Sometimes farmers who want to rent land and landowners looing for good renters have trouble finding each other. Maybe the landowner inherited land, in a place she never lived. Maybe investors bought land in an area where they don’t know any local farmers.
Often farmers who would like to rent more land don’t even find out about rental opportunities until the land is already off the market.
When the landowner and renter do find each other, there’s really no open, transparent way for them to set a price. Without official published numbers, farmers are reduced to getting their information about rental rates from coffee row.
Two new web services have recently come online to help farmers and landowners overcome these problems.
RentThisLand.com is an Ontario-based service that matches landowners with renters. Prairie-based Renterra.ca also matches renters with owners, using an open auction system.
RentThisLand.com was started by Kevin Veurink and his brother Andrew. Kevin’s wife Shannon Veurink is the president of the company.
So far, more than 130 landowners have signed up on RentThisLand.com.
How it works — for renters: Potential renters start by filling out a profile for perspective tenants. Shannon Veurink says they encourage potential renters to use this profile to explain why they would be the best tenant choice. “Sometimes we look at what they’ve written and it just makes us so proud of the ag community,” Veurink says. “It’s really great to see people proud of their operations.”
When renters see land for rent on the website that might be of interest, they can submit bids to the landowner. Renters pay a nominal fee of $20 to bid (or can buy a package rate for a lower per-bid price.) If they are successful, RentThisLand.com will charge their credit card 1.5 per cent of the rental price as commission.
How it works — for landowners: There is no charge for landowners to use this site (although they can buy road signs for $34.99, to bring some extra attention to their land.) Once the site has received five bids for a piece of land, the landowners will be notified. They’ll be able to read the profiles submitted by the bidders and select a tenant.
The benefits: While receiving at least five bids for their land gives the landowner a chance to understand the market value of their land, Veurink stresses that this process is not an auction. Rather, she says, “we’re trying to encourage landowners and educate landowners that, while getting a good price for your land is important, that’s not the be all and end all.”
“In a market that is really demand driven and where there is a lot of focus on price,” Veurink says, “it can be hard for young, beginning farmers without personal connections to get a foot in the door.” In the end, she says, “We’re focused on getting the best match.”
In October 2013, RentThisLand.com won an Ontario Premier’s Innovation Award for Agri-Food Innovation Excellence. On March 5, 2014, the Veurinks will be on “Dragon’s Den,” the popular CBC TV show, looking for more investment capital for their business. If they receive money, they plan to use it to increase awareness of their service, especially in Western Canada.
From the Country Guide website: Sticky land rental rates
With more landowners becoming disconnected from local farmers, Lyndon Lisitza saw an opportunity. His plans for an online land rental auction won the University of Saskatchewan’s Tech Venture Challenge in 2012. The award came with $50,000 and a year of office space at Innovation Place in Saskatoon. Now his GIS-based system is up and running. To date, there are about 2,000 users on Lisitza’s renterra.ca site — about 1,800 farmers and 200 land owners.
How it works — for renters: Farmers who want to rent land can join renterra.ca for free. Once a farmer enters his legal land location, he can choose to receive email notifications when land within a certain distance of his home quarter comes up for rent on the site. The site uses a GIS mapping system, but Lisitza says, “Typically, I’ll just give people a call.”
Once land is listed, potential renters will see relevant information about that land: the assessment value, soil class, chemical and fertilizer history and previous yield history. “I hope that I provide enough information that the people who are interested can go online and place a bid,” Lisitza says.
How it works — for landowners: The landowner can specify if the auctions will be based on a straight dollars per acre rate, or on a crop share basis.
Landowners can design the terms and conditions of the auction. Lisitza reminds them that setting an excessive amount of terms and conditions might mean fewer bidders, but in the end, that’s the owners’ decision. Lisitza will also work with the owners to set a reserve price.
Landowners don’t have to take the highest bidder. Once the auction is over, they can look at the farm profile of the winning bidder: the number of acres farmed, land rented vs. leased, machinery used and past yields. If the landowner doesn’t choose the highest bidder, he can look at the next name. Because cash rental auctions are based on one dollar per acre increments, the second highest bid will be only slightly lower.
The benefits: When land is rented in a sealed bid process, where bidders don’t know how much others are offering, Lisitza says the result will often end with a “winner’s curse” — a situation where the winning bid is substantially higher than the second highest bid. With renterra.ca’s one dollar bid increments, this won’t be a factor.
If you have enough competition, Lisitza says, which in this situation means anywhere from five to eight bidders, “what you will get is a market solution.”
After the sale closes, Lisitza says “then the real work begins.” Setting the market price “is just the first dance between the landowner and the tenant.” The next step is actually setting up the contract between the two parties. Lisitza helps them negotiate subtle aspects that can’t be captured by a website. “You really need to hammer in to the details,” he says. “You’re bridging the gap between two people who sometimes don’t know each other from a hole in the wall.”
Leeann Minogue is the editor of Grainews.