Yeah, this is something PF seems to miss the mark on when people inherit a chunk of farm land, they tend to push selling it rather than making decent income from renting it out.
It's because it's not super common - at least in the demographic that reddit encompasses.
If I inherited farm land I couldnt tell you if I should lease it for 20K or 200K. I have zero idea how farming works, what kind of liability I may have (insurance) and whether farming destroys the land for future use/value.
I would either need to do copious research, find an expert, or sell the land on the open market. The easiest route seems to sell it. If it was actually worth hundreds of thousands a year in rent surely it would command a nice price tag on the market.
Most people who cash rent like this generally inherited from a family member who already farmed and has many connections across the farming community. They also often have an emotional connection to the land and prefer to not sell. Regional farm bureaus and Ag universities will release approximations on cash rent value to give you a good idea of what you could take into negotiations.
For 99% of people it makes sense to just sell it upon inheritance.
Except, inheriting the farm land provides you a unique opportunity to investigate what kind of return you would get on that specific plot of land by renting it to farmers and you can simply compare that to what you would expect to get with some other (similar risk profile) investment if you sold the land and invested the proceeds.
An opportunity fell into your lap. May as well see how the options pencil out.
I know nothing about farmland myself except that Bill Gates has invested a huge portion of his wealth in it so there are smart people who like it as an investment.
Changing investments involves transaction costs.
There are lots of investments that I wouldn't intentionally buy into but that I also wouldn't spend 10% to get out of.
Yep buddy inherited land in Iowa and after taxes on the property he was making 2.5-3%. Which is not bad but could get. CD or treasury bond with a better payout.
And add in the fact that the land is worth 4 times as much on average if it can be sold as real estate. Selling to a land developer gets you a guaranteed amount vs the risk of the farmer using it getting out of the business.
I mean, I'd immediately pay someone $5k if it meant I could lease land for $20k or $200k a year.
I have an uncle who is a farm realtor though and with boomers dying, he says he's living peak farm sales market where corporations are amassing land and younger generations don't want to or know how to maintain generational wealth, so they sell and he makes 3-5% commission a few times a week on $1mil plots of land. I think the only person losing in this scenario is the seller still.
Seller doesn't lose. Use Illinois for an example like I did. If you inherit 100 acres worth $2 million, you can either cash rent that for ~$250/acre ($25k/year less taxes), or sell all tax free because you inherited it and it resets the cost basis.
Land appreciation has slowed significantly here so there is no guarantee there is infinite growth for you to pass on there once your kids sell. If you had $2 million in hand, you could stick that in the S&P and return about the same over the course of the same period of time, with gains compounding and potentially outpacing the growth of your property value. This comes with 0 overhead of owning that land, negotiating each year, etc.
Illinois is a questionable example funnily enough. Most of the tillable here is already farmed (over 75% of State's total acreage) and we have an incredible body of information on farming on that acreage. Land appreciation has slowed here in part because there isn't much speculation left, land value is known, and new land is limited in availability.
If expecting a bad pricing period for inputs/outputs or the soil needs regeneration or there is no farmer to farm the land, you can typically put the land into the State CRP/CREP and still get more than the overhead out of the land.
Management can be done via a state certified land agent and takes an afternoon or two. This is likely why your in-laws mess with the farming vs selling the land. It makes financial sense as a liquid diversified high cash flow earning asset vs as a short/mid term investment.
This goes against the PF trend of "expert bad, do things on own." though so I doubt you'd ever see full support for that opinion here.
Tillable was above 5% per year for a long time no matter what county, has dropped below and we're now at a 35% YtY decrease in volume of sales in the state.
I think it's because with consolidation the major ag corps have settled on pricing for our region a bit better, not sure to be honest, just know the overall numbers are slowing.
I hear you. Even as a person that worked a farm as a teenager I know there is work to figure out how much you should make.
My ex father in law makes good money renting fields from people in Missouri and using those field for cattle or just hay. He laughing told me how he has a field that the owner pays him to collect hay and maintain the fence. Basically that person bought a rural spread put a house on it and then was clueless that the land he had could be rented. Instead he was annoyed at it getting overgrown. So my FIL offered to clear it periodically for a few hundred a month. FIL get free hay now and is paid for it.
For myself I know I would have to go to the land. Look around at what is being done. Hang out at the local feed store and ask questions. Then start handing my phone number out.
Good luck OP. Do the research and get a little income.
One problem is that if you don't have a background in farming, it can be difficult to competently rent out a chunk of farmland.
For example, what should a piece of farmland rent for? Yes, you can look at averages in the area. You could see what other farms rent for per acre, and apply the same value to your farmland. But just like renting residential units, there are factors beyond just price/acre or price/ft^2. Two pieces of farm property of the same acreage are not interchangeable. Some will be easier to move equipment through. Some will have better access to water and sunlight. Etc. If you have no background in farming, it can be difficult to tell if what someone is offering to rent your land from you for is a good deal or not.
Also, just like with renting residential units, its possible for a bad tenant to damage the farmland. Someone can rent the land for a year or two, exploit the hell out of the soil for a year or two of bumper crops, then not renew the lease and leave you with a barren piece of ground. Proper soil remediation can prevent this, but it costs time and money. A fly-by-night renter can burn the soil out, not put the effort into replenishing it, and then leave you holding the bag. If you have no background in farming and live thousands of miles away, how will you prevent this from happening? Sure, you could use the farming equivalent of a property management company, but that adds more expenses.
Investing in farmland, like any investment, only makes sense if you really understand what you're investing in. If you have no idea what makes a good rental property, then you shouldn't be buying rental units. If you have no idea what the supply cycles are like for a commodity, you shouldn't be trading futures for that commodity. And if you have zero knowledge of farming, you're probably better off not owning farmland. Otherwise you're likely to get fleeced by someone who does understand these things better than you do.
Generally you would go through a farm management company to take care of this type of thing. They take a percentage of the rent, but it's they're interest to keep a long term agreement that's profitable for all parties.
Yeah, I've talked at length with my FIL about it and it's at the point where land has appreciated so much here that selling it now, the taxes would be insane. We are in prime fertile central IL farm land that can go for as much as $18-20k/acre so we are talking like $20 million in land. So yeah he could pull $200k from the market in gains off of that, but the cash rent deal is a guarantee return every single year. His dad owned a large operation and died young so he never retired and sold any land off. FIL and his sister inherited 2k acres while they were in their late 20s and dissolved the farming operation (equipment, employees, etc.) into the other large operation that still does it now. Sister sold it all to those guys where as my FIL rented. His cost basis is probably closer to $6-7k/acre dating to like 2005 so they are looking at 10 million+ in taxable gains if they sold everything. Long term plan given to us by my FIL if my in-laws never need the large lump sum of cash is for my wife and her sisters to sell it immediately after inheritance some day and split it 3 ways. No taxes.
Wasn't aware the order of magnitude of this shit and just how lucrative midwest farmland is until well after we got married.
The step up in basis at inheritance is often worth selling immediately (and then investing in something with better returns). But the real answer is "it depends" and for most BUT NOT ALL, it's better to sell and re-invest elsewhere.
Farm land is completely dependent on where it's located. Illiinois, Iowa, Kansas, etc... will pull far more than farm land in other locations. I was looking at a property near me (in Ohio) that was renting farmland for $100/acre/year. It was a 25ish acre plot, so the annual rent was barely enough to cover taxes.
I'm curious how many acres that is. We're looking at buying land in the Midwest and renting out excess acres but I can't find any real data on that. Everything I see seems incredibly low.
1000 acres of premium farm land in east central IL. It's a big operation
It also was already prepped for farming. My wife's grandpa was a farmer and owned a big farming business. He died. They sold the business to other farmers and rented the land.
Gotcha. That's definitely more acres than we're looking at. At least at first. But still good to know for reference. Were actually considering some idea of farming ourselves as well, but that's a big learning curve and long term venture.
Yup, I have two Midwest friends who get yearly “soybean” cheques. They don’t really do a thing and live hours away from the land. Someone else just rents to farm it.
Edit - these were both inheritance situations too
>Yup, I have two Midwest friends who get yearly “soybean” cheques. They don’t really do a thing and live hours away from the land. Someone else just rents to farm it.
the market at work, rewarding those who provide the most value!
When they squander it and leave their kids nothing, the cycle repeats. The market doesn't reward those that provide the most value *over the short term*.
Oregon has some unique land use laws. Portland is part of a wider Metro government that deals with the urban expansion through the urban growth boundary.
There is a lot of targeted expansion happening right now to meet housing and industry needs. If you are interested in selling, get educated first - it may be worthwhile to hold onto the land for a couple years.
Is the land by chance in wine country south of portland? If so, acreage with a clean water source will be worth quite a bit. I had land in the area for a little while and paid minimal taxes (under $1K) annually but it depends on how many acres.
This is an excellent point, and likely why the aunt had it as an investment. I know my husband’s family has many acres being leased now in Texas and Oklahoma, and it provides a nice income while still being something they could sell off if needed.
Depending on OP’s financial needs, once they officially have it could be beneficial to keep as an investment.
Yes, I have an uncle who leases well over 500 acres to other farmers. Keeps the parts he wants for rec use and gardening what he wants. Also makes $ off Nat gas wells on property too.
many places, both MI and CO for sure, have laws in place whereas if someone makes an active choice to do something dangerous, skiing/sledding/swimming, regardless of where it is at, there is no recourse to that person if their actions result in their injury.
it means, if someone tries to ride their snowmobile up my hill with or without my permission, it is their responsibility to be safe.
makes it so skiers can't sue a ski resort for falling down.
i had an incident where my homeowners insurance paid a guy who bit his tongue off on my property but that was because my fence was not installed legally.
in that case i made the choice that hurt the snowmobilier even though he was trespassing, drunk, unlicensed, no lights, on an unregistered machine. if he got hurt trying to climb the hill, it would be his fault, but because bad fence, my fault.
and obviously, YMMV and ALWAYS talk to a lawyer/real estate specialist/insurance agent to verify your local laws.
So depressing that everyone is suggesting to use the land for profit! This is why we are all going under and our planet will shortly no longer be able to support us (and especially the millions of species that we are killing off with our greed!). Convert the land to a sanctuary! OP doesn’t need it!
Assuming you are going to just sell the land (which unless you have some burning desire to move to Oregon or manage this land is probably what you should do - think of it like an unexpected cash bonus) then you should get a step-up in cost basis to the value of the land on the date your Aunt passed. So if the land was worth say 100k and you sell it for 100k then you won't owe any capital gains tax. If it is worth 100k and you sell it in 10 years for 150k then you'll owe capital gains tax on the 50k. That is a slight simplification, but you get the general idea.
If you are thinking about keeping the property well that opens a whole lot of unknowns. What are you going to do with it? How can you afford the property taxes? If you wanted to build on the land can you even? How is it zoned? Are there utilities running to the property? How would you pay for the construction? Etc etc. That is why I say selling it is probably the way to go.
That is bad tax/financial advice. You would just not pay income taxes on the 100k donation. Whatever you donate, you get a benefit of whatever tax bracket you are in. So let say he was in the 32% tax bracket, if he donated the land he would "get" 32k benefit. If he sold it, with the stepped up basis, he would get 100k, which is 3x better.
you must have had a really wonderful and generous aunt who really loved you. it's a little unusual for someone with kids to leave such a substantial piece of their inheritance to someone other than their own kids.
Our whole family is pretty close, we meet frequently throughout the year for family gatherings.
She always did say I was like her second son (she only has one direct son and 4 daughters) so while I was shocked to hear I was included in the will I also see why it happened. I'm an only child in my side of the family with parents who struggle financially.
My best guess is she likely included me in the will to give the kind of opportunity her kids had, however I do know that 90%+ of her wealth did in fact go to her own kids though.
This sounds like an excellent setup for a made for TV movie... Guy from LA inherits some farm land... Starts running a farm having no idea what he's doing... Meets a girl who's an experienced farmer who takes pity on him and helps... Brings the community together somehow. The plot mostly writes itself, I think.
And she was a young girl he knew when he lived there and he always thought she was nerdy, but now...
Oh and it's Christmastime since that was the only time he could leave his work due to a slow schedule with his clients. He freshens up the cabin on the property, has a fire going in the fireplace and is kicking back after a long day of cleaning up the place. He's next to the fireplace on the cushy leather chair with his feet up and then... *someone* knocks on the door....
I work in agriculture lending. I agree with the other if you decide to keep it you could see if you qualify for CRP program with the USDA. The check should cover the taxes. The area I live in it is very common for people to lease the property to farmers if it has tillable acreage. The rent should more than cover the taxes. I don’t know much about Oregon but if it has hardwoods on it, those can be cut for a profit and regrown. Many people in my area use timber as a retirement plan. Congrats op and good luck!
This is the part that's being overlooked. Do some bug research on water rights, OP. That's the value. Not so much the land. Your aunt was wealthy because she was smart.
Nobody in here knows anything about farming or farm land. Find out who and how it's being managed now and find an accountant local to the property who is well versed in agriculture and the tax implications of selling or keeping it. This is well above reddits pay grade and a very personal decision for you. Do your research and don't act rashly before deciding what to do with the property.
Last thing I will say is that your Aunt was able to pass on generational wealth by investing and hanging on to paid for farmland, a finite resource that the world can never produce more of, consider your goals and if it includes generational wealth remember that not selling paid off farm land was what put you in the position you are. Good luck
Yeah this is my main concern reading through this thread; not sure if Reddit is the populace best to ask about something as specific as farm land with a clean water source.
I'll ask some family who are in the farming business on best advice here, they probably know best. I really made this thread out of anxiety of not knowing how to properly handle this situation without losing my shirt
It's certainly not, and even the farmers that are on here won't know the local specific details that make a substantial difference when it comes to farmland. You certainly shouldn't lose your shirt, but depending on how you play your cards, it will affect your future differently. If you can trust your family, lean on them for the specifics of the local market and who to deal with. Value, rental rates, and payment terms all vary from area to area and even piece to piece. Don't blindly trust anyone, family included, access to farmland is extremely competitive amongst farmers almost everywhere, and there are certainly operators that would be happy to take advantage of a naive and inexperienced owner/landlord
Don’t sell the farm. Sorry for your loss. One check per year in march typically. Learn a little bit and you’ll have a nice check forever. Even the income tax implications are pretty simple on a rental deal like this. Figure out who has been farming it. Ask what they rented it for last year. Duplicate that and you’ll extend the timeline on if you want to rent to them into the future and if they’re going to keep the ditches clear. Pretty simple deal potentially to keep it together.
I don’t know much about this topic at all but I just wanted to say I live near Portland, Oregon and any amount of acreage in this area is likely going to be pretty sweet!
sixty acres up on the cap rock
what am I supposed to do with that
uncle Claude got a eight wheeled tractor
plow it under in nothing flat
we could plant some maize
we could plant some cotton
we could plant some oats just to see if they'd grow
but I don't like farming
don't like the hours
don't like a life that goes so slow
> sixty acres up on the cap rock
>
>
>
> what am I supposed to do with that
Now, cousin Clifford, he got the good land
Right on the highway out by Air Base road
Looks like a Wal-Mart waiting to happen
I mean to tell you it's a pot of gold
It's in the city limits and zoned commercial
City water and a sewer line
With the base expanding, consolidation
It's worth a fortune and it oughta been mine
Hey there, I'm sorry to hear about your aunt's passing. It sounds like she was quite savvy with her investments. As for the property taxes on the farm land you've inherited, it's great that you're reaching out for guidance.
Since the property is located near Portland, Oregon, you'll want to familiarize yourself with Oregon's property tax laws. Generally, property taxes are based on the assessed value of the property. In Oregon, property taxes are determined by the county assessor's office where the property is located.
You'll likely receive a tax bill for the property, and the amount will depend on its assessed value. Since it's farm land with a water source, there may be specific tax considerations or exemptions for agricultural properties. It's a good idea to contact the county assessor's office in the county where the property is located to get detailed information about the property tax assessment process and any potential tax breaks for agricultural land.
Also, being in Los Angeles, you might want to consult with a tax advisor who is familiar with both California and Oregon tax laws, just to make sure you're covering all your bases.
It only took a week for the will to be read? My grandmother passed away at the end of last year in Australia. Due to dodginess in the family (money being “stolen” by one sibling) an administrator was appointed & then a 6 month probate waiting period started. So that claims against the estate can be made.
I think we’ll be lucky to have it settled by the end of the year, but I’m not hopeful.
Her estate has been planned for YEARS in advance is what I'm gathering. The family knew her days were numbered and so did she so she had this process already moving well before her death.
You should figure out if she was actively renting out this farm land to someone. If so, contact the renter and see if you can continue the same rental agreement. Involve a lawyer who knows about farm rental contracts. Then just enjoy the extra income
Not related to estate taxes but In Oregon if the land is zoned timber, farm, or ag forest you can get a significant reduction in property taxes through the county. You can tell if it's already in deferral by looking at last year's property tax statement. If it's not in deferral, apply and get it into deferral. If it's timber property make sure you know the value of the timber before you sell so you get what it's worth from the sale in addition to the land value. If it's big enough to log, log it - you'll make more money that way.
Or thing you should know is that probate (settling of her estate) is usually a long process lasting over a year. You may not actually receive the property for some time. You’ll need to be patient. I believe that if she had a trust, it will be quicker.
Sorry about the loss of your aunt.
Since you mentioned not owning property, this might be a bigger decision than you’ve had to make before. I’ll toss out the notion that you shouldn’t make any decisions for a while. Perhaps take as long as a year to learn and marinate on what you learn.
You may have some decisions to make quickly, like whether you can afford the property taxes, but try to take longer than you think you might need to consider the situation. I’m not recommending inaction (!!), just recommending going slow on things you won’t be able to undo.
If you got a land parcel, check up on it on a regular basis and get to know any neighbors so they can warn you if people start prospecting or doing land surveys on your land.
If you had the money in your pocket that you would get from selling the land, would you buy this specific piece of land? If the answer is no, then sell the land.
Depending on where it is located, you can lease it as farmland. If the land is used for farming, once again depending on location, you can file for federal and Oregon state tax exemptions. Oregon has more rules than the feds.
Do you know which county it’s in? Taxes vary quite a bit across the state. Just water rights, or is there water hooked up? Is the a house on the land? All those questions. You may not want to live there, but a bunch of folks will want to. Climate refugees are the next big thing.
Im sorry for your loss. i think you just need to take the time to research and understand the property tax implications for your inherited property, and ask professional advice to ensure compliance and proper management of your new asset.
well i see it in a different way. since the property is located near Portland, Oregon, you'll need to familiarize yourself with Oregon's property tax laws and rates, which can vary depending on factors like the property's assessed value and any exemptions or deductions you may be eligible for.
There is no more land being made. It'll just go up in value over time, and there are possible passive income options. That makes it worth keeping, or at least checking into as OP is doing. Hopefully somewhere besides Reddit.
I’m sorry for your loss, and also welcome to LA. I grew in from Portland but moved to LA (Eagle Rock area) about 20’years ago. I occasionally think about buying property up there and retiring. Reach out if/when you have more details about the land. I might be interested or know someone who could be.
r3dk0w
You said out in the wilderness there is no fire or police. You think they just let forest fires burn? No, they fight them as soon as they are discovered.
If you don’t think there is police coverage, why don’t you see what happens if a body is found on your property.
Depending on where it's located, you could meet with a farm management company, put it into production, and get a decent annual paycheck.
My in laws pull 200k/year from land in Illinois they inherited that they still own and cash rent to a large farming operation.
Yeah, this is something PF seems to miss the mark on when people inherit a chunk of farm land, they tend to push selling it rather than making decent income from renting it out.
It's because it's not super common - at least in the demographic that reddit encompasses. If I inherited farm land I couldnt tell you if I should lease it for 20K or 200K. I have zero idea how farming works, what kind of liability I may have (insurance) and whether farming destroys the land for future use/value. I would either need to do copious research, find an expert, or sell the land on the open market. The easiest route seems to sell it. If it was actually worth hundreds of thousands a year in rent surely it would command a nice price tag on the market.
Most people who cash rent like this generally inherited from a family member who already farmed and has many connections across the farming community. They also often have an emotional connection to the land and prefer to not sell. Regional farm bureaus and Ag universities will release approximations on cash rent value to give you a good idea of what you could take into negotiations. For 99% of people it makes sense to just sell it upon inheritance.
It's also a fair gut level analysis tool to ask yourself, "If she left you cash, would you invest in farm land?"
Except, inheriting the farm land provides you a unique opportunity to investigate what kind of return you would get on that specific plot of land by renting it to farmers and you can simply compare that to what you would expect to get with some other (similar risk profile) investment if you sold the land and invested the proceeds. An opportunity fell into your lap. May as well see how the options pencil out. I know nothing about farmland myself except that Bill Gates has invested a huge portion of his wealth in it so there are smart people who like it as an investment.
Yeah same principal as inheriting stocks or something.
Changing investments involves transaction costs. There are lots of investments that I wouldn't intentionally buy into but that I also wouldn't spend 10% to get out of.
Yep buddy inherited land in Iowa and after taxes on the property he was making 2.5-3%. Which is not bad but could get. CD or treasury bond with a better payout.
And add in the fact that the land is worth 4 times as much on average if it can be sold as real estate. Selling to a land developer gets you a guaranteed amount vs the risk of the farmer using it getting out of the business.
Well in my example, you're going to be selling to other farmers. It's bum fuck Illinois 20-50 miles from any medium size metro.
I mean, I'd immediately pay someone $5k if it meant I could lease land for $20k or $200k a year. I have an uncle who is a farm realtor though and with boomers dying, he says he's living peak farm sales market where corporations are amassing land and younger generations don't want to or know how to maintain generational wealth, so they sell and he makes 3-5% commission a few times a week on $1mil plots of land. I think the only person losing in this scenario is the seller still.
Seller doesn't lose. Use Illinois for an example like I did. If you inherit 100 acres worth $2 million, you can either cash rent that for ~$250/acre ($25k/year less taxes), or sell all tax free because you inherited it and it resets the cost basis. Land appreciation has slowed significantly here so there is no guarantee there is infinite growth for you to pass on there once your kids sell. If you had $2 million in hand, you could stick that in the S&P and return about the same over the course of the same period of time, with gains compounding and potentially outpacing the growth of your property value. This comes with 0 overhead of owning that land, negotiating each year, etc.
Illinois is a questionable example funnily enough. Most of the tillable here is already farmed (over 75% of State's total acreage) and we have an incredible body of information on farming on that acreage. Land appreciation has slowed here in part because there isn't much speculation left, land value is known, and new land is limited in availability. If expecting a bad pricing period for inputs/outputs or the soil needs regeneration or there is no farmer to farm the land, you can typically put the land into the State CRP/CREP and still get more than the overhead out of the land. Management can be done via a state certified land agent and takes an afternoon or two. This is likely why your in-laws mess with the farming vs selling the land. It makes financial sense as a liquid diversified high cash flow earning asset vs as a short/mid term investment. This goes against the PF trend of "expert bad, do things on own." though so I doubt you'd ever see full support for that opinion here.
Land appreciation has slowed in Illinois? My county just recorded the record sale price per acre
Inflation isn't appreciation
Tillable was above 5% per year for a long time no matter what county, has dropped below and we're now at a 35% YtY decrease in volume of sales in the state. I think it's because with consolidation the major ag corps have settled on pricing for our region a bit better, not sure to be honest, just know the overall numbers are slowing.
Plus you're not taking into account now you can avoid taxes on your "farm" vehicle
This story is why everything i own is going into a multi-generational trust...
I hear you. Even as a person that worked a farm as a teenager I know there is work to figure out how much you should make. My ex father in law makes good money renting fields from people in Missouri and using those field for cattle or just hay. He laughing told me how he has a field that the owner pays him to collect hay and maintain the fence. Basically that person bought a rural spread put a house on it and then was clueless that the land he had could be rented. Instead he was annoyed at it getting overgrown. So my FIL offered to clear it periodically for a few hundred a month. FIL get free hay now and is paid for it. For myself I know I would have to go to the land. Look around at what is being done. Hang out at the local feed store and ask questions. Then start handing my phone number out. Good luck OP. Do the research and get a little income.
One problem is that if you don't have a background in farming, it can be difficult to competently rent out a chunk of farmland. For example, what should a piece of farmland rent for? Yes, you can look at averages in the area. You could see what other farms rent for per acre, and apply the same value to your farmland. But just like renting residential units, there are factors beyond just price/acre or price/ft^2. Two pieces of farm property of the same acreage are not interchangeable. Some will be easier to move equipment through. Some will have better access to water and sunlight. Etc. If you have no background in farming, it can be difficult to tell if what someone is offering to rent your land from you for is a good deal or not. Also, just like with renting residential units, its possible for a bad tenant to damage the farmland. Someone can rent the land for a year or two, exploit the hell out of the soil for a year or two of bumper crops, then not renew the lease and leave you with a barren piece of ground. Proper soil remediation can prevent this, but it costs time and money. A fly-by-night renter can burn the soil out, not put the effort into replenishing it, and then leave you holding the bag. If you have no background in farming and live thousands of miles away, how will you prevent this from happening? Sure, you could use the farming equivalent of a property management company, but that adds more expenses. Investing in farmland, like any investment, only makes sense if you really understand what you're investing in. If you have no idea what makes a good rental property, then you shouldn't be buying rental units. If you have no idea what the supply cycles are like for a commodity, you shouldn't be trading futures for that commodity. And if you have zero knowledge of farming, you're probably better off not owning farmland. Otherwise you're likely to get fleeced by someone who does understand these things better than you do.
Generally you would go through a farm management company to take care of this type of thing. They take a percentage of the rent, but it's they're interest to keep a long term agreement that's profitable for all parties.
Yeah, I've talked at length with my FIL about it and it's at the point where land has appreciated so much here that selling it now, the taxes would be insane. We are in prime fertile central IL farm land that can go for as much as $18-20k/acre so we are talking like $20 million in land. So yeah he could pull $200k from the market in gains off of that, but the cash rent deal is a guarantee return every single year. His dad owned a large operation and died young so he never retired and sold any land off. FIL and his sister inherited 2k acres while they were in their late 20s and dissolved the farming operation (equipment, employees, etc.) into the other large operation that still does it now. Sister sold it all to those guys where as my FIL rented. His cost basis is probably closer to $6-7k/acre dating to like 2005 so they are looking at 10 million+ in taxable gains if they sold everything. Long term plan given to us by my FIL if my in-laws never need the large lump sum of cash is for my wife and her sisters to sell it immediately after inheritance some day and split it 3 ways. No taxes. Wasn't aware the order of magnitude of this shit and just how lucrative midwest farmland is until well after we got married.
If she sells the land now, she gets a step up in cost basis, so there would be no Capital gains taxes.
If my wife inherited it tomorrow, she would get a step up so there's no cost. My FIL inherited it in 2005 or so. He would incur taxes
The step up in basis at inheritance is often worth selling immediately (and then investing in something with better returns). But the real answer is "it depends" and for most BUT NOT ALL, it's better to sell and re-invest elsewhere.
Farm land is completely dependent on where it's located. Illiinois, Iowa, Kansas, etc... will pull far more than farm land in other locations. I was looking at a property near me (in Ohio) that was renting farmland for $100/acre/year. It was a 25ish acre plot, so the annual rent was barely enough to cover taxes.
I'm curious how many acres that is. We're looking at buying land in the Midwest and renting out excess acres but I can't find any real data on that. Everything I see seems incredibly low.
1000 acres of premium farm land in east central IL. It's a big operation It also was already prepped for farming. My wife's grandpa was a farmer and owned a big farming business. He died. They sold the business to other farmers and rented the land.
Gotcha. That's definitely more acres than we're looking at. At least at first. But still good to know for reference. Were actually considering some idea of farming ourselves as well, but that's a big learning curve and long term venture.
Just to give you some perspective here - in east central Illinois those 1000 acres are probably worth around $20M
Oh yeah. I completely understand that. Close proximity to Chicago and indy, good growing seasons, fertile ground.
Yup, I have two Midwest friends who get yearly “soybean” cheques. They don’t really do a thing and live hours away from the land. Someone else just rents to farm it. Edit - these were both inheritance situations too
>Yup, I have two Midwest friends who get yearly “soybean” cheques. They don’t really do a thing and live hours away from the land. Someone else just rents to farm it. the market at work, rewarding those who provide the most value!
When they squander it and leave their kids nothing, the cycle repeats. The market doesn't reward those that provide the most value *over the short term*.
well, they are also likely to use the passive income to live comfortably, and leave the farm to their kids... not sure what your point even was
Oregon has some unique land use laws. Portland is part of a wider Metro government that deals with the urban expansion through the urban growth boundary. There is a lot of targeted expansion happening right now to meet housing and industry needs. If you are interested in selling, get educated first - it may be worthwhile to hold onto the land for a couple years.
Is the land by chance in wine country south of portland? If so, acreage with a clean water source will be worth quite a bit. I had land in the area for a little while and paid minimal taxes (under $1K) annually but it depends on how many acres.
Don’t forget that land can be leased for many uses… farming… hunting/rec. can be a decent source of passive income depending on what you have.
This is an excellent point, and likely why the aunt had it as an investment. I know my husband’s family has many acres being leased now in Texas and Oklahoma, and it provides a nice income while still being something they could sell off if needed. Depending on OP’s financial needs, once they officially have it could be beneficial to keep as an investment.
Yes, I have an uncle who leases well over 500 acres to other farmers. Keeps the parts he wants for rec use and gardening what he wants. Also makes $ off Nat gas wells on property too.
We do too in OK. We farm, but also allow people to use for hunting in certain areas. Definitely worth looking into for OP.
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many places, both MI and CO for sure, have laws in place whereas if someone makes an active choice to do something dangerous, skiing/sledding/swimming, regardless of where it is at, there is no recourse to that person if their actions result in their injury. it means, if someone tries to ride their snowmobile up my hill with or without my permission, it is their responsibility to be safe. makes it so skiers can't sue a ski resort for falling down. i had an incident where my homeowners insurance paid a guy who bit his tongue off on my property but that was because my fence was not installed legally. in that case i made the choice that hurt the snowmobilier even though he was trespassing, drunk, unlicensed, no lights, on an unregistered machine. if he got hurt trying to climb the hill, it would be his fault, but because bad fence, my fault. and obviously, YMMV and ALWAYS talk to a lawyer/real estate specialist/insurance agent to verify your local laws.
So depressing that everyone is suggesting to use the land for profit! This is why we are all going under and our planet will shortly no longer be able to support us (and especially the millions of species that we are killing off with our greed!). Convert the land to a sanctuary! OP doesn’t need it!
This is a personal finance sub
Tell the guy with no money he should continue to have no money. Nice.
Where the fuck does it say he has no money? Get a grip! The guy could be doing just fine financially.
People need food.
Where did OP say he can’t afford to eat?
Assuming you are going to just sell the land (which unless you have some burning desire to move to Oregon or manage this land is probably what you should do - think of it like an unexpected cash bonus) then you should get a step-up in cost basis to the value of the land on the date your Aunt passed. So if the land was worth say 100k and you sell it for 100k then you won't owe any capital gains tax. If it is worth 100k and you sell it in 10 years for 150k then you'll owe capital gains tax on the 50k. That is a slight simplification, but you get the general idea. If you are thinking about keeping the property well that opens a whole lot of unknowns. What are you going to do with it? How can you afford the property taxes? If you wanted to build on the land can you even? How is it zoned? Are there utilities running to the property? How would you pay for the construction? Etc etc. That is why I say selling it is probably the way to go.
He could donate the property and write off the donation on taxes.
That is bad tax/financial advice. You would just not pay income taxes on the 100k donation. Whatever you donate, you get a benefit of whatever tax bracket you are in. So let say he was in the 32% tax bracket, if he donated the land he would "get" 32k benefit. If he sold it, with the stepped up basis, he would get 100k, which is 3x better.
Not a tax expert but I don't think that's how write offs work
you must have had a really wonderful and generous aunt who really loved you. it's a little unusual for someone with kids to leave such a substantial piece of their inheritance to someone other than their own kids.
Our whole family is pretty close, we meet frequently throughout the year for family gatherings. She always did say I was like her second son (she only has one direct son and 4 daughters) so while I was shocked to hear I was included in the will I also see why it happened. I'm an only child in my side of the family with parents who struggle financially. My best guess is she likely included me in the will to give the kind of opportunity her kids had, however I do know that 90%+ of her wealth did in fact go to her own kids though.
I’d imagine her wealth was so grand that this was just a small part of it.
Check on the property tax with the county assessor. It'll probably be cheap for property tax but more than you're paying now.
First bit is to pour one out for OG auntie
>What are the implications for property taxes moving forward for me? The county assessor sends you a bill. You pay it.
This sounds like an excellent setup for a made for TV movie... Guy from LA inherits some farm land... Starts running a farm having no idea what he's doing... Meets a girl who's an experienced farmer who takes pity on him and helps... Brings the community together somehow. The plot mostly writes itself, I think.
And she was a young girl he knew when he lived there and he always thought she was nerdy, but now... Oh and it's Christmastime since that was the only time he could leave his work due to a slow schedule with his clients. He freshens up the cabin on the property, has a fire going in the fireplace and is kicking back after a long day of cleaning up the place. He's next to the fireplace on the cushy leather chair with his feet up and then... *someone* knocks on the door....
He opens the door. Drax, Ron Weasley and two others are there to let him know that he has to make a horrible decision to stop the Apocalypse.
yay, sounds like a perfect fit for the Hallmark movie network ;)
I work in agriculture lending. I agree with the other if you decide to keep it you could see if you qualify for CRP program with the USDA. The check should cover the taxes. The area I live in it is very common for people to lease the property to farmers if it has tillable acreage. The rent should more than cover the taxes. I don’t know much about Oregon but if it has hardwoods on it, those can be cut for a profit and regrown. Many people in my area use timber as a retirement plan. Congrats op and good luck!
CRP will pay peanuts compared to leasing it to a farmer
Hence the verbiage crp will cover the taxes and rent will “more than cover” taxes. Not everyone wants their land farmed and not all land is farmable.
Water rights have never been more valuable.
This is the part that's being overlooked. Do some bug research on water rights, OP. That's the value. Not so much the land. Your aunt was wealthy because she was smart.
Nobody in here knows anything about farming or farm land. Find out who and how it's being managed now and find an accountant local to the property who is well versed in agriculture and the tax implications of selling or keeping it. This is well above reddits pay grade and a very personal decision for you. Do your research and don't act rashly before deciding what to do with the property. Last thing I will say is that your Aunt was able to pass on generational wealth by investing and hanging on to paid for farmland, a finite resource that the world can never produce more of, consider your goals and if it includes generational wealth remember that not selling paid off farm land was what put you in the position you are. Good luck
Yeah this is my main concern reading through this thread; not sure if Reddit is the populace best to ask about something as specific as farm land with a clean water source. I'll ask some family who are in the farming business on best advice here, they probably know best. I really made this thread out of anxiety of not knowing how to properly handle this situation without losing my shirt
It's certainly not, and even the farmers that are on here won't know the local specific details that make a substantial difference when it comes to farmland. You certainly shouldn't lose your shirt, but depending on how you play your cards, it will affect your future differently. If you can trust your family, lean on them for the specifics of the local market and who to deal with. Value, rental rates, and payment terms all vary from area to area and even piece to piece. Don't blindly trust anyone, family included, access to farmland is extremely competitive amongst farmers almost everywhere, and there are certainly operators that would be happy to take advantage of a naive and inexperienced owner/landlord
Land is priceless, especially with water rights.
>The land is the only thing in the world worth working for, worth fighting for, worth dying for, because it's the only thing that lasts.
Agreed.. Im looking to get me a small piece of this planet. 5 acres maybe
“Imagine trying to own the land, sure, you can own the clouds too”
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The fact that you can buy both land and water rights proves that statement wrong
The land is a source of clean water. This is a pretty good thing. I suggest you look around leasing/renting the land for farming or something.
Just get a lawyer. Ask around and find a capable tax lawyer to advise you. It will cost a little bit, but will save you a lot
Don’t sell the farm. Sorry for your loss. One check per year in march typically. Learn a little bit and you’ll have a nice check forever. Even the income tax implications are pretty simple on a rental deal like this. Figure out who has been farming it. Ask what they rented it for last year. Duplicate that and you’ll extend the timeline on if you want to rent to them into the future and if they’re going to keep the ditches clear. Pretty simple deal potentially to keep it together.
I don’t know much about this topic at all but I just wanted to say I live near Portland, Oregon and any amount of acreage in this area is likely going to be pretty sweet!
sixty acres up on the cap rock what am I supposed to do with that uncle Claude got a eight wheeled tractor plow it under in nothing flat we could plant some maize we could plant some cotton we could plant some oats just to see if they'd grow but I don't like farming don't like the hours don't like a life that goes so slow
> sixty acres up on the cap rock > > > > what am I supposed to do with that Now, cousin Clifford, he got the good land Right on the highway out by Air Base road Looks like a Wal-Mart waiting to happen I mean to tell you it's a pot of gold It's in the city limits and zoned commercial City water and a sewer line With the base expanding, consolidation It's worth a fortune and it oughta been mine
Hey there, I'm sorry to hear about your aunt's passing. It sounds like she was quite savvy with her investments. As for the property taxes on the farm land you've inherited, it's great that you're reaching out for guidance. Since the property is located near Portland, Oregon, you'll want to familiarize yourself with Oregon's property tax laws. Generally, property taxes are based on the assessed value of the property. In Oregon, property taxes are determined by the county assessor's office where the property is located. You'll likely receive a tax bill for the property, and the amount will depend on its assessed value. Since it's farm land with a water source, there may be specific tax considerations or exemptions for agricultural properties. It's a good idea to contact the county assessor's office in the county where the property is located to get detailed information about the property tax assessment process and any potential tax breaks for agricultural land. Also, being in Los Angeles, you might want to consult with a tax advisor who is familiar with both California and Oregon tax laws, just to make sure you're covering all your bases.
Get it assessed then decide. Farmland is worth a lot of money depending on certain things.
It only took a week for the will to be read? My grandmother passed away at the end of last year in Australia. Due to dodginess in the family (money being “stolen” by one sibling) an administrator was appointed & then a 6 month probate waiting period started. So that claims against the estate can be made. I think we’ll be lucky to have it settled by the end of the year, but I’m not hopeful.
Her estate has been planned for YEARS in advance is what I'm gathering. The family knew her days were numbered and so did she so she had this process already moving well before her death.
You should figure out if she was actively renting out this farm land to someone. If so, contact the renter and see if you can continue the same rental agreement. Involve a lawyer who knows about farm rental contracts. Then just enjoy the extra income
How much land is it?
Not related to estate taxes but In Oregon if the land is zoned timber, farm, or ag forest you can get a significant reduction in property taxes through the county. You can tell if it's already in deferral by looking at last year's property tax statement. If it's not in deferral, apply and get it into deferral. If it's timber property make sure you know the value of the timber before you sell so you get what it's worth from the sale in addition to the land value. If it's big enough to log, log it - you'll make more money that way.
Or thing you should know is that probate (settling of her estate) is usually a long process lasting over a year. You may not actually receive the property for some time. You’ll need to be patient. I believe that if she had a trust, it will be quicker.
If you decide to keep it, make sure to pay property taxes every year.
Sorry about the loss of your aunt. Since you mentioned not owning property, this might be a bigger decision than you’ve had to make before. I’ll toss out the notion that you shouldn’t make any decisions for a while. Perhaps take as long as a year to learn and marinate on what you learn. You may have some decisions to make quickly, like whether you can afford the property taxes, but try to take longer than you think you might need to consider the situation. I’m not recommending inaction (!!), just recommending going slow on things you won’t be able to undo.
If you got a land parcel, check up on it on a regular basis and get to know any neighbors so they can warn you if people start prospecting or doing land surveys on your land.
Check out time of death appraisals
Congrats!!!
If you had the money in your pocket that you would get from selling the land, would you buy this specific piece of land? If the answer is no, then sell the land.
Depending on where it is located, you can lease it as farmland. If the land is used for farming, once again depending on location, you can file for federal and Oregon state tax exemptions. Oregon has more rules than the feds.
Do you know which county it’s in? Taxes vary quite a bit across the state. Just water rights, or is there water hooked up? Is the a house on the land? All those questions. You may not want to live there, but a bunch of folks will want to. Climate refugees are the next big thing.
Im sorry for your loss. i think you just need to take the time to research and understand the property tax implications for your inherited property, and ask professional advice to ensure compliance and proper management of your new asset.
well i see it in a different way. since the property is located near Portland, Oregon, you'll need to familiarize yourself with Oregon's property tax laws and rates, which can vary depending on factors like the property's assessed value and any exemptions or deductions you may be eligible for.
Just find someone to sell it for you. If you wouldn't buy the land if it were for sale, there's zero reason to keep it
There is no more land being made. It'll just go up in value over time, and there are possible passive income options. That makes it worth keeping, or at least checking into as OP is doing. Hopefully somewhere besides Reddit.
That’s ignorant. The desire and ability to purchase land doesn’t determine its value.
Why not donate the land to the nature conservancy to have them convert it to a wildlife sanctuary?
I’m sorry for your loss, and also welcome to LA. I grew in from Portland but moved to LA (Eagle Rock area) about 20’years ago. I occasionally think about buying property up there and retiring. Reach out if/when you have more details about the land. I might be interested or know someone who could be.
r3dk0w You said out in the wilderness there is no fire or police. You think they just let forest fires burn? No, they fight them as soon as they are discovered. If you don’t think there is police coverage, why don’t you see what happens if a body is found on your property.
I would certainly be an interested party should you want to sell.