Buy the farm?

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Topic Author
bigriverexpress
Posts: 7
Joined: Tue Aug 17, 2021 3:10 am

Buy the farm?

Post by bigriverexpress »

Good afternoon Bogleheads. Looking for sagely wisdom as we contemplate a major decision - fulfill a lifelong "dream" and buy 75 acres to build our forever home on, or maintain our status quo?Wife and I are mid-30s, 2 kids under 2 with #3 on the way. We live in a LCOL area in the midwest, residing in our now outgrown first home purchased 8 years ago. Financial scenario below:

Gross annual income -
$134k/yr (me),
$45k/yr (wife) ***potential for wife to take 2-3 years off when 3rd baby arrives

Debts -
$275k (mortgage, 30 years at 2.75%)

Assets -
550k (pre-tax retirement)
212k (150k taxable Vanguard MFs, 60k diverse Crypto)
130k (home equity)
20k (emergency fund)
12k (HSA)
5k (529s)

The situation:

I have always had the desire to own rural farmland as I grew up spending time on my family's 200 acre farm and feel a deep connection to it. Our 3rd child was a bit of a surprise, as we assumed we could live indefinitely in our urban 1700SF first home with our first two children. Our oldest will enter kindergarten in 3 years, and we've begun imagining where they will grow up and go to school.

We have the opportunity to purchase 75 acres (20 acres pasture, 55 acres timber and woodland) in an outlying county. The growth from our city is pushing that direction, and it contains the most desirable school system in the extended metro area. It would fulfil my desire to start a small farm, remain within 30 minutes of friends/family/work, be within a short drive to all needed amenities, and provide a great school system for our kids. We can take our time by purchasing the land now, and building once we have made the necessary choices and spent time on the land. Wife is on board with these ideas, but is completely leaning on me for the financial scope...

On the flip side, it would be a major life change (urban to rural), and have us spending significantly more than we would on a neighborhood "home". We estimate to be $1mm in after purchasing the land and building.

Have any Bogleheads contemplated similar scenarios and come to a decision? Am I missing glaring oversights in attempting to manifest my ideal family "life"?
Last edited by bigriverexpress on Wed Nov 24, 2021 12:52 pm, edited 1 time in total.
homebuyer6426
Posts: 182
Joined: Tue Feb 07, 2017 9:08 am

Re: Buy the farm?

Post by homebuyer6426 »

Do you have a business plan for the farm or would you mainly be using the land for recreation? If so, have you worked intensively full-time in farming and are you sure that you would enjoy it? Or do you plan to keep your current job and use that money to pay for the farm? Seems like you are either going to be time-poor or money-poor here, unless you have a strategy that you know will work.
esteen
Posts: 426
Joined: Thu May 23, 2019 12:31 am

Re: Buy the farm?

Post by esteen »

As you well know, farms are a ton of work. Would you be hiring help to maintain the farm (and have you researched how much that will cost), or would you be quitting your job to work the land full time?
This post is for entertainment or information only, and should not be construed as professional financial advice. | | "Invest your money passively and your time actively" -Michael LeBoeuf
Topic Author
bigriverexpress
Posts: 7
Joined: Tue Aug 17, 2021 3:10 am

Re: Buy the farm?

Post by bigriverexpress »

homebuyer6426 wrote: Wed Nov 24, 2021 12:42 pm Do you have a business plan for the farm or would you mainly be using the land for recreation? If so, have you worked intensively full-time in farming and are you sure that you would enjoy it? Or do you plan to keep your current job and use that money to pay for the farm? Seems like you are either going to be time-poor or money-poor here, unless you have a strategy that you know will work.
homebuyer - thank you for reading and for your response.

The intention of the farm would be for self-sustenance (vegetables, small orchard, chickens, goats), and lifestyle. The only income we would plan for is a timber harvest in 10-15 years. I would continue to work, as my job is relatively high-paying and does not require stress or time outside of the 40 hour work week.
DoubleComma
Posts: 654
Joined: Sun Aug 23, 2020 2:23 pm

Re: Buy the farm?

Post by DoubleComma »

$1M feels a bit of stretch on a $134k income.

Yes, I'm discounting your wife's income because it sounds like she will become a SHM for some period. If you can do the math and feel confident that do it, but only your wife and you get to know what the pressure is to maintain the debt service required to buy the land and build the home.
flyfishers83
Posts: 218
Joined: Fri Jun 07, 2019 6:08 pm

Re: Buy the farm?

Post by flyfishers83 »

A couple of non-financial things.
How far from the farm into town. It's 10 miles for us, and I expect that will get annoying as kids get older.

Is good internet important, and is it available at the farm. That's a big problem around us-even in town-and led to us passing on several houses.

Is it important to you for kids to be able to play with other kids? I grew up on a farm. I thought we would buy land within the last few years. Ultimately landed in a neighborhood that we love. Still rural with our house backing up to woods and ag fields. We love our neighborhood, and our now looking for recreational property with no plan to leave.

On the financial side, be wary of sticking yourself with an expensive property that you have a hard time selling. When you stick a custom house on that piece of land, it might be something that is very hard to sell. I've seen that in my LCOL area. People putting 1-1.5 mil in a property and being unable to sell it.
Are all utilities readily available at the piece of land. Running utilities and building infrastructure can be phenomenally expensive.
When I've looked at properties over the last few years, it was always financially better to buy existing properties.
It can be very expensive to start buying tractors, implements, etc. not even considering farm equipment. If you just want a regular tractor and side by side, my parents spent more than $50k a few years ago. Make sure you go in with eyes open.
evelynmanley
Posts: 48
Joined: Tue Sep 21, 2010 9:13 am

Re: Buy the farm?

Post by evelynmanley »

WOW! This sounds amazing. I work on a farm, and your plans sound like a dream come true. I am not the farmer; I am just a helper, so I can't advise in any way about financial aspects of your planning. But from my observations after ten years on this farm, I know that my farmer is sitting on millions of dollars of land value (paid off 25 years ago), farms 20 acres of the 80 he owns, makes only $20k/year in selling his organic produce to the public, is (obviously) exceedingly frugal, and his wife has had to work two off-the-farm jobs in order to make ends meet. That's the norm now in family farms. But the farmer has said many times he would not change a thing. His grown children live nearby, do not want to work on the farm or take over the farm (except to own the land after their parents pass), after seeing how hard it is and how little money their parents make. But they do know that they can live on the farm whenever they want, they can build homes on that land, and that's an amazing sense of security.

There are LOTS of farming podcasts about this very subject. DM me if you'd like a list.

There are excellent PBS documentaries about this subject, and I highly recommend this one: https://www.pbs.org/pov/watch/farmsteaders/

If you intend to make your living from the farm, this is a very good and accurate read: https://www.goodreads.com/book/show/137 ... t-the-farm
and an article about those farmers: https://www.sfgate.com/local/article/sf ... 513849.php

This is another good read about general misrepresentation of the realities of farming (especially good reading if you've watched the documentary Biggest Little Farm):
https://ecosystemrestorationcamps.org/b ... ittlefarm/

Excellent blog and books by this farmer: https://www.kristinkimball.com/ blog: https://www.kristinkimball.com/farm-note

As an aside, if you haven't read all of Wendell Berry's Port William series of novels and short stories, I know they will go straight to your heart.
https://www.fictiondb.com/series/port-w ... ~19755.htm

I really hope you can achieve this lifelong dream!!!! Please keep us updated!
Last edited by evelynmanley on Wed Nov 24, 2021 1:43 pm, edited 2 times in total.
IowaFarmBoy
Posts: 965
Joined: Fri Jan 22, 2010 8:19 am

Re: Buy the farm?

Post by IowaFarmBoy »

What you are looking at sounds really cool and is something I would have jumped at in my thirties. $1M of property on your income feels like a stretch, especially factoring in extra costs that will come with the farm, like a tractor, mowers, outbuildings, fencing, animals, feed, vet bills, etc. I don't think this land would generate significant revenue to help with the expenses. 20 acres of pasture won't generate much income.
Topic Author
bigriverexpress
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Joined: Tue Aug 17, 2021 3:10 am

Re: Buy the farm?

Post by bigriverexpress »

DoubleComma wrote: Wed Nov 24, 2021 12:56 pm $1M feels a bit of stretch on a $134k income.

Yes, I'm discounting your wife's income because it sounds like she will become a SHM for some period. If you can do the math and feel confident that do it, but only your wife and you get to know what the pressure is to maintain the debt service required to buy the land and build the home.
DoubleComma -

We have scoped this out and it does push the boundry of comfort level (for a Boglehead :happy ) Assuming only my income and forecasting debt payments, we would be around 30% of gross income toward P/I. I understand the land would qualify for ag use exemption from the county, significantly lowering the property tax.

Going from saving >50% of our income toward investments for the last 8 years, to reducing our contributions significantly is slightly uncomfortable. However, assuming conservative returns in our retirement portfolio with contributions only up to company match, we would be looking at roughly $1.5mm (today's dollars) balance when the kids are beginning college. Enough for a possible early retirement.

The concept we have discussed is "pulling our spending and enjoyment slightly into the present", and leveraging the hard work and saving we have already completed to optimize our family's situation now, after a decade of socking away for some undetermined and un-guaranteed time period in retirement.
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TierArtz
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Re: Buy the farm?

Post by TierArtz »

I sure wish I'd bought a farm with woodlands (recreation) when your age, and may still also make a Midwest to Southwest land purchase.

75 acres, mostly woods sounds like a great opportunity if reasonably priced, and it sounds like it is close enough to have access and utilities available.

I inherited a much larger farm in another state and let a management company deal with it for a fee and split the crop yield with the operator. If the value of that land was in VTSAX or a 3-Fund, I'd be making more than the $70/acre or so a year I get after fees, splits, taxes, insurance,and my share of input costs, but it is nice to own a chunk of America!

Farmers National Outdoors might provide management services/hunting lease for such a farm: http://www.fncoutdoors.com/
You could potentially let a manager deal with it and allow you to ponder/save for a build for a few years.
Last edited by TierArtz on Wed Nov 24, 2021 1:17 pm, edited 1 time in total.
OnTrack2020
Posts: 946
Joined: Mon Mar 20, 2017 10:24 am

Re: Buy the farm?

Post by OnTrack2020 »

We live on one acre wherein the previous owner (over 2 decades ago) planted nearly everything including fruit trees, blueberry bushes, grapes, pine trees, etc. You name it, it was planted on the property when we bought it. Oh, and there were fish ponds also.
The one acre that we have has taken a lot of time and energy over the years, especially when raising a family. We have been trying over the years to take it back to just the bare basics. It has cost a lot of money to have trees taken out. Or trees have died due to disease and insects.

I would honestly think about how much time you and your wife will have to dedicate to this--75 acres is a lot. I could see possibly purchasing the 20 acres and taking it one step at a time--not jumping into chickens, goats, vegetables, orchard right away, but seeing how one part goes and doing it well before going into the next step.

If you are planning on continuing to work, then that means your wife will be doing the "farming" during the week, as well as getting kids to and from school, running errands, mowing the lawn, housework, banking, laundry, helping the kids with homework, etc.?? Is she up for that?

Would not purchase the timberland. Anyway, I'm not sure based on the information given that $1M all in is affordable based on your financials.
daheld
Posts: 1241
Joined: Wed Sep 13, 2017 8:14 am
Location: Midwest US

Re: Buy the farm?

Post by daheld »

bigriverexpress wrote: Wed Nov 24, 2021 12:19 pm Good afternoon Bogleheads. Looking for sagely wisdom as we contemplate a major decision - fulfill a lifelong "dream" and buy 75 acres to build our forever home on, or maintain our status quo?Wife and I are mid-30s, 2 kids under 2 with #3 on the way. We live in a LCOL area in the midwest, residing in our now outgrown first home purchased 8 years ago. Financial scenario below:

Gross annual income -
$134k/yr (me),
$45k/yr (wife) ***potential for wife to take 2-3 years off when 3rd baby arrives

Debts -
$275k (mortgage, 30 years at 2.75%)

Assets -
550k (pre-tax retirement)
212k (150k taxable Vanguard MFs, 60k diverse Crypto)
130k (home equity)
20k (emergency fund)
12k (HSA)
5k (529s)

The situation:

I have always had the desire to own rural farmland as I grew up spending time on my family's 200 acre farm and feel a deep connection to it. Our 3rd child was a bit of a surprise, as we assumed we could live indefinitely in our urban 1700SF first home with our first two children. Our oldest will enter kindergarten in 3 years, and we've begun imagining where they will grow up and go to school.

We have the opportunity to purchase 75 acres (20 acres pasture, 55 acres timber and woodland) in an outlying county. The growth from our city is pushing that direction, and it contains the most desirable school system in the extended metro area. It would fulfil my desire to start a small farm, remain within 30 minutes of friends/family/work, be within a short drive to all needed amenities, and provide a great school system for our kids. We can take our time by purchasing the land now, and building once we have made the necessary choices and spent time on the land. Wife is on board with these ideas, but is completely leaning on me for the financial scope...

On the flip side, it would be a major life change (urban to rural), and have us spending significantly more than we would on a neighborhood "home". We estimate to be $1mm in after purchasing the land and building.

Have any Bogleheads contemplated similar scenarios and come to a decision? Am I missing glaring oversights in attempting to manifest my ideal family "life"?
I have a similar background. Didn't grow up on a working farm, but grew up in the country on 15 acres and just a few minutes away from the 160 acres my mom grew up on and the 100 acres my dad grew up on. My brother and I now own my mom's family's place, and my dad owns his family's place. In short, I totally understand the emotional draw you feel. I also now live in a city and I get back to the farms as much as possible. We won't ever move back there permanently, but I absolutely want to build a small place there in retirement.

I think $1 million all in is a big, big stretch on your income. Do you need 75 acres? How much does land go for per acre where you are? You say you'd spend a million on the land and the house combined--how much is house and how much is land? It seems like the simplest "fix" is to find something like 30 or 40 acres to build on in this area. As others have said, there's a lot to think about--how much to people typically spend drilling a well? How much will utilities cost? Is the internet good?
DoubleComma
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Joined: Sun Aug 23, 2020 2:23 pm

Re: Buy the farm?

Post by DoubleComma »

bigriverexpress wrote: Wed Nov 24, 2021 1:11 pm
DoubleComma wrote: Wed Nov 24, 2021 12:56 pm $1M feels a bit of stretch on a $134k income.

Yes, I'm discounting your wife's income because it sounds like she will become a SHM for some period. If you can do the math and feel confident that do it, but only your wife and you get to know what the pressure is to maintain the debt service required to buy the land and build the home.
DoubleComma -

We have scoped this out and it does push the boundry of comfort level (for a Boglehead :happy ) Assuming only my income and forecasting debt payments, we would be around 30% of gross income toward P/I. I understand the land would qualify for ag use exemption from the county, significantly lowering the property tax.

Going from saving >50% of our income toward investments for the last 8 years, to reducing our contributions significantly is slightly uncomfortable. However, assuming conservative returns in our retirement portfolio with contributions only up to company match, we would be looking at roughly $1.5mm (today's dollars) balance when the kids are beginning college. Enough for a possible early retirement.

The concept we have discussed is "pulling our spending and enjoyment slightly into the present", and leveraging the hard work and saving we have already completed to optimize our family's situation now, after a decade of socking away for some undetermined and un-guaranteed time period in retirement.
Sounds like you have a plan. If that is the case, and you both are aligned, then do it.

Personally I would do it and come up with a plan to grow my income. My gut feeling, not knowing you at all, is if you move to the rural location your wife will become a SAHM much longer than a couple years simply do to the logistics of living rural.

I have made a lot of non-BH approved moves; but we value them, can afford it, they aren't preventing savings or our long term plans so it was the only choice for us.
homebuyer6426
Posts: 182
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Re: Buy the farm?

Post by homebuyer6426 »

bigriverexpress wrote: Wed Nov 24, 2021 12:50 pm homebuyer - thank you for reading and for your response.

The intention of the farm would be for self-sustenance (vegetables, small orchard, chickens, goats), and lifestyle. The only income we would plan for is a timber harvest in 10-15 years. I would continue to work, as my job is relatively high-paying and does not require stress or time outside of the 40 hour work week.
Some things to consider:

Self-sustenance from fruits and vegetables in the Midwest would only be for a fraction of the year, unless you invest in time, energy, and equipment to preserve your harvests through dehydration, pickling, freezing, storage, etc. And not everyone likes preserved food.

Pests can be a big problem especially with fruit trees, and predators with chickens. You may need a lot of fencing or netting, and this could need frequent maintenance. You may need to spray your plants with pesticide to get an edible harvest. Tough animals like groundhogs could show up that you would have to deal with in order to get a crop.

People frequently underestimate how much labor is involved in picking fruits and vegetables, let alone cleaning, processing, and storing them. It can be improved with the purchase of machinery, but the trade off is extra money and space requirements. For example, I work full time in an office, and picking/processing berries by hand to make 50 bottles of wine takes up all of my free time in September. And that is just a garden-level harvest on my half-acre.
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Tamarind
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Re: Buy the farm?

Post by Tamarind »

bigriverexpress wrote: Wed Nov 24, 2021 12:50 pm
homebuyer6426 wrote: Wed Nov 24, 2021 12:42 pm Do you have a business plan for the farm or would you mainly be using the land for recreation? If so, have you worked intensively full-time in farming and are you sure that you would enjoy it? Or do you plan to keep your current job and use that money to pay for the farm? Seems like you are either going to be time-poor or money-poor here, unless you have a strategy that you know will work.
homebuyer - thank you for reading and for your response.

The intention of the farm would be for self-sustenance (vegetables, small orchard, chickens, goats), and lifestyle. The only income we would plan for is a timber harvest in 10-15 years. I would continue to work, as my job is relatively high-paying and does not require stress or time outside of the 40 hour work week.
For that list of uses, I think much smaller acreage is called for. 5-7 acres perhaps?

Caring for 75 acres is a LOT of work, and if not cared for the land will not match your mental image for very long. In addition to pasture and field maintenance that everyone thinks of, timber and woodlands also require regular care to prevent it becoming a mess of invasive species or a tinderbox.

You have pleasant memories of spending time on the farm as a child, but how much of the chores were you doing?

I think I would not rush into this - you have a dream but I'm not hearing a plan. I grew up on a "hobby" farm with custom house, woods and fields. My parents had the same dream you do, though they bought less acreage and spent much less. My parents and I enjoyed the farm life so I completely understand the emotions involved. There were 3 major issues that led to them selling at retirement:

1) Inadequate availability of internet meant long commutes well after my parents could otherwise have worked remote. Other services were also scarce.
2) Cultural mismatch with the neighboring community meant that most of their friends were still in the city where they worked. As a result they felt isolated.
3) As they aged it got harder and harder to keep up with maintenance of the property, and also harder to find people with the right skills to hire. 1&2 meant that I moved away after school and could not be on hand to help as much as they would have needed. My wife and I considered buying them out but in the end concluded it just did not make sense.
tedgeorge
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Re: Buy the farm?

Post by tedgeorge »

You could have that small farm lifestyle now. Plenty of people around with small gardens that grow more than they need and chickens are all over the place in my neighborhood (including my backyard). I grew up on a farm and just cutting grass would be hours each week. You ready to give up your free time for something you think you might want to do?

I loved growing up on a farm but now that I'm older with kids, the work and the money needed make it a lot less desirable. I do love watching people try to do it on youtube though. Plenty of people out there vlogging the slog of homesteading.
MathWizard
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Re: Buy the farm?

Post by MathWizard »

Two thing you might not have considered.

Your heating costs will go up a lot likely. Natural gas is only in towns, and propane is quite a bit more expensive. Geothermal though expensive might be an option, especially the horizontal slinky coil type.

If you are in the snow belt,you will be moving lots of snow.
deikel
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Re: Buy the farm?

Post by deikel »

Maybe I missed the information, but how much is the land alone (which you would have to pay now) ?

And then you want to build a home on it for a total of 1 million outlay ?

How exactly do you intend to finance that ? At 135k salary, no bank in their right mind gives you a mortgage of 870k (taking your equity into account that you have in teh current house)? Even worse, you would need a loan for a new building which is inherently more risky (for you and the bank)

If the land purchase is separate, then you would have another mortgage for a while with no use on the land that would pay for it. Can you do a clear cut of the timber, pay some of the land that way and let it regrow and think about a move their later on (once it looks pretty again?) - just a thought, not sure what the timber is truly worth.
Otherwise you can pay off the land first (and your current home mortage) and then build later on ?

I hope you don't intend to tap into your retirement ?

Maybe I am missing something. The general idea is cool and being only 30 min away from everything is kind of very central for my frame of reference, I would certainly also look at such an opportunity - but 1 million layout seems crazy high to me in your situation.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
MHA556
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Re: Buy the farm?

Post by MHA556 »

I say do it. Can’t beat rural life.

Nobody is considering how much the timber harvest will do to potentially help your bottom line when you harvest that. 55 Ac of timber will not require a lot of ongoing maintenance like the rest of the farm will. Actually 20 ac of pasture by itself is pretty simple itself- you could initially just grow hay, and have someone else just handle that for you, or you could lease it out to someone else with cows (pretty much what happens with 20 ac+ pastures near my parents place.)

Seems to me you can be as hands on or hands off as you desire and have time for with some planning. Letting hay and timber grow won’t take much effort, and slowly adding in vegetables and fruit trees on your schedule seems practical.

If you like hunting or target shooting then having a property this size helps make that easy as well.

As far as cost- don’t know. Do they have a timber cruise/estimate for how much there is currently? What is the current owner doing? Etc.

Personally I would find a way to make it work. The potential benefits for someone who wants to be outside the city are enormous. Plus if as you say the city is expanding your direction, it can always be broken up into residential areas later for a nice profit if you decide in 30 years that you are done owning a farm- happens here all the time with all the close in farm areas.
humblecoder
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Joined: Thu Aug 06, 2020 8:46 am

Re: Buy the farm?

Post by humblecoder »

DISCLAIMER #1: I am a city person who knows nothing about farms so I might not be the best person to respond.

DISCLAIMER #2: This response contains some tough love.

This seems bonkers to me. Let's look at this rationally. Let's assume you drain your savings to put 20% down. That's still an $800K mortgage. A 30 year loan payment of P+I around $3750 depending upon the interest rate. That's a third of your current gross salary. This doesn't include property taxes on 75 acres or insurance or maintenance (I suspect maintaining 75 acres is not free). Plus it sounds like you will have to maintain your current house for a time so you'll effectively be paying two mortgages!

To recap:
1. 1/3 of your gross income towards JUST P+I
2. Requires paying two mortgages until house is built
3. Most of your non-tax advantages savings is depleted with a down payment
4. Increase of your monthly expenses to care for 75 acres
5. Third child on the way (child = $$$$)

And it isn't clear it the $1M price tag includes building your dream house on the property. If not, then that makes this even more insane!

I get that you want to live the farm lifestyle. However, maybe there is a less expensive way. If you are only going to raise crops/livestock for your own sustenance, you probably don't need 75 acres for that, I would imagine. Sounds like most of those acres are woods anyway, which you wouldn't use or produce income (at least in the short term as per your response). Like I said, I am not a farm person but I have to imagine that what you want to do can be done on <75 acres.

Or perhaps you can lease some of the pasture or sell the timber rights or hunting rights or something to at least offset the expense.
daheld
Posts: 1241
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Location: Midwest US

Re: Buy the farm?

Post by daheld »

humblecoder wrote: Wed Nov 24, 2021 2:23 pm DISCLAIMER #1: I am a city person who knows nothing about farms so I might not be the best person to respond.

DISCLAIMER #2: This response contains some tough love.

This seems bonkers to me. Let's look at this rationally. Let's assume you drain your savings to put 20% down. That's still an $800K mortgage. A 30 year loan payment of P+I around $3750 depending upon the interest rate. That's a third of your current gross salary. This doesn't include property taxes on 75 acres or insurance or maintenance (I suspect maintaining 75 acres is not free). Plus it sounds like you will have to maintain your current house for a time so you'll effectively be paying two mortgages!

To recap:
1. 1/3 of your gross income towards JUST P+I
2. Requires paying two mortgages until house is built
3. Most of your non-tax advantages savings is depleted with a down payment
4. Increase of your monthly expenses to care for 75 acres
5. Third child on the way (child = $$$$)

And it isn't clear it the $1M price tag includes building your dream house on the property. If not, then that makes this even more insane!

I get that you want to live the farm lifestyle. However, maybe there is a less expensive way. If you are only going to raise crops/livestock for your own sustenance, you probably don't need 75 acres for that, I would imagine. Sounds like most of those acres are woods anyway, which you wouldn't use or produce income (at least in the short term as per your response). Like I said, I am not a farm person but I have to imagine that what you want to do can be done on <75 acres.

Or perhaps you can lease some of the pasture or sell the timber rights or hunting rights or something to at least offset the expense.
I also think the place is likely out of OPs budget, but I think you're overstating it quite a bit. They're not saying it would cost $1 million on day one. I think it's more along the lines of they'd buy 75 acres on day one, for say, $8,000 and acre ($600k total), then build a home that cost $400k. In the process they'd sell their current home, which would help toward the building of the new home.

The numbers I gave are arbitrary as rural, undeveloped land varies wildly in what it brings per acre. I grew up in a rural area and own 80 acres (which neighbors another 80 owned by close family), and my parents own 75 or so about 20 minutes away. My parents land is worth probably twice what mine is, just because it's a decent bit closer to a small city, it's on a paved road, etc. The point is I don't think OP is getting a mortgage for the full price on day 1.

I agree the answer is likely to find somewhere with less ground. It seems as though land prices are such that OP is likely going to need to settle for less land.
humblecoder
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Re: Buy the farm?

Post by humblecoder »

daheld wrote: Wed Nov 24, 2021 4:12 pm I also think the place is likely out of OPs budget, but I think you're overstating it quite a bit. They're not saying it would cost $1 million on day one. I think it's more along the lines of they'd buy 75 acres on day one, for say, $8,000 and acre ($600k total), then build a home that cost $400k. In the process they'd sell their current home, which would help toward the building of the new home.

The numbers I gave are arbitrary as rural, undeveloped land varies wildly in what it brings per acre. I grew up in a rural area and own 80 acres (which neighbors another 80 owned by close family), and my parents own 75 or so about 20 minutes away. My parents land is worth probably twice what mine is, just because it's a decent bit closer to a small city, it's on a paved road, etc. The point is I don't think OP is getting a mortgage for the full price on day 1.

I agree the answer is likely to find somewhere with less ground. It seems as though land prices are such that OP is likely going to need to settle for less land.
Maybe I was overstating it a little bit. But not by much! :beer

The OP didn't clarify whether the $1M was for the land or land+home build. Let's assume the best case and it is land+home as you said. He still needs to buy the land, at which point he is paying a mortgage on land+existing home. Then he needs to build a house, at which point he is paying a mortgage on land+existing home+new home (builder needs to get paid, right?). I suppose if the OP wants to sell the existing home first and live in a trailer on the land or something, that might save money. However, with three kids (including one newborn) that sounds a bit tough to me.

So to recap, here is the progression:
1. Existing home
2. Existing home + land
3. Existing home + land + new home
4. Land + new home

So maybe he doesn't have a mortgage for the full $800K and existing home for the entire time, as there might be a period where they only have the mortgage for the land and existing home. However, if they delay the home build, that means that they are #2 for longer. In either case, they are going to be in a serious cash flow crunch for awhile. Hence I don't think I am overstating it by much!
livesoft
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Re: Buy the farm?

Post by livesoft »

Friends of ours bought a farm in Iowa to live on while still doing their regular jobs. They leased most of the acreage to adjacent farmers and raised a few chickens, goats, cats, bees, other animals, and vegetables, so the farm was productive. That is, they themselves did not become full-time farmers.
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bigriverexpress
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Re: Buy the farm?

Post by bigriverexpress »

This is why I posted our scenario to the BH forum - to receive intelligent, thoughtful, and scrutinous evaluation. If this weren't a challenging scenario from an emotional and financial perspective, I would have no reason to ask for feedback! I appreciate everyone's reading and response.

humblecoder - did not intend to confuse by stating "We estimate to be $1mm in after purchasing the land and building. " in my original post. The land purchase would be soon for $500k. We would then scope out the home build. My father and I have the skills to trench utilities, rough grade a gravel road, and dig necessary spaces for septic. We would likely sell our existing home once the build is scheduled to begin and move our family in with in-laws until complete.

evelynmanley - you are in my atomsphere with everything you posted. Wendell Berry is both a legend (and a neighbor) in our area. You may enjoy "The Biggest Little Farm" documentary as well!

For reference, we have placed offers on homes with 5-10 acres going for $700-850k in this school district. They are subject to market insanity we are all familiar with. I am hopeful this tract is in a dark corner of the market and is fairly priced.
dual_citizen
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Re: Buy the farm?

Post by dual_citizen »

I would do it. And I did do it. And I’m really glad that I did.
evelynmanley
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Re: Buy the farm?

Post by evelynmanley »

bigriverexpress wrote: Wed Nov 24, 2021 6:21 pm

evelynmanley - you are in my atomsphere with everything you posted. Wendell Berry is both a legend (and a neighbor) in our area. You may enjoy "The Biggest Little Farm" documentary as well!
You live in paradise! And my son lives very near you, then, because he's only 25 minutes away from Berry. He wants me to live with or near him at some point (I'm in CA), and I'm looking forward to it. I would love a little cabin on a river like Jayber Crow's.

Your plans are the same as what my farmer did 25 years ago (he's now 65). He and his father found the property, built the house and workshops, put in wells, and started the farm together. The 40 back acres are in black walnuts, which aren't harvested or tended to except for being watered with the allotted county water from the canal. Before starting the farm, my farmer worked with his brother and they built parts of robotic arms for NASA as independent subcontractors. He bought out his brother and bought the farmland. He's been happy about it ever since. (His wife, however, makes it know that "We are living HIS dream," because it is such hard work if you own the land but don't make a good yearly income and have four kids.) I feel grateful every second I am at the farm and wish I were many years younger so I'd have more years to be there to help out and be blissed out.

I didn't like "The Biggest Little Farm." (re: click on the link I sent you about the film in my earlier response to you) It made it look like their magnificent farm was easy to establish, and they failed to mention where they got the resources and the wisdom from other people to make it possible. Not to mention they repeatedly did not protect their own animals from predators, when they could have easily done so.

I hope you keep us updated on your decision, and if you buy the land, I hope you start a blog and let us know about it. What a great dream to have at such a young age, with such great financial resources, and a spouse who supports you.
patch
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Re: Buy the farm?

Post by patch »

If the farm/ life in the country is what you and your family WANT as a life direction I would say go for it. You have the flexibility of building slowly and thoughtfully as you determine the best way to get toward your goals and aspirations with the piece of land as you come to know the where, what, and how the ground works.

Keep in mind (as others have mentioned) you could lease your open ground at least for hay and have it mostly maintained by hopefully a friendly neighbor who you will need as you develop your life on your place. This is what I do for now on my own place. In my area (mid Atlantic; average farm ground) you would get a couple thousand dollars a year+ lease payment for your acres. Then you can expand garden/animals etc. as you have the time and inclination after you get set up.

For your forestland, do yourself a favor and get a professional forester to do a cruise and inventory of your timber. This will establish your basis for future depletion deductions if/when you decide to sell some timber.

For background: my wife and two, now three young children bought a piece of an 1840 farm which we are bringing back to life. Land was in the same family since 1810. Bought it when I was 26. Now 33. It has been and is a journey with many ups and downs but I wouldn’t want to raise my family any other place.
Best of luck to you.

P.S. Professional forester and huge Wendell Berry fan.
Retired Bill
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Re: Buy the farm?

Post by Retired Bill »

I believe you ought to talk with farm credit first and see how much of a down payment they would require before even looking at land. In my part of the Midwest used to be 50% cash down a couple of years ago. With what's going on in 2021 with big increases in values, farm credit now wants up to 60% down. If this is the situation where you are located, you appear to need more cash for a down payment. Talking with brother last night and what was going at $7000 is now at $10,000 and on up now. At $7,000 it took a good cash lease to net 2% before income taxes if land totally paid for. But these are row crop farms, and not small truck farms which are very labor intensive.
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bigriverexpress
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Re: Buy the farm?

Post by bigriverexpress »

MHA556 & patch - The selling family finished a timber cut on their 400+ acres (including this tract) 18 months ago. It was divulged to me that this brought them $500k+. They did not clear cut any areas. Our woodland would be on a grade 10-30% in areas, but I can tell they were able to access it. They left the forest canopy intact and seem to have acted responsibly. However, I do not see an diameter 18in+ trees remaining. Assuming we would be 15 years at least from another cut.

The pasture ground is currently in fescue and is being cut by a neighbor. My understanding is there is no money changing hands and this is a typical agreement in the area, but the neighbor is maintaining the property. This would be valuable for us as the ag exemption for property tax purposes would need a proven agreement for this practice, as well as enrolling the woodland in a forestry management program.

retiredbill - we are pre-approved for $550k, with 15% (15 year) - 25% (25 year) down on the land. Fixed rates currently 3.25-4%. The same agency would issue a construction loan if we chose, where the land equity could serve as collateral. There would be one closing and the loan would roll into a single note at completion if we chose.

Financially, we would liquidate roughly 1/3 - 1/2 of our taxable investments for down payment on the land, and then apply the necessary amount of $120k+ equity from our existing home sale toward the build. I estimate we would be left with $150k remaining in our taxable. We would intend to SLOWLY scope out and purchase necessary equipment over the span of years. Ex. build a simple lean-to shed and purchase 40hp tractor and bush hog. Build a fence for grazing areas. Build a pond. Construct a pole barn. Etc...over the course of years.
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firebirdparts
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Re: Buy the farm?

Post by firebirdparts »

I would love to have done this at your age. My wife would not have been able to ever get okay with it. I really think it’s a good way to raise children and keep them interacting with the physical world more! And that’s pretty important for mental and physical health. Been a great benefit to me anyway.

So I would do it, but you judge whether anybody else in the family is going to go insane as a result of the transition.
A fool and your money are soon partners
bltn
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Re: Buy the farm?

Post by bltn »

Like several ithers, I think thimngs are going to be a little tight financially. Is there anyway your wife could continue to work?
Golf maniac
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Location: Florida

Re: Buy the farm?

Post by Golf maniac »

As others have stated I do not believe you will get a mortgage approved when you build the house given your single income. But only you can run the numbers and see what it looks like. 3 kids will be expensive. I would suggest a 5 to 10 acre lot with a home build that provides the room you need but not necessarily an extravagant build. You can do everything you want on a smaller lot but still be financially responsible.
autopeep
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Re: Buy the farm?

Post by autopeep »

Interesting thread. I didn't realize bogleheads had such romantic visions of pastoral life 😈.

Salary: good not great (and possibly decreasing)
Retirement savings: good not great
Plan: 6 to 1 cost to income just to buy the land (not even the house).

Sure seems like a downright bad plan to me. If OP was trying to buy a single family home in Seattle people would be telling him to abandon the lifestyle and move to a LCOL town. 🤷‍♂️
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bigriverexpress
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Re: Buy the farm?

Post by bigriverexpress »

autopeep - appreciate your reading and response. Your conclusion may not change, but your assumptions and stated understandings are incorrect.

Land cost / yearly income ratio between 2.4/1 and 4/1 (wife negotiating raise to stay after kids birth or quit).

You bring up a great point of discussion: how would people respond if the proposal were to purchase a forever home in Denver area, in a good school district for $950k?
thatme
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Re: Buy the farm?

Post by thatme »

Is this proposed land purchase in the Denver area (if so, where?), because if not, it’s a very different discussion than a forever home in the city, etc.

That said, I would say the $950k purchase in Denver would be a stretch on your income.

Earlier in this thread someone mentioned farming podcasts — to that person, what are some recommendations of good ones? Seems like lot of them out there but not sure which ones are any good.
evelynmanley
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Re: Buy the farm?

Post by evelynmanley »

thatme wrote: Thu Nov 25, 2021 7:33 pm Is this proposed land purchase in the Denver area (if so, where?), because if not, it’s a very different discussion than a forever home in the city, etc.

That said, I would say the $950k purchase in Denver would be a stretch on your income.

Earlier in this thread someone mentioned farming podcasts — to that person, what are some recommendations of good ones? Seems like lot of them out there but not sure which ones are any good.
These are the podcasts I listen to regularly and have learned a lot from:

Growing Farms
Gold Shaw Farm Podcast
Farmside Chat
Farm Small Farm Smart
The Food Grower Podcast
No-Till Market Garden Podcast
Winter Grower
The Beginning Farmer Show
Farm & Rural AG Network
Grounded by the Farm
Louisiana Farm Life
PBS Video app - often has documentaries about farming and farmers

Southern Foodways Alliance Oral History Project - https://www.southernfoodways.org/oral-history/
Gravy Podcast: https://www.southernfoodways.org/gravy/
SFA has fantastic videos of farmers and people who buy from them:
https://www.youtube.com/playlist?list=P ... rkQATnZQ9n

"This Farming Life" - BBC, 4 seasons (a 5th season available soon in U.S.) by BBC Scotland is on the Britbox channel (I watch it through Prime Video) is excellent:
https://www.bbcstudios.com/case-studies ... ming-life/
** 99 cents subscription for 2 months on Amazon Prime until November 29th; $6.99 after Nov 29th

And Clarkson's Farm on Prime Video is hilarious:
https://www.imdb.com/title/tt10541088/episodes

Have you read Wendell Berry's Port William series of novels and short stories? If you love farming, you will love these:
https://www.goodreads.com/series/275420-port-william
Last edited by evelynmanley on Fri Nov 26, 2021 10:37 am, edited 2 times in total.
Valuethinker
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Re: Buy the farm?

Post by Valuethinker »

MathWizard wrote: Wed Nov 24, 2021 1:50 pm Two thing you might not have considered.

Your heating costs will go up a lot likely. Natural gas is only in towns, and propane is quite a bit more expensive. Geothermal though expensive might be an option, especially the horizontal slinky coil type.

If you are in the snow belt,you will be moving lots of snow.
There's definitely been a shift on green building advice sites towards Air Source rather than Ground Source ("geothermal") heat pumps.

I had a relative in Ontario, farm house on top of an exposed ridge, installed in 1990s. They were very happy w GSHP. However much of their heating was a large wood fireplace (w glass doors) which heated the chimney that was the core of the property. It also provided much needed air conditioning.

The basic thrust is that whereas at one time Coefficients of Performance of say 4.0 to 5.0 for GSHP and markedly below that for ASHP. Except in cold temperature extremes, the latest Japanese ASHP are a lot closer to those numbers. If you search on poster Talzara here, who clearly knows a lot about this, you will find some more info.

So for say a 1x difference in COP, unless you have a very high electricity price, it may well not be worth the additional cost.

Depending on what other needs are on the property, an ASHP w propane backup might be the best? Above say 20F the HP will work and in very cold weather the propane furnace. Or just let the electric bar kick in.

Usual observations about HPs working well with underfloor heating - but apparently that's a lot easier to do in Europe (where concrete slab floors are common) than in North America. I think I picked up a comment that air-to-water HPs were not common or not available in USA - that's a pity because hydronic heating ("rads" or "emitters" in the heating jargon) is much better from a dryness point of view.

With a substantial solar array, home storage battery, HP & provision for a future EV charger, a newbuild homeowner can go a long way towards clean energy use/ future proofing.
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