not to lease the land, custom farming is an option as well. In this case you, the owner of the land, will make decisions regarding inputs, crop and marketing. However, you will hire other people to perform the work for you. Custom operators will handle all the machinery operations on your land in exchange for a set rate or fee. This arrangement has less risk, but during a bad year profits from custom farming will be much lower than a conventional lease. Whether you want to be active, semi-active or completely hands-off, you have options available to you if you decide to hold the farmland as an investment.
Selling the Land