Farmer's Business Network pushing land loans

[766 Man]

Just now, zleinenbach said:

No apologies needed, we are all adults (well most of us 😁)

I agree that with today’s inflated prices it’s hard, damn near impossible, to start farming. Profitably.

But, I don’t think the Banks will just rubber stamp loan approvals for the heck of it. 
 

I just meant by earlier post that if Joe Blow wants to be an organic possum pooty grower, what the he’ll do I care?

At least it’s going to an ag use, rather than the developers gobbling anything flat up for obscene amounts of money, but there again it’s not my business to judge what they spend their money on.

  They will rubber stamp if an area needs economic stability such as paid property taxes and stable balance sheets.  It is a domino effect if a bunch of operations are foreclosed upon with real estate prices reduced to a fraction of what they were.  Operators that were in a good debt/asset ratio can be reduced to insolvency in one heck of a hurry.  

[766 Man]

25 minutes ago, maxxum 140 said:

I am in in the process of buying land (from relatives so they are cutting me a bit of a break) and financing it through FSA didn't qualify for beginning farmer because you have to have been farming for 3 years but less than 10.  They have other options I'm pursuing but it is a 40 year loan 2.5% interest and no down payment.  I have the land enrolled in CRP because rental rates are very enticing right now and with what I can get from CRP it makes 1 1/2 of my land payment per year, so after my 10 year contract is up I will have made 15 years worth of payments so that actually figures out to be more years because of all the extra principal that is paid every year.  Land can be bought just need to pursue all options and see what pencils out.

  I had the personal misfortune of trying to buy land from relatives at a package I could live with.  I hung on for several years on that property but had to sell after a couple of really poor years.  If you think that you will be buying from relatives let the conversation start well ahead of when somebody has one foot in the nursing home already.  I should expand upon what I just wrote (getting tired for the evening).  I really took a greater chance than I should have but figured opportunity was only going to be there once.  Because the nursing home was already involved the interest was 8 percent.  I tried to get a conversation started over a decade earlier than when the sale took place but was greeted by stubbornness in the two older generations.  Stubbornness accomplishes nothing in transferring a business over.  Had a conversation been started when it needed to that land would still be in the family today.  

[Gearclash]

1 hour ago, Matt Kirsch said:

At $4000 an acre,

{insert mirthless chuckle here}

Try $20-25,000 here.  That’s for cropland with NO development potential.  Ain’t no way a youngster will buy land at that price.  Bank probably won’t even give you a loan of half that amount per acre.

[gearheadmb]

I used to think that since ground doesn't typically depreciate, as long as you could someday sell it for at least the same amount you paid all it really cost you to farm it was the interest and taxes, but......

The last farm that sold in my area at auction went for $16k/acre. If your loan is at 4% interest it you would be around $700 per acre per year just on the interest, plus property tax. I dont see how it could be sustainable. 

[hobbyfarm]

1 hour ago, maxxum 140 said:

I am in in the process of buying land (from relatives so they are cutting me a bit of a break) and financing it through FSA didn't qualify for beginning farmer because you have to have been farming for 3 years but less than 10.  They have other options I'm pursuing but it is a 40 year loan 2.5% interest and no down payment.  I have the land enrolled in CRP because rental rates are very enticing right now and with what I can get from CRP it makes 1 1/2 of my land payment per year, so after my 10 year contract is up I will have made 15 years worth of payments so that actually figures out to be more years because of all the extra principal that is paid every year.  Land can be bought just need to pursue all options and see what pencils out.

Congratulations on the purchase agreement.  40 years wow.  We settled on the place across from us not to long ago and financed it for 30 years.  Our lender just changed their policy recently.  The previous cut off was 20 years.  Obviously less is better but we needed a reasonable payment. I know there was a bunch that did 30 but didn't realize you could go 40.

Around 2005 there was interest only loans basically banking on appreciation.  As far as I know that ship sailed with the 2008 housing crisis.

[TeachersPet1066]

2 hours ago, 766 Man said:

4,000 dollar per acre land never mind higher than that which describes a lot of ground around here.  Ground that honestly only produces 30 bu per acre soybeans and 160 bu per acre corn and not that fantastic yields

Good point and see the same bushels - did a test plot here and the best 12 rows were 183 and the 5th set of 12 rows was 159.8.  That was with putting extra fertilizer on when it came out of ground and then friend came and put UAN on.  6 Bean plots in ‘20 were 46 to 54 and again that was putting extra fertilizer on a few times.

[BoilerRed]

Call me paranoid, but personally I'd avoid any Federally backed loans in the current climate.  I could say more but would risk running afoul of forum rules.

[Big Bud guy]

1 hour ago, gearheadmb said:

 

The last farm that sold in my area at auction went for $16k/acre. If your loan is at 4% interest it you would be around $700 per acre per year just on the interest, plus property tax. I dont see how it could be sustainable. 

When has land pay ever paid for itself in recent times?  That ship sailed around here 30 years ago.  Just finished off a 15 year land loan a year early on 700 acres that was $800/acre.  I'd say off the top fo my head, only half of them years during the loan the land would have paid for itself.  Land is selling for over 1,200 acre here. This is land that raises 40 bu wheat on a good year every other year.   

[junkandcattle]

2 hours ago, maxxum 140 said:

Land can be bought just need to pursue all options and see what pencils out.

Sounds like you have a good deal going.

Just because it pencils out for one guy doesn't mean it pencils out for everyone.

Just because it pencils out it doesn't mean they should do it.

I hope they are not setting young people up to fail.

[ray54]

We that have or at least try to make a living farming are running into a brick wall so to speak. Land is always a sound investment in that it will never disappear. Compare it to classic cars as in the Road Runner thread here. Many things can happen to make that hunk of steel worthless or at least take the monetary value away. But in the USA if you have a business that has made any amount of money where do you invest it. The stock market, the commodities market, you sure don't put it in the bank and collect interest. So you buy land just as a place to park money. Maybe not that many people making 1/2 a million a year, but compare that number the number of us farming. It's getting bigger and that is the compotation in the land market. If they collect rent that make them anything over cost is bonus in many cases. Like the stock market the pay off is when you sell out at the end.

[Jacka]

4000 a acre? Mountain ground,  timbered off and only scrub brush growing brings that here.Farm land brings 8 to 17k per acre and it changes value with miles depending on lay of the land.I bought my farm 35 years ago.But one thing to remember what is expensive today will be cheap tomorrow. 

 

 

 

[856 Custom]

Never heard of this Farmers Business Network till now. From what I gather their preying on young and gullible. Stay away

[Matt Kirsch]

1 hour ago, Jacka said:

what is expensive today will be cheap tomorrow

I only wish that were true. They have been crying that the bottom is going to fall out tomorrow for as long as I could comprehend the English language, but it just keeps going up. Even in the supposed "correction/crash/whatever you want to call it" back in 2008 when "the bottom fell out" all it meant was the prices remained stable for a couple of years. Nobody who owned real estate lost a dime. It was just the ones that owed money on variable rate loans that got screwed.

Just trying to do right by my family. They should not have to wait until I die to get their shares of the estate, but in this climate it's either that, or sell the farm to some fool who thinks they can make payments on $4000/acre... I can't imagine trying to make payments on $8000-$25000 an acre.

[856 Custom]

Ground in my area hasn't been 4000.00 a acre since around 2009 and I don't foresee it ever getting that (cheap) again. Shure would be nice if it would, but it's not going to happen.

[Reichow7120]

Well. When the government prints money like there's no tomorrow. This is what happens. 

The dollar is worth less and less. Tell me something right now that you pay for that isn't inflated. 

[axial_al]

When he was asked “when is the best time to buy land”, the old county agent replied: “when it is for sale.”

[Diesel Doctor]

If the banks are pushing land loans, it is to their advantage and not yours.

I remember in the mid-70's when banks were saying, "Buy land, their not making it any more!"

We had a drought in our area and it put a lot of farmers in real trouble.

Many got zero crop or just a bit better in 1976.

The farms started to decline at that point through the 80's.

Our 15,000 populated county lost 1/3 of the people from small farms.

BE CAREFUL OUT THERE!

You have to look after your own interests as no one else will, including the bank.

[Dirt_Floor_Poor]

9 hours ago, Big Bud guy said:

This is land that raises 40 bu wheat on a good year every other year.

Do you have to leave it idle/fallow every other year because of moisture? Or are you able to do something else with it?

[IH Forever]

2 hours ago, Matt Kirsch said:

I only wish that were true. They have been crying that the bottom is going to fall out tomorrow for as long as I could comprehend the English language, but it just keeps going up. Even in the supposed "correction/crash/whatever you want to call it" back in 2008 when "the bottom fell out" all it meant was the prices remained stable for a couple of years. Nobody who owned real estate lost a dime. It was just the ones that owed money on variable rate loans that got screwed.

Just trying to do right by my family. They should not have to wait until I die to get their shares of the estate, but in this climate it's either that, or sell the farm to some fool who thinks they can make payments on $4000/acre... I can't imagine trying to make payments on $8000-$25000 an acre.

I think you might have missed the point of that comment.  I don't think he was saying it would go down.  I think he was saying that it will appreciate and in 10 years $4,000/acre will seem cheap.  

As other's have stated I'm guessing that FBN is using a government backed young farmer loan.  Not really preying on young people.  Just using a program that is a decent deal for young people and is also profitable and federally backed, so relatively safe, for the bank.

I remember an old farmer who owned a lot of land saying "I never bought a farm that looked like it would pencil out when I bought it."  In our area it's $12,000 - $19,000/acre.  I agree it won't pencil out if you look at it individually, but most buying already have land that was bought much cheaper so they look at a total cost/acre for the operation.  That doesn't work for a young person or anyone who doesn't already own land.  For me the bigger issue is getting enough for the down payment.  It may bring $19,000/acre but banks aren't lending that much.  I'd love to buy an 80 but coming up with $300,000+ for a down payment isn't a simple task.

[766 Man]

9 hours ago, ray54 said:

We that have or at least try to make a living farming are running into a brick wall so to speak. Land is always a sound investment in that it will never disappear. Compare it to classic cars as in the Road Runner thread here. Many things can happen to make that hunk of steel worthless or at least take the monetary value away. But in the USA if you have a business that has made any amount of money where do you invest it. The stock market, the commodities market, you sure don't put it in the bank and collect interest. So you buy land just as a place to park money. Maybe not that many people making 1/2 a million a year, but compare that number the number of us farming. It's getting bigger and that is the compotation in the land market. If they collect rent that make them anything over cost is bonus in many cases. Like the stock market the pay off is when you sell out at the end.

These markets work for the moment because the US companies no longer offer pension plans and the government has skimpy returns on savings interest.  Just wait until there is a net withdrawl the values will decline in a hurry.  Not only that people who only make 8, 9, 10, or 15 dollars per hour are not going to keep inflating a market that was previously fueled by wage earners making 20, 25, 30 dollars per hour and more.

[766 Man]

2 hours ago, 856 Custom said:

Ground in my area hasn't been 4000.00 a acre since around 2009 and I don't foresee it ever getting that (cheap) again. Shure would be nice if it would, but it's not going to happen.

  Never say never.  We are long overdue for a major correction.  Like the ones seen after WWI, the beginning of the Great Depression, and the early 1980's.  

[Gearclash]

44 minutes ago, Diesel Doctor said:

You have to look after your own interests as no one else will, including the bank.

This X infinity! I always say you better know before you go to the bank whether or not they will give you the money.  If you don’t, you haven’t done your homework.

[766 Man]

  Ag land markets that see values of 15K, 20K, or more per acre have players running their businesses like a real life Monopoly game.  Sure you bought Vermont Avenue for 1,500 dollars but it is going to take a long time if ever for that move to pay for itself.  Meanwhile in the real world the tax assessor almost immediately got busy raising your assessment on that.  

[Big Bud guy]

1 hour ago, axial_al said:

When he was asked “when is the best time to buy land”, the old county agent replied: “when it is for sale.”

We’ve only turned down land a handful  of times the last 100+ years.  Every single time we’ve bought a piece, it was too expensive at the time but a bargain 10 years later.  

[iowaboy1965]

32 minutes ago, 766 Man said:

  Never say never.  We are long overdue for a major correction.  Like the ones seen after WWI, the beginning of the Great Depression, and the early 1980's.  

Problem with that line of thinking is, as stated previously there are too many foreign invetors/countries as well as wealthy people or corporations looking to park money in land. Bad times might just mean the working man just has less opportunity to invest in land while the wealthy keep pouring money in land?