Starting Your Farm: Chapter 4
The Small Farmer’s Journal has decided to run editor and publisher Lynn R. Miller’s book Starting Your Farm as a serial series. Below is Chapter 4.
“If a man would enter upon country life in earnest and test thoroughly its aptitudes and royalties, he must not toy with it at a town distance; he must brush the dew away with his own feet. He must bring the front of his head to the business, and not the back of it.” – Donald G. Mitchell, 1863
MONEY CHANGING HANDS
As we suggested at the opening of this book: Some of you will find this writing simplistic, but evidence is that we need to attack these questions at the most basic level, not just because we have new people looking for introductions but also because many of us can benefit from having our motivations and knowledge questioned and reevaluated.
The price of a farm starts a process that can lead to a greater or lesser total cost. You have a lot of control over the outcome. But you need information. Hopefully you will find some here.
I strongly advise anyone new to these pages to read the first three chapters of this book. Also, as wide and varied a subject as this is, it is impossible to include all elements. Although we’re going over specifics, it is the tone of doubt, inquiry and insistence that is most important to communicate.
Because of the Small Farmer’s Journal we hear from a number of folks buying their first farm. Far too often we get sad stories of tragic mess-ups in the final stages of money changing hands. Can we learn from our mistakes? Yes.
Last chapter we covered some critical preliminary ground covering the researching of properties and listing agreements.
Assuming that you’ve found a farm you want to buy, next you’ll need to determine if you can buy it. If you have sold your property, and/or saved your money, and have the means to buy the farm you are sitting pretty. Best of all possible worlds — congratulations. However, don’t stop reading. There are plenty of pitfalls that can surprise even you. (Perhaps especially you, since unscrupulous people may identify you as a more likely culprit.) Piece of advice: How much money you have, in what form, and where, is nobody’s business but your own.
If you do not have the full price of a considered farm, in cash or any other form, you will likely have to look for financing (or borrowing — and they are not necessarily the same.)
But before we get into that, there is an important- in betwixt- option, trade. If you have property that you want to sell, but haven’t yet, consider trading it for or towards the farm. It isn’t necessary that the farm owner want your property. A realtor with some intelligence and hustle will have the information and means to possibly locate a third property (one the farmer wants) that can tie the deal together as a three-way trade. Oft times the values are different and money also changes hands. But it can work out quite well. It’s too complicated to go into great depth and detail but trading is an important option worth looking into.
FINANCING and/or BORROWING
If you need financial assistance in order to buy the farm, here are some basic rules which vary some from region to region, and with differing particulars.
1) Real Estate Mortgages are usually long term. Long term real estate mortgages are usually written for 10, 15, 20, 30, and 40 year contracts with 20 years being most common. Often contracts can be written with a payment schedule amortized (calculated) for 20 years or so but with the contract maturing at 10 or 15 years. What this means is that you will have a balloon (or considerably larger) payment to pay at the end of the contract. Some big banks prefer this program because it gives them the opportunity to gain interest points and fees if, and when, you choose to rewrite the mortgage to extend its term. For you it’s a device to keep payments lower for the first years. An important procedural tool.