Structuring a cash lease with a floor on mature pecan acreage, with alternate bearing risk sitting with the tenant

A common structure for someone who wants income from an orchard without farming it is to buy the crop and lease out the farming. Take 60 acres of mature pecans, trees mostly 25 to 35 years old, one shared irrigation well under a recorded easement, purchased at $9,800 an acre, so $588,000 with about $11k in closing and title work, all cash. The lease terms matter more than the purchase price. A straight cash rent is simple but hands all the upside to the operator. A pure crop share hands the owner the volatility of a crop that alternate bears, meaning a heavy year is usually followed by a light one, sometimes by half. A base of $550 an acre paid in two installments, say February and September, plus 20 percent of gross receipts above $1,900 an acre in any year, balances that. Base comes to $33,000. Over three years the bonus might pay once, say $6,400, which is better treated as noise than as reliable income. The obligations worth building into a lease like this: the tenant carries hedging and pruning on a written schedule, replaces any tree lost to storm or disease within one dormant season at their cost up to a capped number of trees a year, and provides the crop insurance declarations page each spring. A pruning-slip penalty, say base rent stepping up by $75 an acre if maintenance lapses, prices the fact that a neglected orchard hands back a worse asset than it received. Typical owner costs: property tax under an ag valuation, liability insurance, a well reserve funded into a separate account, and modest accounting. Net yield in a structure like this often lands around 3 percent cash before any bonus, which is modest but genuinely passive. The real risk is operator concentration. A single operator farming several hundred acres total means that if he quits or becomes unable to farm, the owner is left with an orchard they can't farm themselves, in a shrinking pool of custom operators for a crop like pecans. Requesting financial documentation from a prospective tenant before signing, even when it's an unusual ask, is a reasonable diligence step for exactly that reason.