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SE MN | I'll use your numbers.
$660,000 net
Buy 80 acres for $1,600,000 with 100% financing. 6% interest for 10 years gives an annual payment of $218,000. Rent of $40,000 less property and income tax net $25,000 on the new farm so total available to pay of $467,000.
Write off $160,000 of tile and fertility which saves $50,000 in tax. Mortgage interest of $100,000 reduces tax bill by $30,000 annually so year 1 has almost $550,000 available to pay for the farm. And again, this uses your assumption that the person with 2,000 paid for acres earning $660,000/year has absolutely no cash to put into the deal, no investment income from previous years of $660,000 years of net income, nothing at all. Which I would call "unlikely" at best.
Looks like to me the farm will be paid for in 5 years and they will buy another one. Or they might by another one later the same day as they have the ability to do so and they want to.
I know several people who own 2,000 acres free and clear. | |
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Land prices
