NDSU Extension - Mercer County

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How to Determine What to Pay for Land Rent

determining land rent, average county rent value

Submitted by Craig Askim, Extension Agent/Agriculture and Natural Resources

As the year ends, the most popular phone call I get relates to land rents. Many people want to know what the average county rent value is. While this is a good question to ask, the answer is not straightforward in Mercer County or any county across the state. The North Dakota Department of Trust Lands funds a survey each year to address this question. The survey compiles responses from agricultural producers from across the state to provide results on a county level basis. While this is an excellent resource to use, it is only a starting point and not a final answer.

 Like many counties in the state, Mercer County’s landscape changes greatly from one corner of the county to the other. Therefore, it is no surprise that the soils change greatly also depending on the location within the county. When looking at land rents it should come as no surprise that these rates vary greatly throughout the county. So, how do we determine what we should pay or charge for land rent?

I will describe below in detail the five main factors to use to determine land rents: productivity index of the land, reported values, projected crop budget margins, experience of landowner, and what is most important to both parties.

Landowners and renters need to determine the productivity index rating of the land. How do we do this?  First, obtain a soil profile of the land by county from an internet soil profile website. Once you have that number compare it to the overall index of the type of soils in your land, compared to the county average.

Reported rent values. Use information you obtained or have of rental rates in your designated area location of the land, not county, like within a five mile radius of the land location. Another factor that could be used is the county most frequently reported average compared to the minimum and maximum reported. This information is in the North Dakota Department of Trust Lands report each year.

Projected crop margins. Once you know the productivity index and reported rent values you can put dollar values to the projected net of return to the land by using crop marketing futures, market prices and crop marketing advisor reports. By knowing your cropping history yields you can produce an estimate to determine what is called your return to labor and management.

Experience of the landowner/renter. To place a value on this factor renters need to determine the experience rating of the property owner. Does the landowner have “no experience”, such as land that was inherited, with little understanding of farming terminology; “limited”, has understanding of terminology or farm experience from growing up on a farm etc.; or “experienced”, recent management experience and has history of renting land. The landowner should ask the same questions to the renter to determine what the best type of agreement is.

What is Important. Key information to gather is the history of the land. Both parties need to communicate with each other to determine the values of the land. Answers to these questions will help guide in the decision making process. Does the landowner want top dollar only? Do both parties want to be fair to each other? How many landowners are there? Does the landowner want to give the renter a break? Does the renter use sustainable farming practices? Who takes care of the farm site or non–rentable acres, shelterbelts etc.? Who am I am renting to? From past history, is the renter a top, average, or poor manager/renter? What is the history of the landowner?  When it comes to payment, is the renter’s line of credit good?

I hope by reading this you will have a better understanding that the land rental rate has more to it than just the amount both parties agree upon. You can get top dollar today and have nothing tomorrow if the factors listed above are not taken into consideration.  

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