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Leasing vs. Owning for the Small Farmstead - Personal Considerations

 

One of our readers asked if we’d considered leasing land instead of owning it. I posted some thoughts about the financial considerations last week. Here's some thoughts on the personal considerations we're taking into account.

Personal Considerations

 

Flexibility

It’s amazing how much land out there is being farmed on a hand-shake lease agreement. We know of a couple that had to move after a year because the landlord up and decided to sell the property after he had sat on that land his whole life! I'm sure them getting on it and turning it around had nothing to do with it... yeah. Other people have had great outcomes though, so it's really hit or miss, but it's a real risk. 
 
How flexible can you be with your business? If you were forced to move at the end of a one year, or a multi-year contract could you do it? Constructing movable equipment, negotiating terms on site improvements, and understanding that you may not be able to do everything you want on leased land are all very real hurdles to face when leasing land. Unless you sign a long-term lease you will probably have to move at some point in the future.
 
Could you maintain consistent production during the move? Would you lose customers or be forced to move to a new market? Can you develop a brand that could withstand such disruption? Will the animals be severely impacted and your illness/mortality rate increase? These are just some of the questions we tried to answer and these are the realities of the current farming situation for many young farmers. Leasing is often the only answer. However, there are numerous examples of farmers out there facing those realities and there’s some pretty damn ingenious answers (a creamery on a tractor trailer, for instance), so it can be done. Hitch up that egg-mobile and head on down the highway!

(In)security and Infrastructure

A landlord can come in and wreak real havoc on your operations. Unless your lease agreement clearly stipulates the terms of site use and the duration of your tenure then you could be in for a rude awakening one day. You may find out that they don't want pigs rooting up their land, or they have an unnatural fear of honeybees. What happens to that barn you constructed or the other permanent infrastructure? You could ensure that any improvements are your property, but just be ready for some complex negotiations and the potential for owning some highly illiquid assets on someone else's property. If you put down nutrients in the form of manure, improve existing pastures or buy minerals to enhance soil fertility you won’t necessarily reap future benefits.
 
On your own land you are the gatekeeper and if you can get the permitting and licensing then you can pretty much do what you want. That might not always be a good thing for newbies like us!
None of this is to say that leasing can't or won't work. There's too many examples where it has, and in some instances it was a far better option (i.e. Greg Judy). I think we just came out on the side of buying land. A large part of that is because we're fortunate enough to be able to. There's obvious risks and the downside is potentially much greater, but at the end of the day the scale clearly tipped in that direction for us. 

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