|
Frytown, Iowa | I don't know...
I was thinking about land earlier today... And the crazy prices. It makes a guy forget that money matters.
Oh what? You want to buy a farm? What's it worth? Oh anywhere in the ball park of xxx,xxx and xxx,xxx (a difference of $100,000)
A hundred thousand dollars to a beginning farmer is a bunch and when the price of a parcel can vary that much over just because another well established farmer wants it... Well it's tough to pay the premium...
Lets talk about the new way to figure the price of land... This really makes me laugh, as a very young farmer, discouraging...
You figure what the farm can make... Take out the taxes from that income because no, it's not a tax write off... Then take that times the acres. That is what that farm can make in the most record high crop farm income ever... Yahoo. Ain't nothing like banking for the best. Ok, so figure out what your interest rate is and figure out your loan on a 30 year schedule. Find where your income matches the payments... Then you need a .05% down payment which is way small, you can handle that. There you have it. You have a beginners farmer loan with a dinky down payment stretched out over 30 years... Low interest!!!
So since the bank won't lend you anymore.. And your loan only covers what the farm will pay for itself... You now have to save up an additional 2000/acre because "ground never pays for itself" and yes that saying holds very very true... So on an 80 you have to save up an additional 160,000 just to get close... Now if this is at an auction..., yes that might be the fair price to pay but it's an auction!!! So ground is going to go another $1000/ac. higher. Maybe more, but we will use round numbers... Now you have to save up or come up with another $80,000 just to have the rights to win the auction... And hey! Ground never pays for itself right? So it doesn't matter if it doesn't pay for itself by $50 a year or $50,000 per year you can always justify it because "ground never pays for itself".
Meanwhile young farmers get married and have kids, and have a tough time convincing their new wives that they need to live like 3rd world poppers saving up money so they can have the false hope of buying a small farm buy putting enough money down ($240,000) so the farm can "work" for the bank. Meanwhile she says why the hell don't we go buy a fancy house in town for cash and while we are at it get 2 nice 2 yr old vehicles to haul the kids to private school with that down payment...
These are the present day struggles for young farmers. No, we don't have to shovel livestock crap by hand for 6 hours in the freezing rain everyday, but in some ways that very well could be easier compared to now... Think about it. EVERYone farmed back then. Now it's a secret club you got to marry into, be born into, or (even now more than ever) sacrifice your previous 6 years of yearly income tucked away as savings for the chance to start making payments for the next 30 years based on all time high profits...
And every year a young guy saves money to get the bigger down payment and thinking "it's now obtainable"... He's now farther behind in reality.
| |
|
? How can a young farmer start out now days?
