by Greg LaBarge, Fulton County
One of the most frequently asked questions is “What cash rental rate is fair?” The question is asked by both landlords and tenants. The issue has two side that should be viewed as exactly that a question with two answers, with each party figuring out cost and returns for their investment. While everyone would like it to be one rate that fits all, the reality is every situation is different. It truly is a negotiation that needs to happen with each transaction.
For the landlord, the DIRTI five cost of ownership provide a baseline. The ownership costs are Depreciation, Interest, Return on investment, Taxes and Insurance which provides a starting point for negotiations. Considerations should also be given for things a tenant might do such as weed control on non-tillable acres, snow removal and other task that have value to the landlord.
From a tenant view, input cost of producing the crop, transportation, marketing, plus returns to the capital investment in machinery, management and labor need to be covered. The tenant will want to know the value of extra things they may do that adds or maintains the value of the land for the owner.
There are numerous resources that can be used in the rental development process. A listing of recent land rental surveys, sample agreements and other useful information can be found at http://fulton.osu.edu/topics/agriculture-and-natural-resources/farmland-rental-resources