Am I missing something?

[Nesikep]

you are right, I forgot that the tractors aren't really his anyhow, so that doesn't really matter. I would keep the 24HP for a while though, we had a 30HP JD950 which we bought for 5000 in 1990, we put 3500 hours on it and we just sold it last week for 3500, in far worse shape than when we got it.. you can put 5000 hours on that thing and it will hardly make a difference to the price the owner of it would get.

One suggestion though.. before you go investing a large amount of money into permanent upgrades like big corrals, etc, make sure that you'll be able to use them for a long time, and not that someone gets jealous at seeing you "making money" and suddenly you have 50 cows and no land anymore, I can't scroll back enough to be able to tell, but from what I recall this isn't realyl *your* land, it's family or something?

 

[Brute 23]

Disclaimer:This is just my opinion, based on my expereinces, take it as that... not the bible... and I will not argue it like the bible. I am about 3-4 hours, as the bird flys, south of you.

To start, cattle will pay for cattle, but you can not charge 2000 gal of diesel to them just because that is on the ranch. Basically, the cattle won't pay for you to make food plots or any extra stuff on the property. You will have to learn to divide out what diesel you use on cattle and charge that to them for book keeping purposes.

A few thing that came to mind...
-You don't want to keep a first time heifer's calf as a replacement.
-Say you have 10 mommas. You will be lucky to maybe get 2 replacements out of them once you get rolling.
-You will lose money swapping bulls around before the cattle are paid for.

Do you have any known expences that are going to go agaist the cattle? Lease money, tractor rent, electric bills, general maintance, ect....

The way cattle prices are now you should get some great deals. I would try to get all the money you possible can for say 20 mommas. Even if you have to buy some of them a little young and turn them out on pasture for a couple months before putting a bull in. This is a great time to be buying cattle if you have grass.

Just in general, what I would do, is take your cash and buy the ten cows (how ever many you can pay cash for) and bull. Stick them on the place and make it a point to see how little you can spend on them. Keep it to the necessities... feed and vacs. No improvements to the place, no $500 hay rings, no brand new facilities, ect. Keep very detailed books of every dollars spent and earned. Just get a feel for what you are dealing with. Then set a budget and goals from that.

Hopefully, IF in a year it isn't working out you can bail the cattle and not lose money on them.

As some one said, try to make a deal with the neighbor to graze what you are not using with him knowing what your future plans are. Just year to year, and keep a tight hold. Don't let him overgraze and ruin you. May be able to make all kinds of deals by partnering up on hay, feed, borrow a bull to breed heifers, ect.. With the grasses you listed having, you probably only need one pasture (70ac), two max, for 10-20 head. We can stock 1cow to 3ac safely on improved pasture.

IF you have not read it yet, either Jogee or Caustic says learn to be a grass farmer and they are exactly right. Take care of those improved pastures.

 

[Howdyjabo]

You will end up doing long term improvements to the place--So right upfront get a contract signed that repays you for the % of improvements you don't get to capitalize on if you get kicked out.
Also have a clause that gives you 6 months or more to get off- so you don't have to have a fire sale and loose your investment.


Plus consider growing out some preconditioned steers while you are expanding or have extra grass-
buy your hay.
Don't mess with heifers for a few years- sell your calves and buy more 3in 1's
and for a few head AI always made sense to me.

 

[Bez+]

As I read all these threads I start to chuckle.

Advice coming in from all sides of the house.

Mysterious excel spreadsheet information.

Folks from all over chiming in - often conflicting and maybe with the possibility of being wrong for the location.

Probably smarter to actually go to the local ag rep, and sit down and actually come up with a plan - a real business plan - they actually do work.

Utilize the people in the area that are there to help you.

Might cost you some time, some money - but you will learn a heck of a lot at the same time.

This might even make you change your mind on the best utilization for the land.

Now .............

Sole rights to use?

What does that really mean?

Whatever you do, make sure you do not spend any money or make any committments until you know you will actually have a place once the owner is dead.

You might use it - but what about the money you spend?

What about the development?

Then .......

Uncle dies tomorrow in a car accident - then what? It does happen you know.

How many folks are going to come for the money?

How has the estate been set up so you get to keep it?

Or has it - like far too many that come here to cry about it - been left to God and the government?

Seen it happen before - lots of promises and no paper - but the final settlement sent that land to another person.

Or - even better - the distant - estranged - dick head relative shows up and wins in court.

This schitt really does happen.

Be wary and be smart.

Get your ducks in a row - no matter what anyone TELLS you - if it is not on a signed and better - a notarized piece of paper - all those promises and all that work is is not worth the sweat off your left testicle.

If it does come to you - will you have the cash available to take it over once the estate is settled - or will you have to break it up and sell?

That is where you want to start.

Got the papers and finances in order?

Do not start to build that house by planning the roof - start at the foundation and work your way up.

Then and only then would I even think about doing anything.

Without the paper you are spinning your wheels and risking a lot of time, effort and money.

Bez+

 

[grannysoo]

Without the paper you are spinning your wheels and risking a lot of time, effort and money.

Bez+

A risk that I would not be willing to take. No paper = No deal.

 

[Jim62]

The idea of using family land and equipment for free in this startup is very troubling to me. I've seen this kind of a thing done numerous times, and the outcome is almost always a train wreck. As soon as the tenant/operator gets everything improved to his satisfaction, uncle Joe decides that it's time to sell the place, or somebody dies and the new property owner decides that he wants to raise cattle, too. After all, he's got a ranch all set up and equipped for it. The tenant/operator has by now pi$$ed away many thousands on improvements, all of which turn out to be money down the proverbial rat-hole, plus he's got 100 head of cattle with no place to go.

There may be a family somewhere that will work together in harmony, but none that I know of. When land and money get involved, it's every man for himself. It's a nice plan, but I wouldn't touch it with a 10' pole.

But, that's just me (and my experience) :tiphat:

 

[Jogeephus]

Without the paper you are spinning your wheels and risking a lot of time, effort and money.

Bez+

A risk that I would not be willing to take. No paper = No deal.

I once rented a place from an absentee landowner. He wanted to sell the place but I didn't think I was in a positon to buy it just yet and I thought they were asking too much. Wanted to but... Anyhow, after two years of renting the place and working on it they dropped the rent cause they were so pleased at how it looked. A year later, a fella saw the place and bought it for the asking price cause it now had that curb appeal. I was disheartened some but I knew the deal. It was good while it lasted.

 

[Brandonm22]

I agree with Jim62. This whole deal sorta scares me. You have tractors somebody else paid for for some reason what was their plan for them and why are they available for you to use? You have a tenant, he is paying something to somebody. How much is that person getting and why would he not be upset if he lost that income? If you got 800 acres and can only afford 8 - 10 cows, but have a big time job, why not focus your energy on decreasing your debts, cutting your cost of living, and building a big wad of cash? Spend your free time learning more about the cattle biz and developing a business plan. Save up $80,000 as fast as you can, then you can put $40,000 into cows and have $40g in cash and other investments. Treat the cows as an investment and not just a hobby that is subsidized by your paycheck.

 

[marksmu]

To everyone with the get agreements from the owner I 100% agree....the land is my dad's right now. I found it at a firesale from the previous owner & his family two years ago. The previous owner was a master developer, and had bought it with big plans. He bought the tractors and most of the equipment and then was transferred out of the country. He sold the entire place turn key for nearly the cost involved in the improvements he made. There was alot of the "family" drama that caused the sale to be so affordable. He had spent a fortune buying things, and then had to leave, he only owned 100 of the 800 acres and so he got the raw end of the deal when it was sold.

Neither here nor there, but long story short, I found the property and wanted it, but could not afford it...My dad wanted an investment piece of property and had plenty of money...He bought it, with a buy/sell agreement for me finding it...I have an option on the land to buy it first if he ever decides to sell...the maximum allowed increase is 4% annually (or the minimum stated by the IRS at the time of sale)...I also pay a small lease on the land to him, to pay the property taxes....the Ag payment comes to me as the "operator" and he pays the taxes from the lease income. The lease is a 15yr lease again with an option to extend at current pricing at the conclusion of the term.

I am responsible for upkeep of everything - no tallo trees - no overgrazing, and all repairs & maintenance. I know I have a good thing and I want to be sure that I can maximize it while I can. I am however not too worried bout the family drama even though I did protect against it....my entire family dads, uncles, cousins, brothers, and even my grandmother all work together in the family engineering company...its 3rd generation at this point and even though there is drama it pans out.

I am buying the cattle with the cash I have been putting aside each year for the cattle only. I am still saving for retirement, maxing IRA's and 401K, as well as hording cash when possible. My wife is an attorney with a great job, and I am thankful to be able to live on my check and save hers b/c of plans of children in the next year or so...

So with that said, I take every bit of advice to heart...I read a book called grass fed cattle, and I am trying to utilize many of his ideas - it was a good book..it seems that many of you are doing what it says...Im going to try to start with his central theme...I am a grass farmer, who uses cows to maintain the grass.

I enjoy the work outside, and think I will enjoy the cattle as much as I spend the money on them....I want to build a herd but at the same time I want to enjoy dong it...Hopefully that works out....I am glad that there are so many opinions on it...it just shows me that everyone is doing it differently, and apparently everyone is enjoying it. If you didnt enjoy it you probably would not take the time to talk about it on here..

I am personally obsessed right now, and I hope to take that obsession and make it into a dream that at a minimum can pay for itself in the long run.

 

[1982vett]

Sounds like things are in good order and backing won't be pulled from under your feet. Good luck.

 

[Brandonm22]

To everyone with the get agreements from the owner I 100% agree....the land is my dad's right now. I found it at a firesale from the previous owner & his family two years ago. The previous owner was a master developer, and had bought it with big plans. He bought the tractors and most of the equipment and then was transferred out of the country. He sold the entire place turn key for nearly the cost involved in the improvements he made. There was alot of the "family" drama that caused the sale to be so affordable. He had spent a fortune buying things, and then had to leave, he only owned 100 of the 800 acres and so he got the raw end of the deal when it was sold.

Neither here nor there, but long story short, I found the property and wanted it, but could not afford it...My dad wanted an investment piece of property and had plenty of money...He bought it, with a buy/sell agreement for me finding it...I have an option on the land to buy it first if he ever decides to sell...the maximum allowed increase is 4% annually (or the minimum stated by the IRS at the time of sale)...I also pay a small lease on the land to him, to pay the property taxes....the Ag payment comes to me as the "operator" and he pays the taxes from the lease income. The lease is a 15yr lease again with an option to extend at current pricing at the conclusion of the term.

I am responsible for upkeep of everything - no tallo trees - no overgrazing, and all repairs & maintenance. I know I have a good thing and I want to be sure that I can maximize it while I can. I am however not too worried bout the family drama even though I did protect against it....my entire family dads, uncles, cousins, brothers, and even my grandmother all work together in the family engineering company...its 3rd generation at this point and even though there is drama it pans out.

I am buying the cattle with the cash I have been putting aside each year for the cattle only. I am still saving for retirement, maxing IRA's and 401K, as well as hording cash when possible. My wife is an attorney with a great job, and I am thankful to be able to live on my check and save hers b/c of plans of children in the next year or so...

So with that said, I take every bit of advice to heart...I read a book called grass fed cattle, and I am trying to utilize many of his ideas - it was a good book..it seems that many of you are doing what it says...Im going to try to start with his central theme...I am a grass farmer, who uses cows to maintain the grass.

I enjoy the work outside, and think I will enjoy the cattle as much as I spend the money on them....I want to build a herd but at the same time I want to enjoy dong it...Hopefully that works out....I am glad that there are so many opinions on it...it just shows me that everyone is doing it differently, and apparently everyone is enjoying it. If you didnt enjoy it you probably would not take the time to talk about it on here..

I am personally obsessed right now, and I hope to take that obsession and make it into a dream that at a minimum can pay for itself in the long run.

Ok, you answered most of my questions. A lot of folks have land that has been in their families for decades and nobody does anything with it. If somebody does do something everybody else gets all hot and bothered that they may be cheated out of something. Somebody blows up at somebody. Everybody lawyers up and they go to bed at night hating their relatives forever. THAT is a minefield.

That is NOT your situation at all since you have a First Right of Refusal on the property and I suspect that this is not by far your father's largest asset in the world. You seem to have the income and the other assets that if you lost $400 a cow every year, it isn't really going to hurt you any short term or long term, and you are not in a place where you have to work 90 hours a week just to get noticed. In that circumstance, if you really want 8 cows, a bassboat, a camper trailer, a 58 Chevie Belair, or Arabian horses just go ahead and do it. You will learn more by doing it, than you will by just studying it, and you only live once. Welcome to the cow business.

 

[HerefordSire]

There is something bothering me about this whole deal.....allow me to explain....

There are financial advantages of farm ownership when running a farm for profit. You mentioned you do not own the farm but you are going to incur all the expenses. I think it would be wise, since you have outside income, if you signed a purchase contract for the land at the current market value with the owner of the land. Finance the land @ historic low interest rates, as we are currenty seeing, preferably for about 20 years or less depending on the amount of payment you can afford. Make your payments to the owner. The owner no longer gets the financial advantage of running a farm. However, you do. The owner can place the proceeds of the land payments in a tax deferred investment inside a trust account (hopefully with your name on it) so as not to have to pay taxes immediately on capital gains.

Are you with me so far?

I read your most recent post so this is what I would recomend based upon the little bit of info you provided:

I don't know how many siblings you have, but if the owner (your father) of the land died, the IRS will attempt to take 50% of his net worth provided his net worth if over a threshhold amount. Your father can, donate as charity to you, up to $10K per year to you and possibly $20K per year if he files jointly. The idea is to get the assets out of his name before he passes away. By the sounds of it, he is already doing this.

If you and your father are generally willing to follow the above plan I posted in the previous post, this would be my first recommendation.

On the other hand, if you or your father did not want to generally follow the above recomendaton, I would not enter into the cattle business. You could develop the land for duck hunting and hunters (your passion), and market the escape through doctors and attorneys. I know this but don't ask me how I know this.

As a general rule...risk is relative to return. For example, if you personally have little or no risk, you will more than likely not have a return to speak of. It is not worth the responsibility you are considering. Concentrate and invest your resources in your passion.

Good luck!

 

[marksmu]

herefordsire....When I first read your post, I wasnt 100% sure why you thought I needed to do all that...but after your last post I understand...It makes complete sense....Something I will have to discuss with him...he is always thinking of new ways to pass assets down without having them taxed...its a huge problem in our family company due to the size of it now.

At any rate, you have given me a great lunch discussion for tomorrow! I sure would love to see my name on the deed of the place - I would work at everything the same but the feeling of "ownership" is still a powerful feeling.

Also, in terms of simply pursuing my passing....my passion is duck hunting, but I love working out doors nearly as much as I do duck hunting...I have spent nearly two years cross fencing the ranch on weekends with a friend, and my wife just does not understand how that doesnt bore me to all get out. Two years of fencing nearly every weekend, and I still enjoy it 10000x more than I do sitting at my desk at work.

Also, where my ranch is, cattle and ducks go quite well together....a full field improved with millet is not only great for cattle but also for ducks. I have watched everyone around me work this process....they plant the millet which cant be hunted year 1 - and just graze it...year 2 its no longer a "baited" field and they run catle on it when they need to so they dont mow - and then pull the cattle in November from select fields, and run them back through as needed. Cattle are placed back on the millet first of march with the spring green up. The cattle help fertilize the millet for the next year, help aerate the field, and knock the seeds off which helps for the next year.

I see cattle not only as an investment, and something that I will enjoy, but also as a tool to help me maintain the fields that I will be hunting. It all seems win-win to me - but I am an incredibly optimistic person...

 

[Brute 23]

Its a great feeling to grow some thing. THe hardest thing will be holding yourself back, let it build slowly and bebt free.