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Old 04-30-2018, 06:52 PM
 
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I own a quarter (160 acres) of farmland in the upper Great Plains. In general, what is everyone's feeling about where farmland is headed? The reason I ask is because I'm thinking I may want to sell. I posed this same question three years ago but held onto the property. I'm single, 63, have no great need to pass on to heirs and am retired with a pension, etc. I can get by fine with just the rental income plus pension, but am thinking I might be further ahead in the long run to just sell it, pay the taxes (or work out some sort of payment plan) rather than keep taking rental income. Seems I'd want to sell it at some point anyway. Have been thinking of buying a place in AZ where I’d live permanently. I’ve snowbirded there and like it. I just rent in South Dakota now.

Maybe I'd be better off knowing I'd have the extra lump sum in which I could just stick in the equity market or whatever, etc. than I would be just taking the rental income. Also, not getting any younger and I most likely want to sell it at some point anyway I might as well enjoy the money the sale provides at some point instead of hanging onto until death.

Opinions? Ideas? Thanks.
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Old 04-30-2018, 06:59 PM
 
Location: midvalley Oregon and Eastside seattle area
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The real question: Are there any potential buyers?
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Old 05-01-2018, 07:21 AM
 
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I dont think anyone but a local real estate person can answer that. Farmland could be very different from area to area, and state to state.
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Old 05-01-2018, 07:33 AM
 
Location: Raleigh
7,049 posts, read 5,233,801 times
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Quote:
Originally Posted by Burkmere View Post
I own a quarter (160 acres) of farmland in the upper Great Plains. In general, what is everyone's feeling about where farmland is headed? The reason I ask is because I'm thinking I may want to sell. I posed this same question three years ago but held onto the property. I'm single, 63, have no great need to pass on to heirs and am retired with a pension, etc. I can get by fine with just the rental income plus pension, but am thinking I might be further ahead in the long run to just sell it, pay the taxes (or work out some sort of payment plan) rather than keep taking rental income. Seems I'd want to sell it at some point anyway. Have been thinking of buying a place in AZ where Id live permanently. Ive snowbirded there and like it. I just rent in South Dakota now.

Maybe I'd be better off knowing I'd have the extra lump sum in which I could just stick in the equity market or whatever, etc. than I would be just taking the rental income. Also, not getting any younger and I most likely want to sell it at some point anyway I might as well enjoy the money the sale provides at some point instead of hanging onto until death.

Opinions? Ideas? Thanks.
Is it cropland? Is it irrigated? What part of the state? "Farm" Land in SD can sell for between $600 an acre to $6000 an acre. All depends where and what it is.

Do you know what kind of tax hit you would take selling it? You need to ask an accountant that's familiar with farms, because most people here will give you advice based on what they know about holding a residential rental property.
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Old 05-01-2018, 08:18 AM
 
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It sounds like you want to sell it but are just looking for confirmation. Selling now will definitely give you more flexibility. As for your capital gains tax, that should be relatively easy to figure out based upon what you paid for the property and your estimated sales price (capital improvements could be a consideration).

Other options might include selling on a Land Contract with a significant down payment. Then you'd get a smaller sum up front but have additional regular income to supplement your pension. If you go that route, make sure to get legal advice. Since it's presumably vacant farm land, there would be less of a concern moving to Arizona and not being able to check on it regularly, as you would have with selling a house.

You might also check into whether South Dakota has any programs to buy the development rights to the farm land. That would give you the bulk of the money for the farm land's value, and it would enable a farmer to purchase the remaining fee value for a lessor price. You could hang on to the fee title and sell it at a later time, if you wished. The federal government also has a number of programs to purchase development rights/conservation easements, but those usually require a local nonprofit or government partner. Some of the USDA conservation programs also pay for term and perpetual easements. Most of these programs take time to get approved, but if you're in no hurry to sell, they might be worth looking into. Of course, an outright sale is always easier.
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Old 05-01-2018, 09:27 AM
 
1,926 posts, read 1,328,728 times
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Originally Posted by jackmichigan View Post
It sounds like you want to sell it but are just looking for confirmation. Selling now will definitely give you more flexibility. As for your capital gains tax, that should be relatively easy to figure out based upon what you paid for the property and your estimated sales price (capital improvements could be a consideration).

Other options might include selling on a Land Contract with a significant down payment. Then you'd get a smaller sum up front but have additional regular income to supplement your pension. If you go that route, make sure to get legal advice. Since it's presumably vacant farm land, there would be less of a concern moving to Arizona and not being able to check on it regularly, as you would have with selling a house.

You might also check into whether South Dakota has any programs to buy the development rights to the farm land. That would give you the bulk of the money for the farm land's value, and it would enable a farmer to purchase the remaining fee value for a lessor price. You could hang on to the fee title and sell it at a later time, if you wished. The federal government also has a number of programs to purchase development rights/conservation easements, but those usually require a local nonprofit or government partner. Some of the USDA conservation programs also pay for term and perpetual easements. Most of these programs take time to get approved, but if you're in no hurry to sell, they might be worth looking into. Of course, an outright sale is always easier.
Thanks, Jack, and others. It's farmland (it's cropland, but i guess I assumed that) that is probably worth 4000-4500 an acre from what I can glean...has been growing crops such as corn and beans for years. I know what he capital gains would be. I would like the flexibility of having the money. The land was gifted a few years ago and the cost basis is low so there would be a sizable capital gains tax plus, if based on Arizona residency, I think an AZ state tax.

Thanks for the ideas.
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Old 05-01-2018, 09:32 AM
 
Location: Dallas, TX and Las Vegas, NV
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Time to sell and enjoy your retirement!
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Old 05-01-2018, 09:53 AM
 
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Quote:
Originally Posted by Burkmere View Post
Thanks, Jack, and others. It's farmland (it's cropland, but i guess I assumed that) that is probably worth 4000-4500 an acre from what I can glean...has been growing crops such as corn and beans for years. I know what he capital gains would be. I would like the flexibility of having the money. The land was gifted a few years ago and the cost basis is low so there would be a sizable capital gains tax plus, if based on Arizona residency, I think an AZ state tax.

Thanks for the ideas.
We own farmland in SD that we lease out (crops are corn and beans). We recently got valuation of $9000 acre from the DOT. They are widening the shoulder of the road and are paying us for an easement on the property. We had previously thought about selling the farm, but are not quite ready to do so. At the time, we were told the value per acre was around $6000. Quite a differential in a short period of time.

Have you spoken to an auction company? I know that is a route a lot of people take when selling farmland.
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Old 05-01-2018, 10:48 AM
 
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A quarter section of Dakota farmland with an oil well or two might be nice. Be certain your farmland doesn't have oil, gas, or coal or before you sell it.

As far as value goes, right now trade agreements with China are at risk that include many farm commodities. Prior to this recent development, Ag land prices were going nowhere but up. Location is everything. Which county is this land located in?

I would discuss thoroughly with CPA prior to selling. There could be more in play than capital gains. If you have income you need to shelter, retaining ownership in Ag land could be advantageous.
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Old 05-01-2018, 12:58 PM
 
Location: Raleigh
7,049 posts, read 5,233,801 times
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Quote:
Originally Posted by historyfan View Post
A quarter section of Dakota farmland with an oil well or two might be nice. Be certain your farmland doesn't have oil, gas, or coal or before you sell it.

As far as value goes, right now trade agreements with China are at risk that include many farm commodities. Prior to this recent development, Ag land prices were going nowhere but up. Location is everything. Which county is this land located in?

I would discuss thoroughly with CPA prior to selling. There could be more in play than capital gains. If you have income you need to shelter, retaining ownership in Ag land could be advantageous.
Yes, there are often tax deferred and preferential tax deals in place for farmland, that often come due on sale...
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