Cash Rent Transparency

Des Keller
Progressive Farmer Editor

Chris Baumann says he couldn't understand why a $60-billion-per-year industry -- the annual value of all cash rent leases in the U.S. -- had no transparency whatsoever. The online startup he helped found 2 years ago, CashRent.com, seeks to widen the market to more farmers looking to rent while likely improving what landowners receive.

The site has already been referred to as the Zillow of farmland cash rents. Baumann and Brad Belser, who owns an Illinois land brokerage, are co-founders who enlisted the help of Chicago-based venture capital firm Candor Ventures Partners for the startup.

Baumann, a real estate broker and entrepreneur, based in Morton, Illinois, was trying to determine the appropriate cash rent value for the 50 acres of cropland he owned in the state as part of a 150-acre tract he bought as an investment and for recreational purposes.

But, what should the rent be? That question led Baumann and Belser to research soil sampling, productivity indexes and the ways farmland owners generally find tenants. After weeks of study, Bauman's instinct for action was clear.

"Let's build an online software program that informs landowners of the value of their most valuable asset and helps farmers grow," he says. That led to two years' worth of work on the software, the business model and funding partners. The result is CashRent, which to date has farmers and/or landowners registered in 27 states, though their biggest numbers are in the heart of the Midwest.

CASHRENTSTIMATE

The key to the success of the site thus far is its "CashRentstimate" algorithm that determines a value for particular property based on the number of acres, soil types, soil health, location, yield history, commodity prices and other factors. Landowners input their information when registering a property on the website. Likewise, individual farmers looking to rent register as well as specify factors about their farms, such as agronomics and equipment used. The result is a report that gives a landowner a price range a farmer might be expected to pay.

To date, 26 parcels have been rented via CashRent with a lease value of more than $880,000. Austin Suhr, CashRent vice president of operations, explains the rents on those 26 properties increased an average of 28% as a result. The new leases have been transacted on farmland in Illinois, Iowa, Minnesota and South Dakota. The site has also had listings in Indiana, Kentucky, Michigan, New York, Oklahoma and Texas.

The determination on who eventually rents the ground is at the discretion of the landowner. "High bid doesn't automatically win," Baumann says. "The choice is still up to the landowner." Farm owners may ultimately use factors like proximity to the farm, agronomic practices or other circumstances to make the decision on who will rent a farm.

NEXTGEN FARMER EXPANDS

That was the case for Wyatt Mustread, a 24-year-old farmer in Smithfield, Illinois, who was looking for land to rent when he came upon CashRent online. He registered on the site and, within five minutes, bid on 50 acres located only 2 1/2 miles from where he lived.

"I wouldn't have even known this farm was available without CashRent," he says. "Registering was easy. Nothing asked was invasive."

Mustread also called the company, which offers telephone support, and was given contact information for the landowner. Mustread and his wife, Madison, visited the landowner (an investor) and hit it off. "He liked that we were young farmers nearby trying to build our own operation," Mustread says. "We ended up getting the ground, and we weren't the highest bid."

CashRent charges 4% of the gross lease to the winning farmer. For instance, if a farmer wins a three-year lease valued at a total of $150,000, he would pay 4% one time on $150,000, or $6,000.

WIN-WIN FOR EVERYONE

Registered tenants are notified about land up for rent within a 60-mile radius of their location. "This is a tool we think is valuable for farmers so they don't have to rely on word-of-mouth at the local coffee shop to find out what is coming up for bid," says Baumann. The site can also be used to give farmers and landowners the value of cash-rent at a given time.

To that end, Baumann says their algorithm is constantly adjusting, and takes into account shifting commodity and input prices. What they've found so far is that most farmland on the site -- maybe 90% -- ends up renting for higher than the range calculated by CashRent's formulas.

"We're a marketplace," says Baumann. "We want to provide value to the landowner and value to the farmer by informing them of more opportunities to farm ground."

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