Yes, you can buy farmland with another person. In fact, spouses, family members, business partners, farmers, and investors often purchase land together.
Buying farmland with someone else can make a larger purchase possible. For example, buyers can combine their down payments, borrowing power, and other resources.
However, buying the farm is only the first step. Before making an offer, you should decide how you will own, finance, manage, and eventually sell the property.
Why Would Someone Buy Farmland With Another Person?
Farmland can require a large amount of capital. Therefore, buying with someone else may give you access to properties you could not purchase alone.
There are many reasons people buy farmland together. For example:
- Parents and children may expand a farming operation together.
- Siblings may purchase family farmland.
- Two farmers may buy an adjoining farm.
- Spouses may purchase farmland together.
- Friends may invest in agricultural land.
- Investors may combine their capital.
- A farmer and an investor may purchase land together.
The arrangement can involve two people buying an 80-acre farm or several investors buying a much larger property.
Either way, discuss the ownership structure before making an offer.
How Can Two People Own Farmland Together?
There are several ways to own farmland with another person.
For example, the buyers may own the real estate directly. Another option may be to create an entity, such as an LLC, to own the property.
The right structure depends on several factors. These may include financing, taxes, estate planning, liability, and long-term goals.
Also, the way the deed is titled can have important legal consequences.
Therefore, buyers should talk with an attorney and other qualified advisors before deciding how to own the property.
Can We Buy Farmland Through an LLC?
An LLC may be an option when several people want to buy farmland together.
In this situation, the LLC may own the real estate. Meanwhile, the individual buyers own interests in the LLC.
An operating agreement can establish rules for:
- Ownership percentages
- Voting rights
- Management
- Capital contributions
- Income distributions
- Property expenses
- Ownership transfers
- An owner’s death
- An owner leaving the group
- A future sale of the farm
However, an LLC is not automatically the right choice for every purchase.
Talk with an attorney and tax professional before deciding which ownership structure is appropriate.
Do We Have to Own the Farm 50/50?
No. Two people do not necessarily have to own equal shares of a farm.
For example, one buyer may contribute more money toward the purchase. As a result, the buyers may decide to have different ownership percentages.
The same applies when three or more people buy land together.
Most importantly, everyone should understand their ownership percentage before closing.
How Does Financing Work When Buying Farmland Together?
Financing depends on the property, buyers, lender, down payment, and ownership structure.
An agricultural lender may consider:
- Purchase price
- Down payment
- Income
- Existing debt
- Credit
- Farm income
- Rental income
- Collateral
- Ownership structure
- Ability to repay the loan
When several people borrow together, the lender may need financial information from each borrower.
In addition, purchasing through an LLC may create additional lending requirements.
For that reason, talk with an agricultural lender before submitting an offer or bidding at an auction.
Who Gets to Farm the Property?
Decide this before buying the farm.
For example, suppose two people purchase farmland together, but only one person farms.
Will that person pay rent?
Will the owners share the crop income?
Will another farmer rent the property instead?
These details matter, especially when one owner is a farmer and the other is mainly an investor.
Therefore, put the operating arrangement in writing whenever possible.
How Do We Divide Farmland Income?
How you divide the income depends on your ownership and operating arrangement.
Farmland may generate income from:
- Cash rent
- Crop share
- Flexible cash rent
- CRP payments
- Hunting leases
- Wind or solar agreements
- Other property income
At the same time, farmland has expenses.
Those expenses may include property taxes, insurance, drainage, repairs, conservation work, management, and improvements.
Decide how you will divide both income and expenses before purchasing the property.
What Happens If the Farm Needs Improvements?
This is another important question.
Suppose two people own a farm that needs $50,000 of drainage tile. One owner may want to make the improvement. However, the other owner may not want to spend the money.
Who makes the final decision?
Who pays for the improvement?
What happens if only one owner contributes the additional money?
A written agreement can answer these questions before they become problems.
What Happens If One Owner Wants to Sell?
This may be one of the most important issues to discuss before buying farmland together.
Circumstances change over time. For example, an owner may:
- Need cash
- Retire
- Move
- Change investment strategies
- Want to buy another farm
- Experience financial problems
- Pass away
- Simply want to sell
Therefore, your ownership agreement should explain what happens when someone wants out.
For example, the other owner may have the first opportunity to purchase that person’s interest.
You can also establish a process for determining the value of an ownership interest.
Discuss these issues with an attorney before purchasing the property.
What Happens If One Owner Dies?
Estate planning is also important when people own farmland together.
What happens after an owner’s death depends on several factors. These may include how the property is titled, estate planning documents, the ownership entity, and applicable law.
Without proper planning, the surviving owner could eventually own the farm with the other owner’s heirs.
That may not be what either person intended.
As a result, estate planning should be part of the conversation from the beginning.
What Happens If We Disagree?
Joint ownership means sharing decisions.
For example, one owner may want to sell the farm while another wants to keep it. Likewise, one person may want to install tile while another does not.
A written agreement can establish how major decisions will be made.
Depending on the ownership structure, decisions might require a majority vote, unanimous approval, or another agreed process.
It is much easier to establish these rules before a disagreement occurs.
Can a Farmer and an Investor Buy Farmland Together?
Yes, depending on how the transaction is structured.
A farmer may bring agricultural experience and the ability to operate the land. Meanwhile, an investor may provide capital.
However, both parties should understand the financial arrangement.
Before buying, answer questions such as:
- Who provides the down payment?
- Who signs the loan?
- Who farms the property?
- Does the farmer pay rent?
- Who receives the income?
- Who pays the expenses?
- How are improvements approved?
- How is appreciation divided?
- What happens when someone wants to sell?
Clear expectations can prevent misunderstandings later.
Can Family Members Buy Farmland Together?
Yes. This can be especially useful when a family wants to keep farmland in the family.
For example, parents may decide to sell a farm that several children want to keep. Instead of one child buying the entire property, the children could explore purchasing it together.
Similarly, siblings might buy additional farmland as a joint investment.
However, family relationships should not replace written agreements.
Clearly documenting expectations can help protect both the property and family relationships.
Can We Buy Different Tracts at the Same Farmland Auction?
Possibly. It depends on how the auction is structured.
A multi-parcel farmland auction may allow buyers to bid on individual tracts, combinations of tracts, or the entire property.
As a result, two buyers may decide to work together to purchase a larger combination.
If you plan to bid with someone else, establish your financing and ownership plans beforehand.
Do not wait until after winning the bid to decide who is buying the farm.
Should We Get Pre-Approved Before Buying Farmland?
Talking with a lender before bidding or making an offer is a good idea.
Farmland transactions can move quickly. At an auction, the successful bidder may need to sign a purchase agreement and provide earnest money immediately.
Pre-planning also helps you establish a realistic budget.
Additionally, your lender can explain what information is required from each buyer.
What Should We Decide Before Buying Farmland Together?
Before buying, have a serious conversation about the future of the property.
Discuss:
- Who will own the farm?
- What percentage will each person own?
- How much will each buyer contribute?
- Who will borrow the money?
- Who will farm the property?
- How will income be divided?
- How will expenses be divided?
- How will improvements be approved?
- What happens if more money is needed?
- How will major decisions be made?
- Can an owner sell their interest?
- Can the other owners buy that interest first?
- How will the property be valued?
- What happens if an owner dies?
- What happens if the owners disagree?
- How can the entire farm eventually be sold?
These questions may not seem important when everyone is excited about buying a farm. However, they can become extremely important years later.
Is Buying Farmland With Someone Else a Good Idea?
It can be.
Buying with someone else can allow you to combine capital, borrowing capacity, knowledge, and other resources.
However, joint ownership also means sharing decisions and responsibilities.
Therefore, establish the ownership structure, financial expectations, management responsibilities, and exit strategy before buying.
An attorney, agricultural lender, CPA, and other qualified advisors can help you structure the purchase.
How Do I Start Buying Farmland With Someone Else in Iowa?
First, decide what type of farmland you want and how much you can afford.
Next, determine how much each buyer can contribute and how you plan to use the property.
Then, talk with an agricultural lender about financing. You should also speak with an attorney about ownership options.
Once those pieces are in place, you can begin looking for farmland that fits your goals.
At Whitaker Marketing Group, we work with Iowa farmland buyers looking for land for farming, expansion, investment, recreation, and long-term ownership.
Whether you are buying alone, with a family member, or with a business partner, understanding the property and purchase process can help you make a more informed decision.
Looking for farmland in Iowa? Contact Whitaker Marketing Group to discuss the type of property you want and available farmland opportunities.
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