By Blake Jackson
Renting unused farm buildings can create opportunities for both property owners and agricultural producers.
According to Erin Cuprinka, Extension Educator for Field and Forage Crops with Penn State Extension, leasing farm structures allows owners to offset ongoing expenses while giving farmers a more affordable way to expand or diversify their operations without significant upfront investments.
One common approach to setting rental rates is the cost-based method, which calculates rent using the owner's annual expenses. These include property taxes, insurance premiums, routine repairs and maintenance, loan interest or opportunity costs, and depreciation.
After totaling these yearly costs, the amount can be divided by the building's usable square footage or functional space to establish a reasonable rental rate.
Another option is the market-based method, which compares rental prices for similar agricultural buildings in the local area. While this reflects current market conditions, comparable data may be limited or vary depending on the region.
Producers and landowners can also consult the Farm Building Rental Rate Survey published by the North Central Farm Management Extension Committee for additional guidance.
For specialized facilities such as poultry houses, greenhouses, or milking parlors, the income potential method may be more appropriate. This approach estimates how much rent a tenant can afford after accounting for production expenses, providing a practical starting point for lease negotiations.
The commercial equivalent method compares farm buildings with nearby commercial storage or rental facilities. Since farm buildings often require tenants to assume more maintenance responsibilities, rental rates are typically somewhat lower than commercial alternatives.
Several other factors also influence rental value, including the building's size, condition, available features, maintenance responsibilities, location, and regional demand. Travel distance and access to markets or infrastructure may also affect pricing.
Before signing a lease, both parties should clearly understand their financial obligations. Property owners need to account for all ownership costs, while tenants should carefully evaluate their production expenses and expected returns.
A written lease agreement is strongly recommended to outline responsibilities and establish clear expectations for both parties.
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Categories: Pennsylvania, General