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| I am not saying that they are all like this but most of the ones I have seen the present owner has his teat in the wringer and this is a short term solution I.E. He has the machinery etc to farm it but is short on equity. His ratios are out of whack with the bank so if he can sell it and rent it back it keeps him afloat for the time being. One I ran into one time I think the guy was trying to pull a fast one on city slicker investors. He was trying to exploit the IRV rule in real estate appraisal. The IRV rule is INCOME divided by RATE= VALUE. So what the guy was trying to do was make you believe that the rent in the area was X amount of dollars (which was at least 25% over the going rate). He would sign a 3 year deal at that rate making you believe the farm was worth way more money than it was. From an investors standpoint it looked about right. But in reality it was priced way too high for one thing and the other thing is the lease was only as good as the guy signing it. I placed both hands on my checkbook and drove the pickup out of his yard steering with my knees. | |
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Farmland market observation
