We’re now getting questions about 2018 farm leases. Although there are a lot of different types of leases (cash, crop share, custom, flex, etc.), for the purposes of this article, I am referring to the cash lease.
The cash lease is the most common type of lease found in Iowa. Our farm management clients like the idea of the certainty it offers. Landlords know how much the income will be and when that income will be received. The disadvantage is that the landlord may not receive the benefits from an upward swing in grain prices until the following year.
The question we’re getting at this time is, “what are cash rents doing for 2018?”. With the stabilization in grain markets over the last year, it would appear that they will be fairly steady. 2018 rents are set off of “the market”, the same as housing prices and land prices. So, what is this “the market” thing?
Annually, Iowa Land Management and Real Estate Company, as part of our farm management business, has a few farms that our clients wish to have bid by anyone interested in farming their farm. These are generally new farms that we are putting under management. After reviewing the packet that we send to each prospect, the prospective tenant will submit their offer according to the terms and conditions set out in the bidding packet. We’re able to then compile that information to give us “the market” rent. We can then apply this information to other farms we manage after adjusting for any differences there may be between the bid parcel and farms that are already under management. Obviously, we feel this is the most accurate way to determine fair market cash rental value. As our clients are reasonably asking for no more, nor no less than what’s fair, we’re very happy to have this market derived cash rental value information available to us.
If you’re still in need of help in setting your 2018 rent (there is no deadline as to when this has to be done by), give us a call and we’ll be happy to give you our thoughts on 2018 cash rental values as well as other types of leases that might be applicable to your situation! 877-718-LAND