[USER]

I have a young (21) yo family member, previously pretty financially ignorant/irresponsible but now has and 2 kids.

He is days away from inheriting quite a few acres of farmland that his family has leased out which is worth around 500k and brings in 12k/year profit after all taxes, fees, etc.

He is dead set on selling claiming he’s going to start getting into real eatate/becoming a landlord but he has zero experience and zero time due to his new family and work.

Does anyone have any easily digestable sources i can point him to that will help quickly give the basics in this situation.

He’s of course an adult and it’s ultimately his decision but this is a once in a lifetime opportunity and if he’s smart his family could be set for life.

Thanks for any constructive help!

[Michael]

What if he added income opportunities to the land- turning that $12k to $36k a year?

[Glenn]

Sell it, put it in an S&P 500 Fund and he is literally set to retire at 55.

No need to do anything else or complicate anything

[Kathy]

I would take the guaranteed $1k a month and avoid being a landlord

[Aud]

He’s going to make $12,000/ year on this property but could sell it for $500,000?

[Kristen]

$12k seems like a low annual return for a $500k property, but someone with actual real estate knowledge can chime in.

I wouldn’t mind him selling it and parking that money in high-yield savings accounts (at least two because of the federal account insurance limit).

Maybe for 6 months to a year just for the dust to clear and for him to have time to grieve the loss of whoever passed and to think more about what he wants to do.

Spending a windfall impulsively is usually very dangerous and unlikely to go well.

Since he doesn’t have the time and energy and experience to manage rental real estate, it would probably be more profitable just to sink it into an S&P 500 fund.

[Ben]

1st one People destroy rentals. All the rent will go for repairs if you can get them out.

2nd People don’t pay rent first its their new cellphone, kids need new shoes, I need brakes on my car, I need to pay car insurance this month.

The times have changed from rent came first.

[Dena]

I was an instructor for Robert Kiyosaki, author of Rich Dad Poor Dad specializing in real estate.

I’m experienced in both farm land/cash rent as well as residential & commercial leasing.

Now I mentor & teach young people ages 12-22 on how to achieve fire.

I’d be happy to talk with him regarding the pros & cons of each so he realizes how hard being a landlord is.

Message me.

[Molly]

After 30 yrs in RE, I can tell you that changes in the market, especially related to corporate and cash buyers, it’s a really tough, insecure way to make a living, especially as a family’s primary bread winner.

He can easily get a license and team up with seasoned pro to sell the land and then decide IF it’s for him.

I suspect Not.

Also, if surrounding parcels are leased to same farmer, (1) that’s the pool of likely buyers, (2) the terms on any existing Lease could have a major affect on the value.

[David]

there are enormous tax benefits to owning farm land that vary depending on the state.

I think he should know about that before selling

[Judy]

Farmland is a steady income that doesn’t go up and down too much. You can walk on the farmland and touch it!

[Adam]

Bigger Pockets Real Estate Podcast, pages etc.
Honestly, the return on equity of 12k/yr on 500k equity is flat out terrible.

A high yield savings account would 2x that.

Buying 2 single family homes in cash would likely bring in 3-5k/mo.

If he leveraged that and bought more properties than lower cashflow, but then better appreciation returns.

So I think based on a return of equity he is thinking in the right direction.

But to answer your question. Anything bigger pockets!

[Wanda]

I own 55 acres of farmland. It’s paid off. It’s worth 550 thousand, but find someone to pay that.

Minus real estate commission and capital gains tax at 20% or it may even be a little more.

We rent the farm and gross 18000.00.

Way better than a rental home …

Farmers are begging for land to rent near me.

[Tyler]

If I was 21 with the possibility of 500,000 to invest I would. It’s basically COAST FIRE From day 1.. never needing to put another dollar aside for retirement for the rest of my life.

Also, if he’s able to keep his expenses at 5,000/k (inflation considered), he could retire at a 4% withdrawal at 36 years of age.

If I were you I would try to convince him of this route…

or take the 1K a month, and cash in on the land in 15 years and consider retiring…

though I would cash it all in today.

[Christine]

If he is willing to read this book, it should get him thinking in the right direction:

Real Estate for Dummies by Eric Tyson

[Josh]

Tell him to listen to bigger pockets YouTube channel. I have several rentals and they all provide a much better yield than that farmland.

In my market if you had $500k cash and had the right experience and credit profile to finance 80% of purchase price, you could retire from putting 500k$ into rentals

[Adam]

If you put that in a MMA rn it makes 25000. I would want to keep the land.

sounds like they need to increase the rents on the land and if they don’t own a house they could put their house on a 2 acres.

The increased rent would count as income.

A CPA could make it worth it on the back end with taxes.

Would look at finding tax write offs working with a knowledgeable CPA.

Ultimately all you can do is help but they are young this is why you need a trust when passing down things so that they can’t get full control or wishes have to be honored and assets are protected

[Tara]

If he wants to start in real estate as a landlord, he was just handed his first opportunity.

He should keep the land click the 12,000 a year and save that to put towards another property.

[David]

He can mortgage some or all of the property for cash to use in other investments.

Ideally, the income from the property can offset some or all of the mortgage payment and other costs.

Then he still owns the land and can benefit from additional appreciation and possible income growth.

[Tom]

Looking at it strictly from an annual return perspective (and there are other perspectives to consider), $12,000 of $500,000 is 2.4%. Not all that great.

[Zoey]

12k cash flow a year with $500k asset is too low. I would sell it and invest in real estate.

It would cash low at least $50k/ year

[Author]

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