He wants an answer this week. I still don't know what cash rent means.
Somebody I do work for is selling 78 acres about two hours from me and offered it to me before it lists. Asking $6,100 an acre, so roughly $476,000. I run a service business, five years in, and I have cash sitting there doing nothing useful, but I've only ever owned the building my shop is in.
What I don't understand yet is how the income side works. The seller says the ground is "cash rented" to a neighbor at $240 an acre. I read that as the farmer pays me $18,720 a year and does everything else, and I don't touch a tractor. Is that actually it, or is there a version where I share in the crop and the price of corn becomes my problem?
Second thing I don't get is the phrase "Grade A farmland," which shows up in everything I read. Is that an official rating somebody assigns, or is it just how brokers describe good dirt?
And third, $18,720 on $476,000 is 3.9 percent before taxes on the land. That seems low for tying up that much money in something I can't sell in a week. But everybody writing about farmland acts like the low yield is the point, which I don't follow yet.
I have until the end of the month before it goes on the open market.