Ann Johanns
Program Specialist, Farm Management
Iowa State University Extension & Outreach
Acreages in Iowa often include outbuildings where owners have no immediate plans for traditional agricultural use. Is there an opportunity to capture some revenue from renting those buildings to others? If so, what can be charged?
The good news is that facilities can be rented for a variety of purposes. Rental rates will vary depending on the age, condition, size, location and efficiency of the building being rented. Generally, in lease agreements for agricultural purposes, the property owner is responsible for real estate taxes, insurance, building repairs and upkeep. Insurance on the livestock would be the responsibility of the tenant/owner. Typically, the tenant also pays for utilities, especially if the entire building is being utilized.
Buildings can also be rented for non-agricultural purposes, primarily as storage sheds for boats, campers, snowmobiles, etc. Visit with your insurance agent regarding what types of liability insurance might be required for commercial use. Zoning laws may vary depending on planned use and location. The building owner is again responsible for taxes, building repairs and upkeep.
Buildings that used to house livestock or agricultural equipment may require some work before potential renters will consider renting it vs. commercial buildings in town. Commercial units in town are not always large enough for oversize RVs, boats, etc., but their location is generally more convenient. A rental fee will not be as high as the commercial spaces in town, but those rates serve as a good benchmark for your rental rates. The annual costs of owning the building (depreciation, interest, repairs, taxes, insurance) will be the lower limits of what an owner should charge as rent. Lean-to buildings with dirt floors may require boards down. Some structures may require additional work to prevent varmint or weather damage to stored items.
Establish a written building lease that specifies payment, length of lease, transferability, operation and maintenance of the property, who has access to the buildings and property and when, as well as recourse for delinquent payments. Any good lease must be built upon strong communication and trust between the two parties for it to be mutually beneficial.
According to the North Central Farm Management Extension Committee’s Farm Building Rental Rate Survey, the average rental rate on machinery storage ranged from $.02 to $1.65 per square foot, depending on the age of the building, concrete floors and door height. The average rental rate was $.45/sq. ft.
Utilizing buildings as extra hay storage is also a common option for acreage owners. Rental rates for small square bale storage ranged from $.07 to $.25 per bale. Large square bales ranged from $1.50 - $3.50 per bale and large round bales ranged from $5.00 to $5.71 per bale, with an average of $5.24.
In addition to farm buildings, look at potential grain storage as rental income. Commercial storage for grain ranges from $.02 to $.03 per bushel per month, with a 60- or 90-day minimum. Elevator grain storage includes handling and managing the grain, services not provided on the farm, therefore farm storage is typically below commercial rates. The 2014 Iowa Farm Custom Rate Survey found an average of $.025 per bushel per month or $.17 per bushel for the whole year. Ranges reported were $.01 to $.06 per month or $.10 to $.30 per year. The range reflects the size of the bins, convenience for unloading and loading, age, etc.
For more information about determining rental rates and terms, visit the Iowa State University Extension and Outreach Ag Decision Maker website. Example lease forms for buildings and livestock facilities are available on the AgLease101 website from the North Central Farm Management Extension Committee.
- Renting Extra Grain Storage -- C2-25
- Farm Building Rental Rate Survey.pdf -- North Central Farm Management Extension Committee