How much to pay for a place to cash flow

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wrightwayangus

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Looking at the prices out there and getting to a point where expanding our operation is in the future. Wondering what y'all think is a worthy price per animal unit. I'm talking what a place will actually run and not what a real estate guy says because that is an issue in itself. The going rate seems to be $10,000. Does this seem adequate to everyone or not? Thnks
 
For a 30 year payout on $10,000 that would be $333 per year with no interest. Add $1 a day expense per unit, $365.
Roughly $400 a year expense with no interest. Roughly $300 per unit gain in a perfect world. (@ $700 per unit on calf sales)
At 3.75% interest add about another $160 to expense per unit.
Somebody probably needs to double check this as it is way to early in the morning to be thinking.
 
novatech":2rsuans5 said:
For a 30 year payout on $10,000 that would be $333 per year with no interest. Add $1 a day expense per unit, $365.
Roughly $400 a year expense with no interest. Roughly $300 per unit gain in a perfect world. (@ $700 per unit on calf sales)
At 3.75% interest add about another $160 to expense per unit.
Somebody probably needs to double check this as it is way to early in the morning to be thinking.

I think you are close to right in my mind, like you said it is early.
I can see the per unit cost easily being 1.50 a day.
 
Depends a lot on enterprise mix and productivity and interest rate and your stockmanship.
Best cash flow around here was medium productivity row crop ground with a mix of crops and livestock. Corn rotation and stockers for example. Many folks like to drive tractors but don't know how to make money off pasture - - so that can be an edge. If you can remodel an unused livestock set up that can be another edge.
Right now there are also some guys chasing sandy ground and putting in center pivots. Not my thing but the bankers really love these guys, so that tells you something.
 
I am just starting at studying the cattle business. Can someone explain the question in a very basic way?

Thanks
 
HDRider":1bow68o2 said:
I am just starting at studying the cattle business. Can someone explain the question in a very basic way?

What I am asking is going to be a dollar value for each animal that I am putting on the place. I will be most likely running cow/calf pairs (breeding stock) so the price is for how many pairs I can run on a place. My estimate of $10,000 per animal unit would have the land value for 10 pairs be at $100,000. It's a different way of looking at cost of property instead of looking at price per acre which you then need to translate to cost per animal unit to figure out if the animals you raise on the property will be able to pay the cost of the land and if your really good pay the operating costs plus an income for your time. Hope this helps and I'm sure some other folks will chime in with good responses as well. WWA
 
wrightwayangus":2nojmrsf said:
HDRider":2nojmrsf said:
I am just starting at studying the cattle business. Can someone explain the question in a very basic way?

What I am asking is going to be a dollar value for each animal that I am putting on the place. I will be most likely running cow/calf pairs (breeding stock) so the price is for how many pairs I can run on a place. My estimate of $10,000 per animal unit would have the land value for 10 pairs be at $100,000. It's a different way of looking at cost of property instead of looking at price per acre which you then need to translate to cost per animal unit to figure out if the animals you raise on the property will be able to pay the cost of the land and if your really good pay the operating costs plus an income for your time. Hope this helps and I'm sure some other folks will chime in with good responses as well. WWA

I think I understand. What time frame or length of time do you consider in the equation? If I understand what you are saying, would you not put some time-frame on how long you run the stock over the land? (stock qty * time = land value) or (land value/stock qty = time to recoup cost of land).

Thanks
 
Here in the NW I see those ads for places that work out to be $10,000 per unit. I don't see how they will pay for themselves. Of course the ads for those places seem to run for a long time. Other people must push a pencel like I do. Every now and then I see an ad for a place that works out to $6,000 a unit. Those ads seem to drop off the screen fairly quick. If you have enough cash that money doesn't matter you can buy a pretty nice ranch at $10,000 a unit. If you are trying to make a living off it I don't see paying much over $6,000.
 
HDRider":3bdfjjlj said:
I am just starting at studying the cattle business. Can someone explain the question in a very basic way?

Cattle eat a lot of feed so it is usually the biggest cost.
Some types of cattle need a different quality level of feed to be productive.
Looking at the cost of a pound of feed is a good way to compare options, AS LONG AS YOU compare the same correct quality of feed.

Along with the feed - - you need enough cast to pay for the labor and the interest and the principal and all the other overheads. This is where it can get tricky because most cattle operations are not labor efficient, and most land has been bid up by speculators. So some folks back calculate how much they can afford to pay for land (based on an estimated feed production level) and still pay all the bills.
 

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