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Pros and cons of leasing agricultural real estate

8/8/2016 | Real Estate Blog

Under the right circumstances, leasing a piece of land for agricultural uses can be a lucrative option for both the landowner and the land user. A piece of land can have many uses, depending on how it zoned. Before leasing a piece of land for agricultural uses, it is wise to consider the advantages and disadvantages of this kind of arrangement.

Leasing a piece of land instead of buying it can give a relatively young farming venture a valuable head-start in making inroads to a competitive industry. As an agricultural operator, you may find that your particular business may benefit from having additional capital available for other expenses like livestock, annual inputs, and machinery. In most farming ventures, so many variables may affect your business plans that having the flexibility to move from one piece of property to another is invaluable, as most agricultural leases are based in one-year terms. Buying a piece of property instead of leasing a similar lot can place restrictions on the scalability of the operation, or place undue burden on an operation that can’t quite meet productivity that justifies the full size of the land.

Leasing agricultural property can also have its drawbacks. As previously noted, agricultural leases are generally created for one-year terms. The short-term nature of these time periods, compared to long-game nature of the farming industry can add dangerous uncertainty about the continued availability of a given piece of land. Not only may a lot of land not always be available to lease year-over-year, landlords can often be reticent to invest in the infrastructure components of the land, such as buildings or roads within the land. Also, without owning the land, a farmer will only be able to accrue equity in the associated machinery, livestock, or savings, which can hamper the farmer’s ability to borrow.

Anyone considering leasing land for agricultural may find that an experienced land use attorney can help ensure that any agreement reached is crafted to protect his or rights and interests.