Strategies for young farmers to build ownership

I’m 30 years old and have been back on the farm eight years, but I own nothing. My dad owns everything. When we need something, he buys it. I guess it’s simple because he has the money and I don’t. However, when I think about other things you have written, it seems like that strategy is compounding my future problem because I’ll likely have to rebuy everything someday at a higher price from my siblings. How do I change that trend rather than just waiting and watching?

- Submitted by email from S.W.

Solution:

Hearing from S.W., a young farmer who wants to invest in the future of agriculture, makes me happy. Farming may not be easy but it sure can be rewarding.

S.W., you are describing the “barriers to entry.” Cash and collateral are the two biggies, but there can be other barriers as well. Fortunately, you’re on the farm now, and I hope that leads to realistic opportunities with your dad soon. An early barrier can be getting along with your dad. Do you communicate well and recognize the value the other generation provides? Does he value your enthusiasm, energy, and ideas? Do you value and respect his work and sacrifices?

A beginning farmer loan may be an option, but that can be challenging too. Personally, my son had a great experience with the guidance of a very helpful lender for his first land purchase. You’ll need to do your part to prepare for loan approval.

You either need cash or collateral to buy anything, or it might take both. Cash is difficult to accumulate when starting. Saving now is great, but it’s also scary figuring where to safely invest money to keep up with inflation. You could systematically put that cash into life insurance on your dad, but will that buy as much as you hope it does later as you “wait” for someone to die?

The collateral all belongs to your dad. Often parents get to a stage in life where they don’t want more debt, so they quit buying. That is understandable, but it can cause some farms to stagnate. If the value of the collateral is untapped for years, the size of the farm may level out because neither generation is maximizing the collateral. When your dad passes away, you could spend the rest of your life buying the same farm again, making it impossible for the farm to grow.

Let’s look at specific ideas for ways you can overcome the financial barriers.

• Communicate and prepare for opportunities. Schedule times to sit down and plan.
• Make your first purchase a money maker. Maybe custom work of your own will generate cash flow
• Earn that opportunity to use a piece of your dad’s land as collateral.
• Strategize the use of beginning farmer programs.
• Start buying your dad’s farm now. At first, your dad may not like the idea, but there are several ways to accomplish this without much pain.
• Split future purchases — even a small percentage of future machinery or land helps. Then have an agreement to buy the remainder.
• Rent new land to subsidize other purchases.
• Recognize how your dad got what he has. Likely he worked relentlessly, reinvested everything, fixed what was broken, and seldom left the farm. Some in the younger generation like to be done at 5 o’clock, buy new stuff, have fun toys, and go on expensive vacations. Are you willing to sacrifice something now for something greater later?

Be proactive. Document plans. Appreciate opportunities.