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Land-Use Diversification 101
Tight farm profit margins have some farmers thinking about this question: How can I make more money with my land? The obvious answer is to increase yields and grow higher-priced commodities. However, there are a lot of other answers, as well. Hopefully this article will get you thinking unconventionally in regard to land usage.
Many farmers are blessed with large, flat, versatile pieces of ground, which frequently have few governmental restrictions on use. Some of the land lies within a few miles of a city; some of it runs along interstates. Farms in the Midwest can grow hundreds of different varieties of trees. A lot of farms have gas lines and electrical transmission lines running across them and an endless supply of wind and sun. There are hidden values that you sometimes don’t consider.
Several years ago, I was thinking about buying a farm east of Greeley, Colorado. When I visited the farm, I noticed a bunch of wind turbines next to it (and a rattlesnake at my feet). The local farmers, who would be renting it, told me the farm was infested with volunteer rye, and it would be hard to grow wheat on it. They were not very excited about renting it, so I dropped the deal. A few years later, the thought hit me: Man, am I dumb! I could be sitting with a couple of wind turbines in Colorado right now paying me $5,000 to $7,000 each. The same wind that blows across the land next door blows across the farm that I didn’t buy.
Wind turbines are just one of the many ways you might make more money with your land. Here are some other ideas: solar arrays, billboards, cell phone and radio towers, hunting leases, gas leases, selective tree harvesting, you-pick strawberry fields, you-pick pumpkin patches, roadside vegetable stands, and camper and boat storage.
Let’s drill down on some of these ideas.
Recently, I’ve been getting solicitations to rent land proximate to the existing electrical grid to build solar arrays. The developers say they want 15 to 20 acres and are willing to pay up to $1,000 an acre on a 20-year lease. Even if it’s only half as good as it sounds, it’s worth investigating and a possible win-win scenario. The developer wins with solar energy credits; the landowner wins with some long-term above-market fixed income.
Natural gas exploration leases slowed down a bit when the price of oil and gas tanked, but the crude oil price has more than doubled from the low. (You may have noticed the rising gasoline prices.) Natural gas leases will fire back up again given higher prices. Those leases can run $100 to $500 an acre for a five-year deal. In addition, they may never even set foot on your property. In those cases, there is no disruption whatsoever to the farming operation – a win. If they, indeed, search for and find natural gas, it’s a big win. You might get 1∕8 of the gas production from that well for the rest of your life, which would be some thousands of dollars per month.
Cell phone towers are another great way to make money. The lease rates I’ve seen range from $10,000 to $50,000 a year and for a tiny patch of land. With cell towers, you can’t rely on the hope that developers will always come find you. If you’re looking around and noticing that you own the highest point in the county, then contact tower developers to let them know what you have and that you’re interested.
Little static billboards are probably on the way out, but new digital billboards are on the way in. If you own frontage on a major interstate, sign companies may be willing to pay $5,000 to $10,000 per year to lease a tiny bit of land. All they need is an easement to get to the sign and access to power. These lease deals can be 20 years, which is a nice alternate stream of income. The sign companies pay all of the sign construction costs and are required to pay for deconstruction at the end of the lease if that becomes necessary.
I’ve talked about the nuances of hunting leases in other articles. To be brief, small groups of bow hunters and rifle hunters will gladly pay $1,000 to $5,000 a year for exclusive hunting rights to your extraneous woods. They will want 40 to 400 acres, but much of that can be tillable. If your land supports white-tailed deer, there is probably someone willing to rent it. Of course, be sure to have people sign indemnity agreements and be clear in the lease about the use of ATVs, camping on the property, and not disrupting the farming operation in any way.
A Cut Above
Speaking of woods, if you have even 10 acres of mature trees, it’s probably worth having a forester come in and assess the inventory. Almost any kind of hardwood can be used to make crane mats or pallets. Some of the oaks, walnuts, or cherry trees may be veneer quality and command a higher price.
If the forester thinks you have enough lumber to sell, for a small percentage of the sale proceeds, the forester will inventory what you have and send lists out to loggers. The licensed loggers will bid on what you have, and you will typically run with the highest bidder. The forester will mark the trees that will be cut and should come back to make sure only the marked ones are cut. This could make you $5,000 to $25,000 with only minor disruptions to your farming operation. (Be aware that soil compaction in the field from the logging trucks can be a bit of a problem.)
Here are a few nonstandard ways to generate income: Tough Mudder races, dirt race tracks, and paintball courses.
Some runners these days want to get out and get close to nature. They want to get muddy and wet. They want to crawl over logs and jump over fire. You can’t do that in the city, so you need a farm with parking for hundreds of cars and all of the required mud and logs. The race organizers pay some thousands of dollars for one day of use and probably come back annually.
Out in the country, you may have driven by dirt racetracks in the middle of nowhere. Sometimes they’re just tiny ATV or motocross tracks, which you could build for almost nothing and with existing farm equipment. Certainly, if you are close enough to a population, you could make money charging people to ride ATVs or motorcycles on a selected area of your property with or without a developed track.
Lastly, 10 minutes from my house there’s a paintball course in some hilly woods. A few hundred people come out on the weekends and pay $20 a piece to shoot each other with paintballs on about 10 acres. Do the math: $6,000 a weekend! It is labor-intensive on the weekends, but it would allow you to do planting and harvesting during the week. The courses rarely change, and they didn’t cost that much to build.