What Can I Rent My Land For?
- [Presenter] What can I rent my land for?
This is not an uncommon question but it does pose difficulty in providing a specific dollar figure.
There's no one correct answer, even for two parcels that may be adjacent to each other.
There are a number of factors that go toward determining an appropriate rental rate and it is subjective to a degree on the landowner's answers to some questions.
Let's consider the following.
First, is there an alternative use for the land that you're renting?
Does the alternative use generate revenue?
If so, how much?
Land that can be used for more than one purpose to generate revenue may not only increase the number of potential renters but can potentially demand a higher rate.
What are the characteristics of your land in the areas of soil quality, field size, and field topography?
Larger acreage fields with higher quality soils that have more desirable topography can demand a higher rental rate than fields with poorer quality soils, small acreage, or less desirable topography.
Are there similar rentals in the area?
If so, what are the owners charging or what are farmers paying?
Sometimes this is difficult to find out as individuals may not be willing to share that information.
If landowners or farmers are unwilling to share the rent values they receive or pay you can try talking with local real estate agents.
They may have knowledge of the rental values and be able to share rates without identifying specific people.
If you are unable to find out what similar parcels of land in your area are renting for you may find the starting point with the cash rent values reported by your state department of agriculture.
Pennsylvania's Annual Bulletin for instance reports average cash rents for crop land and pasture by county.
The values are provided by farmers and landowners through a survey.
So for counties where a value is not indicated using the rental rate from a nearby county can serve as a starting point for negotiations with potential renters.
How much are the taxes on the land?
This is a cost in addition to general maintenance for laneways, drainage, et cetera that needs to be built into a minimum renal fee.
The sum of your ownership costs needs to be covered.
Is there more than one party interested in renting the land you have available?
If so, what would they use it for?
Sometimes depending on the intended use you the owner may want to charge more or less.
For instance, if you as a landowner are passionate about organic agriculture you may be willing to rent land to an organic producer for less than what you would rent to someone using conventional methods.
You should still charge enough to cover your costs but to support certain production methods you may be willing to forgo some profit.
If there are multiple possible renters and use doesn't matter, determine the minimum rent based on expenses, determine what you'd like to receive in rent, and see who will pay that rate.
Negotiation can follow from there if needed.
Finally, not related to rental rate but still important you should have a written contract.
The contract, at its minimum, should spell out the rental rate, length of use, and any restrictions on use.