Thursday, April 7, 2011

What Can I Rent My Land For?

Last night I received an email from someone interested in knowing what they could rent some acreage for.  This is not an uncommon question, but it does pose difficulty in providing a specific dollar figure (which is what folks typically are looking for).  The problem in giving people a specfic amount lies in the fact that there is no one correct answer...even for two parcels that may be adjacent to each other.  There are numerous factors that go toward determining an appropriate rental rate and it is subjective to a degree on the land owner's answers to some questions which follow.
Land rental questions to consider:
  1. Is there an alternative use for the land that you're renting?  Does the alternative use create revenue?  If so, how much?  Land with alternative uses for generating revenue can potentially demand a higher rate.
  2. What are your for tillable land factors in the areas of soil quality, field size and field topography?  Large fields with higher quality soils that have more desireable topography can demand a higher rental rate than fields with poorer quality soils, small acreage, or less desireable topography.
  3. Are there similar rentals available in the area?  If so, what are they charging?  Sometimes this is difficult to find out so you may have to work on gut feelings as to what a going rate in the area may be.  Areas of PA, such as the Southeast, tend to have higher rates than other areas.
  4. How much are taxes on the land?  This is a cost in addition to general maintenance (for laneways, etc.) that needs to be built into a minimum rental fee.  Whatever the amount ownership costs add up to be needs to be covered.
  5. Is there more than one party interested in renting what you have available?  If so, what would they use it for?  Sometimes, depending on the intended use for what's being rented you, the owner, may want to charge less or more.  So for instance, if you as a land owner are passionate about organic agriculture, you may be willing to rent land to an organic producer for less than what you would rent to someone using conventional methods.  You should still charge enough to cover your costs, but to support organic agriculture you may be willing to forego some profit.  If there are multiple possible renters and use doesn't matter, determine the minimum rent (based on expenses), determine what you'd like to receive in rent and see who will pay that rate.  Negotiation can follow from there if needed.
Finally, not related to rental rate, but still important, you should have a written contract.  The contract (at its minimum) should spell out the rental rate, length of use, and any restrictions on use.

1 comment:

Jen Lau said...

This is very informative and a must-read, in my opinion. Owning a land is really a great investment, because from time to time it continues to increase its value. Plus, there are lots of things you can do to it – leasing, renting, or sell it. But before this, everyone should know the all-about of the process. And with this post, I’m sure people will have an idea on the questions to raise before going on. Thanks for sharing.