November 11, 2022
I am a 17-year-old senior in high school. I am a girl. I live on a 275-acre dairy farm with my parents and my younger sister. We milk 77 Holstein cows. My mom works full time at a cheese plant in town and helps with chores on weekends. My sister is a freshman in high school and helps with chores. I do chores and I help my dad with fieldwork.
I will be graduating from high school in June. My parents want me to go to college. I want to farm full time. They need the help, and it is what I really want to do. My dad says I need to get an education, work a few years at a job and save my money before I decide to return to the farm. My parents are 50 years old. My dad said I can still help on the farm on weekends when I am home, and during the summer and vacations. I’m afraid if I go to college, my parents will decide to sell the cows because they don’t have enough help. My dad says if he needs help, he will hire the neighbor boy to help for a couple of hours after school during the week. What are your thoughts?
Tom Kestell: Congratulations on your pending high school graduation. This is a critical time in a young person’s life, so spend it wisely. I don’t know where you live, but in many parts of the state, there are excellent technical colleges that can be attended at a relatively low cost. You could attend one in your area and fill in the gaps in your education that could help your career as a dairy farmer, or prepare you for a backup career if farming does not work out long term. Farmers in the future are going to have to be tech-savvy, excellent accountants, precise planners and creative innovators to survive in a fast-paced, rapidly changing occupation. It never hurts to get a new perspective on farming from outside sources.
Many successful farms and family businesses demand that family members work for an outside company for up to five years before joining the family-owned enterprise. This has worked well for them and added to the success of the family enterprise once they return. Now is the time in your life to keep your eyes, ears and mind wide open, and to do the things that will enhance your ability to first, enjoy the journey of life, but also to be successful both personally and professionally.
Rather than working an off-farm job, I suggest a complimentary enterprise that you could start while in school that would help your father. Raising beef or selling beef already raised on the farm are just a few suggestions, or maybe even renting some additional acres that, with your father’s mentorship, you could operate on your own. The possibilities are endless. Use your imagination and get your father involved, and this will help foster a better working relationship or point out future problems that need to be worked out.
Sam Miller: I admire your dedication to your parents to work on the farm and your desire to want to farm with them full time, but I think you should take a step back and look at the long term. My bias is to agree with your dad for you to get an education and work somewhere besides the farm for a few years to gain an education, experience and perspective. If coming back to the farm is the right thing in a few years, the knowledge and skills you return with will make you an asset to the business and set you up to eventually take over the business. If your parents do sell the cows, there are many other opportunities to farm by working for or with other operations, and you will have more skills you can bring to the business. Good luck with your choice.
Katie Wantoch: Agriculture is a broad field that encompasses farming, cultivating, growing and raising in a fast- and ever-evolving world. The study of agriculture is important and critical with the introduction of technology that continues to revolutionize production and distribution around the globe. These are the reasons your dad wants you to continue your studies at a postsecondary school. We never stop learning and acquiring new or modifying existing knowledge, behaviors, skills and values.
You want to continue farming with your family, so identify areas that you can learn more about that would enhance your family’s farm business. What interests do you have that you could pursue? Your dad wants you to learn from others besides what he can teach you. Continue to show your interest in taking over the farm by working with your dad on weekends and breaks from school. Hopefully your dad will appreciate your newly gained knowledge, and you can work together to incorporate those new ideas on the farm.
Sell or rent farmhouse, buildings?
My wife and I are in our late 60s, and we have decided to retire from farming. Farming has been good to us and we are in good health, but we are ready to retire. I sold the cows a couple of weeks ago. After I finish harvesting my corn, I plan to sell the equipment in January. We found a nice house in town to buy from a friend. He said he will sell it to me on land contract at 4% interest for $190,000, which seems like a fair price for a three-bedroom ranch house that he recently remodeled. Other than painting one of the two bathrooms, my wife says there is nothing we need to do to the house.
My question is, can I rent my farmhouse out and use the rent money to make our mortgage payments on the house? We are putting down $50,000, and we will owe about $140,000 on the house. What we can get for rent for our farmhouse will pretty much pay for our mortgage payments for the house in town. Our friends think we should just live in the house on the farm, but it is an old farmhouse with lots of stairs. Our only debt is we owe $100,000 to the bank for our equipment, but what we get at auction should more than cover that. We will be renting our 200 acres of cropland to our neighbor for $200 an acre. We plan to start taking our Social Security when we turn 70. We are both on Medicare. Please let me know what you think.
Tom Kestell: Congratulations on a successful and fruitful career. Now is the time to live your retirement on your own terms. If you would like to change your lifestyle and move into town to a newly remodeled ranch home, do it! Maybe your friends would like to rent your older farmhouse, but I doubt it.
I would seriously consider selling the buildings if you can find a qualified and willing buyer. Farm buildings no longer in use tend to go backward rather quickly and take constant maintenance to keep them in good condition. However, in the right hands, these unused buildings can be a perfect fit for a young family to grow and explore how they can best use your facilities. The land is what holds the value and also increases in value over time. On this note, put into place your expectations on how you want your land operated. If you give a long-term rental agreement and the possibility of the right of first refusal to purchase the land in the future, this will give your renter the incentive to maximize the stewardship of your most valuable asset.
There is a time to sow and a time to reap — do things in your retirement that will enhance your harvest of all your work.
Sam Miller: First, congratulations on a well-earned retirement! Your plan sounds well thought out. You must have visited with your tax preparer to assist in planning the sale of your assets by stretching the sales out over a couple of years. Moving to a ranch house with the ability to age in place seems to make sense as you get older rather than needing to climb stairs in the farmhouse.
If you’re able to rent the farmhouse for an equal amount of the land contract payment, it seems you have a good financial plan. The combination of land rent and Social Security likely will provide adequate funds for living expenses. If you are concerned, complete a household budget looking at monthly expenses compared to the income from all sources. Good luck with your transition to retirement.
Katie Wantoch: You have done a great deal of planning for retirement, including thinking about a residence that would be easier to accommodate your needs as you age. A recent article by attorney Tim Halbach shared advantages and disadvantages of land contracts. While the land contract for the house seems to make sense, I would encourage you to consider the length of time of this mortgage and your age. Do you want to have a mortgage payment for the next 10 to 15 years? Will you be able to maintain a tenant(s) in your farmhouse to match the length of the mortgage? Keep in mind, you may have double of some expenses for both properties, such as insurance, property taxes, utilities, etc. Also, you will need to claim the rental income from your farmhouse and farmland, with an opportunity to deduct related expenses, but may be subject to net investment income tax.
I would seek advice from your tax preparer or accountant for the income tax obligations that will be generated upon the sale of your assets and future rental income. You should weigh your long-term options and consider if selling your farmhouse to purchase a new home might be a better option than the land contract.
Agrivision panel: Tom Kestell, dairy farmer, Sheboygan County, Wis; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, statewide University of Wisconsin Extension farm management outreach specialist/professor of practice. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].
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