AgNavigator Real Estate

Farm Management Division

Overview of Available Services

 

CASH RENT

 

AgNavigator Real Estate will review the current market and make sure your farm is generating a cash rent payment that is in line with the going rental rates for the area.  AgNavigator Real Estate will negotiate on behalf of the landowner to establish a fair agreement with a top farmer in the area.  AgNavigator Real Estate will monitor the farm on a regular basis and collect rental payments as determined by the owner and pay the rental income to the owner.  As the owners agent any costs associated with the property such as property improvements, irrigation power units etc will be handled by AgNavigator Real Estate and billed to the owner.  Nothing will be billed to the owner without the owners prior approval and a detailed summary of all transactions will be provided to the owner on a quarterly or monthly basis.  This form of management provides a simple yet effective return on your investment with nominal risk and owner input but eliminates the potential for profit sharing or higher returns in profitable years.  The owner has the risk of the ability of the farm operator to pay the rent but has no risk for input costs or crop failure. 

 

NON PARTICIPATORY SHARE RENT

 

AgNavigator Real Estate staff will review market conditions and local market rents and determine a fair share rent agreement between the tenant and the landowner.  Share rent agreements may be negotiated in a wide variety of ways but most common in our market are a 1/3 share of the crop being paid to the landlord and 2/3 to the tenant in this scenario the landlord pays none of the operational costs of the farm.  The landlord pays all of the ownership cost such as real estate taxes, irrigation equipment, fences, and buildings.  In this type of share rent agreement a strong advantage during times of high prices and a disadvantage during low price cycles is the price risk of selling the landlords share of the grain.  AgNavigator Real Estate can also assist by providing a grain marketing service and market the grain on the landlords behalf if you choose not to do it yourself.  In this agreement AgNavigator Real Estate will closely monitor the farm to make sure the landlord receives their correct share and that best farming practices are being followed. 

 

PARTICIPATORY SHARE RENT

 

This management agreement is similar to the Non Participatory Share Rent with the added landlord participation in paying a percentage of the input costs of the farm equivalent to the share of the crop.  AgNavigator Real Estate will monitor all expenses and crop inputs and provide monthly reports. 

 

BUSHEL RENT

 

In a bushel rent agreement the farmer provides all input costs and all management of the farming enterprise.  The landowner receives a payment equal to a predetermined number of bushels from the crop produced on the farm.  This program allows the landlord to share in rewards and risk of the commodity price.  For example in irrigated farmland in South Central Nebraska a typical cash rent may be $150 per acre and a comparable bushel rent may be 50 bushel per acre.  If the grain price at harvest is $2 per bushel the corresponding revenue to the landowner would be $100 per acre but if the harvest price is $5 per bushel the revenue to the landowner is $250 per acre.  The AgNavigator Real Estate staff can also assist the landowner in managing the price risk by using proven management tools to lock in price. 

 

FARM OPERATION AGREEMENTS

 

Farm operation agreements are an innovative concept developed by AgNavigator Real Estate to create a way for land owners and farm operators to work together in a profit sharing arrangement for their mutual benefit.  In a farm operation agreement the landowner remains the operator of the farm for Farm Service Agency and all other billing a practical purposes.  A production agreement is issued listing the terms of the agreement allowing the farm operator to operate the farm and share in the net profits of the operation.  The production agreement uses crop insurance and add on agreements to guarantee a minimum revenue for the operation, this amount establishes the minimum landowner payment and the operation agreement payment for the farm operator.  The terms of a farm operation agreement are determined on a case by case basis and tailored to meet the specific needs of each situation.  Farm operation agreements may also be used in the case of a sublease agreement whereby a leaseholder may want to continue in a lease arrangement but enter into a farm operation agreement with a third party.  This works well for farmers who are ending their active farming career but want to maintain their leasehold relationships.

 

 

 

Example

 

Operator will receive a payment of $125 per acre paid by the landlord half on or before June 1st and half on or before December 1st for normal operation of the farm.  If at harvest his yield has exceeded APH by 5 bushel per acre and the CRC price is $5 per bushel the production incentive will be $25 per acres (actual amount may vary based on variables listed above).  If the net income of the farm including government payments exceeds the total of input cost paid by the owner, base ownership return paid to the owner and base operational fee paid to the operator the operator will receive 40% of the net profit (or amount specified above) if net per acre profit is $200 the per acre profit sharing would be $80 per acre.  The total income per acre for the operator in this example would be $230.

 

 

LAND FOR SALE AUCTION LISTINGS

Services Provided -

 

 

The University of Nebraska has developed the following overview of the advantages and disadvantages:             READ ALL

 

Advantages of Cash Rent:

  • Less (perhaps none) landlord managerial input is required than with other leasing arrangements.  The tenant is allowed a relatively free hand in making management decisions.

  • Reduced involvement decreases the possibility of friction between the landlord and tenant concerning management decisions.

  • Concern about accurate division of crops and expenses is reduced or eliminated.

  • The landlord does not have to handle the marketing of crops.  However, the landlord will not receive additional profits due to high yields or prices.

  • Fixed cash rent lessens the landlord's concern about variations in prices and yields.  The tenant bears all prices, cost, and production risks.

Disadvantages of Cash Rent:

  • A cash-rent amount acceptable to both parties can be difficult to determine.

  • Once a cash-rent is set, a change in the rental rate may be difficult to negotiate in response to changes in prices and costs.

  • In average or above-average years, the landlord may receive less net income than from crop-share rents.  However, additional profits due to high yields or prices will not occur.

  • The landlord has fewer opportunities for income tax management.  Under a share arrangement and cash reporting of taxable income, the amount of taxable income can be shifted some through timing or crop sales before or after the end of the year.  Similarly, purchase of fertilizer and seed for the next growing season can be made in the closing months of any tax year to reduce taxable income.

  • There may be an increased danger that tenant will "mine" the land.  However, competition for land and appropriate requirements in a written lease can minimize this problem

  • The landlord has little opportunity to build a base for Social Security payments due to the difficulty in establishing acceptable evidence of material participation.  This may not be a concern to retired landlords.

  • The tenant assumes risk from price and yield variations.

  • To value the farmland in the landlord's estate at its use value rather than its fair-market value for estate tax purposes, the following two requirements must be met:  1) Before the landlord dies, a cash-rent lease can only be to a member of the landlord's family as the tenant.  2)  After death, the heirs must not cash lease the use-value land; not even to a family member.

  • Eligibility for paying federal estate tax in installments over 15 years after death could be jeopardized.  Land rented through a cash-rent lease does not constitute an interest in a closely held business, which the decedent must have at the time of death to be eligible to pay federal estate tax in installments.  Only crop-share or livestock-share leases qualify as interest in a closely held business.

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