That’s a good question. I bought the farm about 10 years ago. In order for my dad to keep the farm I paid off his ex wife. So it was a quit claim deed and I took out a loan. At the time I think it was worth 500,00
Just be prepared that your father’s will probably still includes what he wanted to do with the farm. But he no longer owns it so that may cause some anger during settlement of the estate.
I’m leaning towards this now. If nothing else, you can offer to give them each a 5 acre parcel to live on, but even that is generous.
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- Liquidity discount. If you’re liquidity discount was only half of the prevailing market price at the time of the transaction, then that’s very reasonable in light of the circumstances. That’s different facts, then what we’ve been assuming of a discount from $1.5M to $250K. You took risk for 10 years and that risk has rewarded you. It would be unfair enrichment to split the property at today’s FMV among 5 people.
- To help me make my decision on the equitable distribution (today) of the transaction (from 10 years ago), I would do a counterfactual mental exercise. If instead of 3x price inflation in 10 years; instead, the property next to your farm dumped nuclear waste (the background plot from Fletch Lives), causing your property value to drop to $0, then would your [half]siblings help to defray your loss by reimbursing you $50k/each … y’know because “family” reasons? If not, then you have your answer on your present course.
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Is anyone currently farming on the property?
If the farm has been used for commercial farming for some/all of the past 10 years, have you been paid any rent by whoever is farming the property?
My dad has been farming the entire time. I’ve never been paid rent.
Does it make a difference. I guess it must or you would not have mentioned it. I’m the owner he is the operator.
The fact that you let your dad farm the land rent-free (who paid the property taxes?) certainly affects the terms you might seek in any deal with your siblings. It might not affect whether to pursue a deal as, in my mind at least, that decision is mostly driven by whether your dad sold you the land at much less than fair market value. But, if there is a deal, then it ought to reflect the fact that you got no rent for a decade or so.**
I should add that my earlier post was based on the assumption that you bought the farm quite recently and, therefore, got a huge bargain. You have since clarified that it was more like a decade ago and the farm was worth vastly less than $1.5mm at that time. I think there is still a case to be made that if your siblings now want to buy a share (they may not), then in the interests of family harmony you should try to work something out. But, that case is far less compelling than it would have been, had you bought the property recently and, thus, for more than $1mm below market value.
** By not charging rent, you may have increased whatever money your dad will have in his estate when he dies. Lots of variables there, and maybe there won’t be much of an estate anyhow. But, if there is an estate and the children are the heirs, then 4/5s of whatever your dad saved by not paying rent could wind up going to your siblings.
There won’t be any estate. Well maybe. He has about 140 head of cattle. And some farm machinery. My dad actually paid the property taxes. 1,000 acres in ND property taxes are under $3,000. Yet my quarter acre in Illinois are $17,000.
up in Wyoming where my friend had a hobby farm for some years, there’s a farmer’s joke - how do you retire from farming with a million dollars ?
A - you start with 2 million…
we partnered with some friends to buy a peach farm, rent it back to the farmer (another divorce), and put a conservation easement on the land so it can only be used for farming, not condos. By now 3 of the 5 marriages are dissolved, the farmer is retired and we’re still in negotiation for five years of back rent. Farmland is tough at the best of times, throw in some family squabbling and it’s a real party.
Before signing the partnership we took it to a lawyer friend, he had one look and said, ‘you do realize you’re never getting this money back ?’
we did it anyway, wanted the conservation easement and we’ve had twenty years of camping on the farm and picking peaches, had our value out of it…
InMotion - your family is nuts, I am sorry you have to deal with this nonsense. You own the farm, morally, legally, and practically. The rest of them can go pound sand…
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Agreed. You bought/own the land. Simple. You should retain it and your heirs should inherit it. If you sell it, the entire proceeds are yours. Anything else is the equivalent of your siblings deciding you should share/split your home, or your 401K, or your savings and investments with them … because (fill in the BS rationale).
Do not argue the point with them. Ignore their requests. No response is a response.
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ND and cattle screams west river to me, but not west enough to be on the Bakken or this would be a way bigger deal. Any row cropping? That impacts your land rental pricing.
Little Bro is welcome to work the land, but he is renting it or lease to own, which he will never be able to pay off at current land values. Sell it to him for $1,000,000 at 1.5x rental rates, he’ll have it paid off in 25 years…
When dad is done working the land, unless you really want to live there, or you have a chance at mineral rights payouts. Sell it, deduct the cost you incurred, plus the unpaid value of rent, plus a reasonable profit for taking the chance. Then argue over what’s left.
$250,000 mortgage, paid over 30 years is a final cost of $430,000ish @4%. Plus you never got paid rent which goes for $20/acre averaged over the last decade. There is another $200,000 of lost income for you (to date), assuming no row crops.
Now you only have a million left over, $760k to you and the other 4 can have $60k each.
You should get your costs (realized and opportunity) x 2, the longer you don’t get paid rent the less the siblings get.
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Its literally in the middle of the state
Mostly pasture land. They do have some row crop land so they can plant corn and hay for the cattle. My dad is getting to the point that he needs quite a bit of help from little brother.
I would never live there. It’s in the middle of no where.
quote=“Sulliesbrew, post:92, topic:1288649, full:true”]
ND and cattle screams west river to me, but not west enough to be on the Bakken or this would be a way bigger deal. Any row cropping? That impacts your land rental pricing.
Little Bro is welcome to work the land, but he is renting it or lease to own, which he will never be able to pay off at current land values. Sell it to him for $1,000,000 at 1.5x rental rates, he’ll have it paid off in 25 years…
When dad is done working the land, unless you really want to live there, or you have a chance at mineral rights payouts. Sell it, deduct the cost you incurred, plus the unpaid value of rent, plus a reasonable profit for taking the chance. Then argue over what’s left.
I like your idea. Kind of what I was thinking to is something like this deal you are proposing.
$250,000 mortgage, paid over 30 years is a final cost of $430,000ish @4%. Plus you never got paid rent which goes for $20/acre averaged over the last decade. There is another $200,000 of lost income for you (to date), assuming no row crops.
Now you only have a million left over, $760k to you and the other 4 can have $60k each.
You should get your costs (realized and opportunity) x 2, the longer you don’t get paid rent the less the siblings get.
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Can u start renting to Dad only? Generic lease agreement, month to month, rent for the cost of property taxes?
Be cleanly above board, no squatting from brother helping?
You forgot the opportunity cost of the 250K for ten years and didn’t compound the returns.
I’d add I think it was 680K above to your 760 (which is too low) …basically she sells for 1.5 and comes out equitably
I almost bought the farm the other day. Luckily it was just carb ice and the engine came back when I pulled carb heat. Phew.
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How’s the duck, goose and pheasant hunting?
As windy added, selling at $1.5 million really is a fair break even. I would layout all of these numbers with the siblings, showing your investment of $250,000 came with costs etc. Had you bought the neighboring property for that cost, here is where you would have been.
We also under calculated rental payments. Wells county has averaged for the last 5 years $59/acre cropland (assuming no irrigation), $19.20 for pasture and $22.20 for hay. Assuming a split of 25% hay and pasture, 40% row crop and the balance is building or wetlands, your annual rent is closer to $30,000/year. Split based on 1.4 acres/head on pasture land, equal land for hay production, balance in row crop.
Offer to sell the farm to an LLC or S corp split amongst the siblings, then require real payments on rents etc.
Family land is a real pain in the ass when it comes time do divvy it up. My in laws slowly sold it all of a 40 or 80 at a time.
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Wow. Thanks for doing the math for me. I think you are pretty close. You actually know how much pasture land per head of cattle.
Yes. I would like to do something like and llc or trust or whatever there is out there. My dad got an attorney that is totally against that. I think Mainly because my dad wants his legacy to hand down the family farm and it will keep operating. But I really didn’t think my brother is going to farm it. I bet he rents it all out.
He is really into antique tractors he has a whole shed full of the A,B,C,D John Deere you know what I mean. He even has two train engines and got his boilers license to operate them. He just wants to PLAY.
Anyway, lots to think about and figure out. I really don’t want to hurt my dad. But unfortunately I think it’s going to come to that.
Boo fucking hoo… your dad and your dad’s attorney have exactly zero say in any of this…personally I’d have it in an LLC for liability purposes already
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This!!! Your dad sold it. You bought it. If it hurts his feelings that you do not “give” it to whomever he chooses … AFTER he sold it … then hurt feelings it is. Your dad’s legacy is he sold (lost) his precious farm in a divorce.
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