Farm next door for sale- I am priced out of the market.

[Wcross]

I just learned my neighbor is selling his farm. It is a small one (68 acres) and has two chicken barns with a Tyson chicken contract. Asking price? 600,000.00 for the whole place. The barns will throw off roughly between 40-50k a year. The chicken contract can be cancelled at either parties request at any time.
The land is not cleared and its hilly. There is a doublewide mobile home on the property. I talked to his agent about buying 20 acres of his land that adjoins mine. I asked what price range I was looking at and was quoted between 4 and 10k an acre!!!!!!!!
I paid 2400 an acre 4 years ago for cleared productive pasture land! I was willing to go as high as 3k and acre.
I don't know who is going to be able to make a go of his place. If someone had 600k to invest they could do better than a 9% return on their cash. They will have to WORK for the 9% return they will get with the chicken business. (It's a LOT of work and a LOT of risk).
They will not be able to run many cattle on the land unless they have a hay field nearby to feed them over the winter. He only has about 20 acres in pasture out of the 68 and the cows will have to use that in the summer.
Selling the place off for a subdivision is not likely. There is no city water or sewer lines. As I said the place is hilly, at some points a 45 degree down angle.
I guess I'm just ranting a bit- The guy paid less than 200k for it in 2000 and has made absolutely no improvements, in fact it has gone downhill with overgrowth.
The profits from the chicken barns has not increased at all. For just sitting on the place for 6 years he priced it at a 300% profit.

[hedgehog]

1. Maybe check back if its still for sale in a few months.

A lot of people are delusional when it comes to real estate prices.

[Egalitariat]

2. Asking prices are just asking prices

In Tennessee, we hope for a "Yankee coming south" when we sell land. Some people hope for a "greater fool". He might be just fishing.

You shouldn't be afraid to offer what you think it's worth.

[n2doc]

3. Sounds like a lot of sellers round here

How does his price compare to other farms for sale in the area? It would seem amazing that prices outside of the coasts would have gone up so much...

[1932]

4. Keep us posted. I'd like to know if he gets that much for the land.

It's clear to me that residential real estate prices are driven by a sense among buyers that prices will keep going up and by banks who are willing to give people loans they know the buyers can't afford.

I'm curious whether this extends to farm land.

The economic calculatioin has to be so much more rational with farm land, as you revealed in your post. I just don't see how people can get caught up in the bubble mentality with farm land.

[Grinchie]

30. It's not the Farmers being irrational

It's non farmers that bought during the real estate boom, and now they are stuck with land they cannot flip.

Also, lots of Developers bought up farmland with the hopes of development in the future, but now that the bubble burst, need to unload it.

Im my opinion, if you cannot purchase the land outright, with cash, then it's a losing proposition, because if you are forced to produce and need to take on debt to do it, then you are stuck in the modern agricultural mindset due to requirements from the lenders. They are the ones who demand the chemicals, tractors and fertilizers.

If you are free to experiment, you'll have a much easier time and not be put under too much stress. You won't have to break your back for the bank either.

[ScreamingMeemie]

5. Unfortunately, the agent has to list at the price the seller wants him/her

to... not the most probable price. Keep your eye on it. We just looked at a house that had absolutely no updates (estate sale) and yet was on the high end of the market. The children say it was "custom" because it was custom built 30+ years ago.

[JDPriestly]

6. Be patient. Chances are this is good for you.

There are three possibilities. The first is that the property will be sold for $600,000. The purchaser will either go broke or, if he or she is very wealthy, hold the property as an investment or invest in it and improve it. If he or she holds the property, you may be able to persuade him or her to sell it to you after a couple of years. If the buyer invests in it, his or her investment may improve the value of your property and you will gain. If the buyer goes broke, it will be on the market again. Watch for a foreclosure sale. The worst scenario here is that a corporate investor buys the property, exploits and ruins it. Watch out for this possibility. The best strategy in that case may be to sell to the corporation yourself and buy elsewhere.

The second possibility is that the seller will accept an offer from a buyer for a lower price before you get a chance to bid for a lower price yourself. Don't let this happen. Go make an offer to your neighbor now for what you honestly think it is worth. Do it in a friendly way. Let your neighbor know you are not trying to discourage or insult him or her, but you'd sincerely like a chance to buy the property and can only afford to spend so much. Tell the neighbor why you think the property is only worth so much. Tell the neighbor whether you plan to pay cash or how you would finance your purchase.

The third possibility is that the seller won't be able to sell the property at all, and will lower the price to a really reasonable price.

Actually, in all but the second case, you gain. If the property goes for a really high price even to a corporate buyer, it means your property will be viewed as worth more. In the third possibility, you'll get the property if you stay alert. In the second possibility you haven't lost anything you have. In any case, if you get a new neighbor, I hope the neighbor is good and takes care of the property.

[fasttense]

7. Bought some cleared pasture land in 2000 for about $2,500

an acre. Went to buy some adjoining hilly land in 2005, it cost $7,000 an acre and the taxes went up. Thanks repukes for the great economy.

[Wcross]

9. fasttense- what county are you in? (be vague)

I am just curious what county you call home in Tennessee? I am in Bedford county (wartrace area). We haven't really seen a big leap in prices until recently. Yes, the taxes are going up considerably! (yikes)

[Kali]

8. Asking doesn't mean he will get it, but if you are anything like

us it doesn't matter if you have anything on it even water.

We are getting a huge influx of 20 and 40 acre ranchette idiots from California - and I do mean idiots. They immediately blade off the native vegetation so that their fat spoiled horsies (that never get used) don't eat any poison weeds - which of course are stimulated by overgrazing by horses and lots of bare ground. They want paved roads for their shiny new duallie trucks and suv's, trash pick up, and other amenities and yet the reason they moved here was to get away from high prices and taxes...um it isn't FREE ya know! Then they let their dogs run and wonder why "coyotes" get them (lots of ranchers just shoot them and don't say anything). Don't get me started on recreational atv traffic.

And I bet 95% of them are repukes.

[Wcross]

10. LOL! We get some funny charactors here too!

One place nearby a nice new home was put up on 15 acres. The guy fences it all in for his two horses. He is out there every weekend mowing the damn pasture with his new John Deere tractor. I don't know what he feeds his horses but I have never seen them running in that pasture.
Another group of houses were put in on 5 acre lots and these idiots are mowing the entire property! Why?
Oh, don't get me started about people that buy one acre lots and figure they need to own an ATV because they live in "the country". They soon find out that people that own land do not feel obligated to let them tear up their hay fields. They end up riding on the local roads which is illegal in Tennessee. I almost killed some this weekend when they came around a 90 degree turn hugging my side of the road. Four people on one ATV (two adults a 2-3 year old and an infant).

[lastout]

15. I live about 60 mi. north of Atlanta--- investors from ATL are driving up

prices like crazy--- land sold in 1999 for $1500.00/ac. is now in the $10,000.00--12,000/ac.
it's insane-- land prices can go up AND DOWN --- save money and wait on the next "crash"
meanwhile,all this influx of people means more services "like Atlanta has" since that is what they are use to. they are also use to high taxes so they don't complain like the locals-----fwiw-----lastout

[Grinchie]

31. Mowing is an important management practice.

Sometimes you need to know back bad grass when it is starting to seed. Sometimes you want to prepare for wildflowers. Sometimes you want to mulch the grass for green manure. Sometimes you want to be able to walk the property and see what's there. Sometimes you want to lay irrigation pipe and more to make it easier. Sometimes you mow to remove fuel for upcoming fire season.

Where I am now, if you don't mow, you'd neck deep in overgrowth in 6 weeks.

I use a regime of heavy mowing when I'm reclaiming land that has been unused for many years, has lots of branches or is uneven and has poor drainage. Mowing will grind up the branches, allow smothered vegetation to show itself, and smooth out the rough patches and expose other hazrds that I would otherwise not be aware of. After a few cycles, I see if it is doing good or bad and determine whether I need to continue or not.

I usually stop when it's nice and tipy, and let it grow back to recover and rejuvinate the soil.

My point is that mowing is a very important management tool when you don't have cows or other ruminants.

[momzno1]

11. Real Estate is Tanking all over the country

don't worry, nobody is buying now, and no one is building either. the market is tanking so in a 8 months or so, or maybe in the dead of winter, make a really low offer on 20 acres and you may be surprised
I read this for a daily dose of doom and gloom
http://thehousingbubbleblog.com/

[Coyote_Bandit]

12. Make your offer

for the low end of what you are willing to pay. Define exactly what property you want to buy. And attach an expiration date. You might be surprised to find yourself buying it.

Obviously there are a lot of factors that are relevant to the fair value of the land. Location. Condition. Use - past, present and future potential. Character of nearby properties. Etc. And don't forget that realtors have an incentive to sometimes overstate land and property values.

There also are a lot of reasons to ask an outrageous price when listing property. After all, somebody just might pay it. And it can make it easier to negotiate a better price.

It would be interesting to know why the property was listed. If it was financed using an adjustable rate mortgage then the chicken business may not be producing enough income to make the payments and provide sufficient income to both operate the business and provide living expenses. A nine percent return of $40 to $50K with a six percent mortgage doesn't leave much.

I grew up in a rural area. We ran beef, operated a dairy and had five houses of laying hens. Laying hens unlike broilers carry the extra work of picking up eggs, cleaning and packing them, storing them in a temperature controlled environment, and hauling them off to the hatchery a couple of times a week or more. It is indeed a lot of work. High property costs coupled with small and often highly variable return have forced many small agriculture operations out of business.

That said, a 9% annual return on an investment of $600,000 is nothing to sneeze at. Economists are forecasting long-term stock market returns at about 7 to 8%. Interest rates and returns on various forms of debt, of course, are lower. Unlike farming or other business operations the markets are a passive investment which allow the investor to pursue another livelihood. And the ability to finance the investment through the use of margins is strictly limited unlike investments into business and agricultural ventures. The sad fact is that $600,000 in and of itself doesn't buy a whole lot these days in terms of business opportunity.

[JoDog]

13. Some of that insanity

is going around in Illinois, too. Some friends of mine live in a backwoods section of the farthest-flung of the collar counties of Chicago. The house next to them went on the market a few months ago. It is a tiny pre-fab ranch (looks to be roughly the square footage of a double-wide), on a half lot, no other buildings, village water but no sewer, and it comes with lake rights on the local recreational pond. The asking price? A ridiculous $100,000! Bear in mind that this area is a 1-1/2 hour drive from the city, and almost a half hour from the nearest train station. My friends paid half that a few years ago on a similar-size house and lot.

It seems a lot of people around here are overvaluing their real estate. Yuppies and the overprivileged move out from the city and other suburbs, make an investment in property and expect it to turn around with a big profit in a few years. Traditionally, such profits were realized after decades. However, there is a sucker born every minute.

I predict that your neighbor and that of my friends will have to change their expectations. Let the real estate agent know what you think is a fair price for the undeveloped acreage. When it becomes clear that your neighbor's delusions of grandeur may have prevented the sale, the agent is likely to remember your interest.

[nosmokes]

14. if you want it and can make a go of it, put in a fair offer and see what

happens. interest rates are going up so now's a good time to jump if you can. good luck.

[lepus]

16. I do not think it is overpriced.

The chicken barns are quite likely the reason for the high price of the farm. The man selling the place likely has a lot invested in the place, and recognizes that the income that the barns generate makes the place worth quite a bit more. But then again, in recent years, land prices have gone wonky. My neighbor is selling 40 acres of his land for around 70K. The land is worth around 750 an acre. I own my 40, I'll just be patient and wait for the price to drop.

[NMDemDist2]

17. Welcome to DU lepus!

:hi:

you may find our handy DU Glossary both helpful and entertaining.

http://www.democraticunderground.com/discuss/duboard.php?az=view_oet&address=358x190

[Wcross]

18. Considering a return of 30k on a 500k investment?

That's a 6% return on investment. Factor in the labor required to operate the barns and you would make more in a CD. You have to check the barns daily and remove the dead chickens. You have to clean out the chicken poop after each batch.
Also factor in that your contract with the processor isn't guaranteed and they have the right to change the terms at any time, they have the ability to force you to spend thousands in upgrades.
My best guess is the value is around 280,000 to 320,000.

[Jim Warren]

19. :-(

[The Wielding Truth]

20. I have a 55 acre farm for sale in western pa.

Great farm land, oldfour bedroom house, barn, chichen coop, summer kitchen, and storage buiding. Probably sell for 200,000. needs new septic sytem. It's lovely but run down. You might be interested.

[Wcross]

21. I am tied to this area for now (Tennessee). n/t

[happyslug]

27. Where in Western PA

Interested in some rural land, but the key is location

[Wcross]

22. Update- It is still for sale 15 months later (found out why).

I have been asking other people who have Tyson chicken contracts and have discovered something interesting. The barns will have to be replaced within ten years by new "super barns". These barns cost 250,000 dollars each. No new barn = no contract renewal. Good luck with that!

[lepus]

23. let the deal slide

I am not saying some idiot will not buy the place, But do not not go crazy buying it either. With the new info on the barns, that changes things a lot.

With the current credit crunch, and likely future credit will go tight also, Save up a good down payment and wait for prices to drop. This kind of depends on whether you have good credit also.

The neighbors place that I mentioned earlier, sold for the price he was asking for. I am looking to buy the place up in the next few years for a bit less. Many people find that they do not like living this far out in the boonies.

With the loss of ability to pay that cheap credit provided, prices must go down. This is true in your case also.

Do not hold your heart on this place, I am going to guess that many places will open up in the next few years if you have have the assets to ensure a loan.

[Wcross]

24. Oh, I have NO plans to get into the chicken business.

After numerous discussions with people growing for Tyson you would have to be a fool to do it. Tyson keeps coming up with "requirements" that must be met in order to continue your contract. These requirements are often unnecessary but tend to keep the growers in debt. They are forced to continue growing chickens in order to pay the debt.
A perfect example is my barber who owns two barns. They told him last year he had to double his feed bin space. He told them he has NEVER had the feed truck fill the bins he has now, why would he need double the space. They threatened to end his contract when he refused to buy the new feed bins from them. (30,000 dollars!) He said go ahead, come on down and get your damn chickens out of my barns. All of a sudden they decided he didn't have to increase the capacity.

After talking to him & others I have no desire to get involved with Tyson.

[wartrace]

25. Update- It is being foreclosed upon.

BTW- I am the former Wcross reincarnated.

I drove by the other day, no cars at the mobile home, no curtains on the windows, no chickens in the barn (curtains were up in 40 degree weather).

I believe it didn't sell because 1) WAY overpriced. I knew he had paid 110k or so for it in 2000 & added a double wide which probably cost 60k at the very most. He was looking for a 350k dollar profit for sitting on it for 6 years. He is being foreclosed on due to his own greed.
2) Tyson is going to require new "super barns" within the next 6 years. They cost 250k each & the cost will come right out of the farmers pocket.

I am going to contact the bank and see if they are willing to sell off a portion off the land. I really don't want the chicken barns or the mobile home but I would love to get my hands on the land that adjoins my land.

[Morpheal]

26. Expecting Farms In Trouble As Economic Dominos Tumble

I would expect more farms in trouble than ever before, as the economic dominos tumble.

I expect that a lot of marginal agricultural production is in danger of becoming little more than land speculation.
A lot of it had already gone that way.

Up here the amount of farm equipment on equipment lots is hitting new heights. Fields full of it.
That and a lot of empty barns and sheds. Some simply decaying away. More derelict farm buildings than in good repair and used for it.
Where does it all lead in terms of big agro business, not even willing to take on a lot of the arable land and existing facilities.
What happens when agriculture becomes increasingly big business monopoly capitalism ?

I see orchards that were absolutely beautiful twenty five years ago, now unsustainable. Everything is too expensive and they cannot
compete. They try to diversify to doing other things, but jack of all trades, master of some, is more than the average person can
take on for very long. People get worn out.

Eventually the bottom drops out of the small would have been or was farmer, land speculation scenario too.

Then what ?

Cheers.

Robert Morpheal

[newfie11]

28. Yes,, corn is down to 2.90 and fertilizer up to 1145 ton

Right now in my area we are ok but if the wheat,corn, and fertilizer prices stay where they are now next spring/summer will be another story. The price of irrigation goes up every year along with taxes on equipment and land. Water allotments are shrinking and have been for 10 years.

So when wheat was 18 a bushel for a short time and corn was 6 for a while I wish all farmers got in on it, but many or most did not.

Locking in a price at 18 only to have your crop possibly destroyed by hail, wind, drought, etc. and face having to buy wheat at possibly even higher rate to cover is a major deterrent.

[Grinchie]

29. The Tyson Contracts are Worthless

This is another get rich raising Chickens scheme that is unsustainable and a scam.

They Tyson contracts are really weird, and I am surprised people actully fall for it.

Tyson contracts with a farmer to raise it's chickens. Tyson supplies the chicks, supplies all the feed, medications, etc. and transports the end product to the slaughterhouse.

All the farmer is responsible for is the Land, Taxes on his improvements, Labor, Water, Utilities, Insurance, Health Care, Disease and keeping the chicks alive until they are ready. Usually, the chickens are crammed together in a Confined Animal Feeding Operation (CAFO). This type of arrangement shields Tyson from the onerous costs associated with taxes and land ownership, and puts the stupid farmer on the hook for these externalities.

Unfortunately, overcrowding makes these operations unsustainable, and they usually fail within 2 to 5 years after the financig wheres out. The farmer is them left holding the mortgage for the Chicken sheds and other improvement. When Tyson decides to, they withold a contract and the Farmer is insolvent and then has to sell.

I would not count on the Chicken business to be a stable income given the contract setups I've see from Tyson. Additionally, I would never be able to raise chickens like that.

This guy probably is mortgaged to the hilt, or have about 300K in debt.

As for being priced out of the market, don't be so sure. Look at it as a symptom of the unsustainable practices that surround us. He can ask $600,000, but he won't get it until a sucker comes along to pay for it. More likely than not, he will just sit there.

I paid $1000 an acre for rainforest acreage in Hawaii a few years back. Good location, oodles of resource, and totally overgrown. I cleared a bit by hand and found a network of excellent roads that were as good as they were 60 years ago, only covered with 18 inches of organic matter. The forest is loaded with fruit tree's that have been neglected for decades, but they still produce tons of fruit annually, without care.

Today, land in the area is assesed at $6000 an acre for land that has never been touched, covered with massive trees and invasives. The buyers who bought at the peak of the bubble in 2005 are desperatly trying to sell these large tracts at $6000+ an acre with no takers for the past two years. Funny thing though, they are being taxed at assessed value. They are bleeding very quickly.

My advice is to offer him 2000 an acre directly if you really want it. Go from there if he haggles. Can't hurt to ask, and it's no insult if he decided to make a counteroffer.

My other advice is to stay liquid and stock up on supplies for next spring, when the Supply Shortfall hits. With the decline in the economy, word is traveling about that we are not producing much of anything these days, and the shortage in goods and services will become acute next spring as the warehouses empty out without being refilled.

I tend to believe this is true, especially since I see huge business parks in the bay area or california sitting empty, plastered with for sale signs. There must be 10,000,000 sqft of industrial available, and half of them with private railroad spurs sitting empty and vacant. It's really scary.

[wartrace]

32. From what I have learned most are not too thrilled with Tyson.

My barber has two barns. He says Tyson keeps demanding he buy expensive upgrades which forces farmers deeper into debt. They wanted him to install one feeder for each barn rather than the one feeder for two barns he has. They said that it would cut down on the number of food deliveries needed. He told them he would just stop taking in chicks & get out of the business rather than waste money on a feeder. He told them they don't ever fill up the one feeder he has now, why have two? They backed off when he threatened to shut it down.

I agree, a Tyson contract is useless. If they decided to close the plant then the barns will not produce a penny but the debt will still be there. There is another operation for sale nearby- 33 acres, four barns & a house for the unbelievable low price of 1.1 million dollars. The math doesn't work.