Hello! Does anyone have any insight on determining a fair market value for leasing a horse property? In my area there are very little comparable. I’m considering renting a one of two barns at an existing horse property. But my responsibilities also include management of the entire farm and caring for the owners horses and second barn. Any professionals renting out there that can give me an idea of how you structure and value such a business deal?
have no idea as for a farm but residential property is about 1% of market value per month …but what you are seeking is commonly done by the stall per month with adds for the facilities that would be allowed to be used
Are you saying that you have to insure the property? Never heard of that in a lease agreement. The owner should have insurance for the property and could apportion a fair-share for your lease. You clearly want liability, care-custody, etc. and name the owner, as well as yourself, in the policy.
My policy is based on replacement cost coverage for the residence, garage, barn and one other outbuilding. Tack, corrals, equipment are covered up to a limit and I can increase those - which I do. Commercial equine is an additional cost as is earthquake. Use is also a factor in the equine portion. Boarding, training, events, rides, etc.
the commercial leases we signed required business liability insurance, structure was theirs not ours
I"m not sure what you are asking. Are you looking for a “ballpark” number on rent? Are you trying to value the structure? Just what are you looking for?
G.
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This is a bit of an unusual situation IME
Like anything, rents, leases are area specific.
Around here the a barn and barn and use of entire property and facility is based on the number of stalls and infrastructure. It is priced by the “dry stall”, $75 to over $400 per stall. The upper end always comes with a fair amount of fenced property, paddocks, good grass, well appointed barn and tack room,feed room. And a proper size ring and indoor arena
The lease may or may not include upkeep, maintenance and repair and capital improvements from time to time. This includes mowing, snow plowing, systems repair and maintenance, weed control, fertilizing, over seeding when needed etc. Utilities are rarely included. All landlords would require commercial liability insurance and they generally will insist on X level of coverage.
Other lease contacts are more like commercial spaces. Which are usually referred to as Triple Net lease. The person leasing is responsible for everything. Any improvements, systems repair and or upgrades paid for by the leasee remains with the property. There is no reimbursement.
In the situation you are looking at, comes down to what it is worth to you. You need to reach out, find barns that are leased and find out what the average cost of a dry stall is in your area and what that includes. Then figure out based on what the property owners expects of you, what exactly is their definition of managing the entire property. What do farm managers get paid for this in your area. There are too many variables under the definition of Farm Manager to give a number. It could be $20,000+ per year to over $50,000++ depending on the horse operation and duties.
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1% of market value per month for residential property?
Is that an industry rule of thumb?
So if the average condominium around here is $500,000 to buy, then the rent should be $5,000 a month?
If the average 3 bedroom suburban house is $1.2 million to buy, then the rent should be $12,000 a month?
Our local rents are crazy high. But not that high yet.
normally it is about 1% to 1.1% of the market value up to $300,000 then may diminish some (into 0.8/0.;9% range) to increase the potential pool of renters … of course market conditions can vary by region/state/city/area of a city …but as a starting point the 1% point per month has been around for a very long period
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“may diminish some (into 0.8/0.;9% range)”
Not even close on upper end horse properties. I sold my farm last year for over $1.6 million. It is located in one of the most desirable areas of PA. Which is why a lot of my neighbors are VERY wealthy. Me, horse and land rich, cash poor.
I it also located in one of the most desirable horses areas in the country Unionville. As the Chronicle calls it, “horse mecca”
Fairly big property at over 100 acres, but far from being really big around here. Lots of very large properties around here.
22 stalls, a 100X200 ring, lots of outside courses, etc. Lots of rideablity off the property. 15 minutes to Boyd Martin’s outstanding schooling courses, 15 minutes to the New Bolton Center, and a number of other top Vets. 20-30 minutes to Fair Hiil, 15 minutes to Plantation Field, etc.
Nice historic house, not Town Country, lol. Giant bank barn, 22 stalls, lots of paddocks auto waters, etc. 200+ tons of Orchard hay baled off it each season.
If I could have rented for $16,000 a month I’d still own it. And could live nicely off the difference from my mortgage payments. The same at .8% $12,800. Though I couldn’t live quite as well.
Because I did not have an indoor my barn and facilities could have been rented around $150, $200 per dry stall. With the house around $5-6,000 maybe. That is under what my mortgage was. We put down 30+% when we bought it.
I follow horse property markets in a number of key states, areas. Few if any can be leased out for more than the money into it and or value. Mortgaged or not. Not even close.
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Interesting. I expect it gets thrown out of whack by our sky high real estate prices combined with a fairly low average wage level.
If you could find a low end one bedroom or bachelor suite condo in our outer suburbs for $300,000 (that would be a very low price), you couldn’t get $3000 a month for it. Maybe $1200 a month.
I’m not sure there is anything whatsoever for sale within city limits for $300,000 or less.
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It’s all supply and demand.
I’ve read in many places that foreign buyers, particularly the Chinese, are very active in major cities across the U.S. and Canada. They will pay a premium, cash price and then take whatever rent they can get. They are NOT in the “real estate business” they are in the “park you assets someplace” business. China is still technically a Communist state and that means at any moment they can walk in and seize whatever assets they want. The savvy, rich Chinese keep homes, other assets, and escape routes ready at all times.
So if you have a bunch of high priced, empty real estate that means low rents (relative to the market value of the property).
If it ever comes to pass that the Chinese government stops this “export” of money you’ll see real estate in a lot of places (including international locations like London) take a big hit.
G.
Following. Interested.
Ive posted lots of times about indoor arenas/barns etc.
I have a good idea of what it would cost to put in an fully insulated indoor (roping) sized arena and build a few attached stalls etc. (of course it always costs more than you think it would)
Do you break even leasing out your facility? I know most of the local trainers around my area, first one who comes to mind owns his own place, with a much smaller than what our arena would be. Same acreage. Place we are hoping to buy is easier to find/drive in and out of
OH yes. We are definitely one of the parking places for flight capital. Many condos and houses sitting empty.
Add to that, our biggest agricultural export by far has been illegal marijuana, making billions of dollars that need to be laundered back into the legit economy. Buying real estate for cash works well. Casinos too.
House prices have actually dropped a tiny amount since marijuana was legalized this year.
Thank you all so much. You have confirmed that this is a tough one to answer. With few comparable in my area, it’s hard to put a price tag on renting the facility. It’s a lovely facility, but in it’s current state, I couldn’t charge more than $500/month full board and stay competitive in my area. The arenas are small, 75’x145’ indoor and outdoor, and the footing needs serious work. The pastures are a good size, but hardly any grass from poor management. I’ll have to feed hay year round and with hay prices rising, that takes a big chunk out of the gross income potential.
I’m hoping they will accept an offer of $1200/month to use the facility and one twelve stall barn. That’s $100 per stall and gives me some room to grow. The other barn would remain there’s for personal use. I will just come up with a fair rate for the labor involved taking care of their horses.
Any other advice is welcome though!
I would do the math on your potential income from the property, and make sure you don’t sign on to anything that you actually can’t afford.
also get it clear who does upgrades and improvements. and who gets to control pasture management if they like letting their horses graze down to dirt all year round. they should be putting some cash into upgrading the arena footings and maybe do so before you move in.
