Creative leasing/buying farm land

[carla]

I have a neighbor that joins me that is wanting to sell his 140 acres. The problem is I just bought several more cows and the banker wants me to pay them off first before I get the loan for the 140 acres. This neighbor is willing to lease me the property untill it sells to someone else. Anybody have any creative financing options that they could suggest. Any lease/purchase agreements that you could suggest? I really want this acreage. All I have to do is open a gate. No hauling cattle, etc. Thanks for any and all suggestions!!!

 

[Craig-TX]

If you've already struck a price with the neighbor, you could get them to sell you an option on the place. It should state the legal description, sale price, option price, the period of time for the option, etc. Make sure you pay them something for the option, even if it's only a few hundred dollars, possibly to be deducted from the price at closing. That way you're making a true contract with consideration. It would be wise to go ahead and pay your attorney to draft the document. Then you know you can buy the land within a certain amount of time and that it won't be sold out from under you.

Craig-TX

 

[D.R. Cattle]

Would he draw a contract up with earnest money and a closing in xxx months or years, while leasing the property to you in the meantime? Or does he want the cash in a hurry? Perhaps he would finance it for you for a short term deal until you pay off the cattle, then you could go to bank and refinance from him.

 

[Anonymous]

Well maybe I'm missing something here, but I guess that in your particular case "several" cows must be many more than what I usually think of when I refer to "several" cows. Its hard to imagine, but if having an outstanding loan on several cows is all thats keeping your banker from lending on a 140 acre land purchase, and if you REALLY want this land, why not just sell the cows and pay off the existing cow debt? (If for whatever reason the other suggested alternatives won't work for you in this situation). Arnold Ziffle

 

[eric]

how much $$ are we talking about here? That would determine what kind of earnest money / deposit you should offer. You stated that he would lease it to you until it sold outright, that tells me that he wants to sell it and not be committed to any long term financing arrangement. If you really want to buy it, you should make him a fair offer before a realtor gets ahold of it and tells him its worth some inflated price! See if you can sell some cows now and make a decent down payment, and maybe get him to tote a note of about 5 yrs max. Then you are on your own to come up with your own financing. With enough down, he might just float a note for you. But land around Springfield has got to be fairly expensive, isn't it? But then again, how many chances will you get to buy land right next door to you!

 

[carla]

I talked with my neighbor last night and we have made an agreement on leasing the place. We just need to get all the details in a contract. He said that he would carry the note on it if I would give him $50-$60,000 down. But I would have to refinace my place to come up with that much down. That takes me back with the problem with the cattle loans. As earlier suggested, if I sell the cattle to pay off the notes then I won't need to lease the place because I won't have enough cattle to run on it. Catch 22!He says that he wants enough up front so that he can move closer to town. His health is a factor in this situation. He doesn't appear to be in a big hurry to move. You know how older farmers are that have been on the farm for 30 years. I know my dad was the same way. Yet, he has advertized it and had some lookers. That scares me that any day he is going to sell it. Any ideas on financing the down payment of $50,000? I have more than that equity in my place, but I hate to try and refinance that, even at a later date, because of the good interest rate that I have. It would make my payment go up on that too. I appreciate everybodys replys and are looking forward to more. Thanks!

 

[dun]

Sit down with local friendly banker and see what they can figure out. We've found that a solid customer gets some non-standard advice and financial support from bankers at times. They're the ones that will have to be satisfied with whatever is worked out so why not include them in the front-end.

dun

I talked with my neighbor last night and we have made an agreement on leasing the place. We just need to get all the details in a contract. He said that he would carry the note on it if I would give him $50-$60,000 down. But I would have to refinace my place to come up with that much down. That takes me back with the problem with the cattle loans. As earlier suggested, if I sell the cattle to pay off the notes then I won't need to lease the place because I won't have enough cattle to run on it. Catch 22!He says that he wants enough up front so that he can move closer to town. His health is a factor in this situation. He doesn't appear to be in a big hurry to move. You know how older farmers are that have been on the farm for 30 years. I know my dad was the same way. Yet, he has advertized it and had some lookers. That scares me that any day he is going to sell it. Any ideas on financing the down payment of $50,000? I have more than that equity in my place, but I hate to try and refinance that, even at a later date, because of the good interest rate that I have. It would make my payment go up on that too. I appreciate everybodys replys and are looking forward to more. Thanks!

 

[D.R. Cattle]

Sell the cows and buy the land. Cows reproduce and you can buy more. Land does not reproduce and especially not next door to you.

 

[carla]

I've been working on an idea of hitting him with a lease purchase option. I don't just want to buy the property in the end, but have part of the lease payment go towards the down payment. What percentage of a lease payment would you suggest? That way he could stay in the house untill I actually purchased the property. That would help him because he wouldn't have to move right away and help me because I wouldn't have to come with such a large down payment. In the mean time I would rid of my cattle loans. Now if I can just get him to do it. Any suggestions on what might sweeten the deal?

 

[skip]

The old gentleman is going to have to say what percentage he thinks is going to work and then you will have to decide if you can live with it. Personally, I have to agree with Craig-Tx about the contract and some consideration up front. I also think Arnold has the right idea about selling off enough of your cows to get the loan down for enough to satisfy your banker to accept the land deal. You may not have to sell off all of them. I don't know about your situation, but there OTHER bankers. Maybe another lending institution might be more flexible with your existing loans. We had the same situation with an adjoining 67 acres. When we had the opportunity to buy it, we put everything else on hold, made a 3 year balloon note amoritized for 10 years with the land owner. At the end of the 3 years, we refinanced with our bank. We did go to 2 different banks to get the best interest rate.