Renting Your Land for the First Time? Here’s What You Need to Do

Latest statistics show that almost 40% of agricultural land in the US is rented or leased from someone else, covering 354 million acres of land out of a total of 911 million acres dedicated to agricultural production. Farmland area is expected to be declining significantly and access to it remains formidable. If you are a landowner and have no plans to use it for agriculture or gardening, renting it out is a viable option given that farmland is in demand. However, before putting up your land for lease, there are several points to consider before leaving your signature on a lease contract.

Good Communication and Expectations

Both the landlord and the tenant will have different expectations as to how rented land will be used. The tenant might want to convert the land into a farm and derive income from production. To enhance crop production, fertilization or weed control will be undertaken. The landlord might not appreciate use of chemicals and will insist on organic management and so on.

Hence, expectations must be clear from the start and misunderstandings can be avoided by detailing the lease agreement to ensure that each party knows how land will be used, the specific equipment allowed, access to the property, infrastructure, boundaries, water sources, the rent price, and duration of the contract.   

Use a Rent Guarantee Insurance

It is vital as well to protect your assets and get a rent guarantee insurance if your tenant fails to pay the lease. Studies show that 40% of Americans struggle when it comes to housing, utilities, or health care so the risk of default payment is always there.  

Having rent insurance will cover your losses in case of missed payments. The guarantor will ensure that rents are recovered until the tenant is evicted as well as initiating legal proceedings and report to the credit agencies.

Screen Tenants Carefully

Another critical aspect to consider when renting out land is to screen potential tenants carefully. The chances of missed payments are lower if you have a tenant in employment and a good credit rating compared to an applicant who is unemployed, has a low rating, no references or guarantor.

Performing discrete background checks, requesting for references, and proof of employment are just some of the things that you can do to ensure that you are going to get your rent checks on time. Some states also allow landlords to check credit ratings, so you can see their credit history and even current debts.  It’s also a good idea to contact previous landlords to see if your future tenant has outstanding debts or history of late payments or caused damage to property.

Becoming a landlord is not always straightforward and although the demand for vacant land is high, it is important that you protect yourself from default payments. Setting a clear contract, paying for a rent guarantee insurance, and screening applicants can help protect your interests and investments. 

Posted in Farming on Apr 25, 2019