Abigail, a 70-year-old woman from Portland, Oregon, says she’s “trying very hard to make it possible to retire by 80.” That goal may be within reach now that a solar company has offered to lease her farmland. Still, she’s not sure if the deal is a financial lifeline or a liability.
Don’t miss
I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10
She called into The Ramsey Show seeking advice and said the company wants to lease 45 acres of her property to build a solar farm, offering a payout of about $4 million for 40 years.
Accepting could allow Abigail to retire in a few years — but there are potential pitfalls.
“I’ve looked at these deals,” said personal finance personality Dave Ramsey. “ In the event they go bankrupt, obviously this lease is cancelled, and then you’ve got a bunch of junk on your farm that’s got to be hauled off. It’s very expensive to get rid of it … You’re leaving this mess for your heirs then.”
A warning and an alternative
Ramsey warned that accepting the lease would effectively place a lien on the property, which Abigail said is worth $3 million today.
Even though she would technically own the land, it would be tied up in the deal for decades. Any future buyer would have to accept the lease terms which complicates a potential sale or inheritance.
Ramsey questioned whether this was all worth it. “ You’re not gonna like my answer, but I wouldn’t tie up a $3 million asset for that and have my whole backyard full of this.”
He offered an alternative: “ I would sell 10 acres and use that money to live off of.”
Abigail’s husband is not in support of renting out the land or selling it, but Ramsey had a blunt response to this. “You’re working at 70 years old and worried about how you’re going to eat at 80. Your husband didn’t save enough money when he was young and working to provide for his wife’s food, and so we’re going to sell some of his land.”
Ramsey said she should figure out how to sell 10 acres to generate $1.5 million by talking to a real estate agent and a land surveyor. That would give her the money to retire without encumbering the rest of the property or saddling her heirs with a long-term lease.
Ramsey’s advice is clear: avoid complexity and don’t leave behind a problem disguised as a paycheck.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Do your research
Leasing land for solar development has let land owners generate passive income, but it’s not always the best option. If you’re facing a situation like this, there are resources online to help you make the right decision.
Mike Nuckols of the Cornell Cooperative Extension Jefferson County made a list of considerations when leasing agricultural lands to solar developers.
“Given the long-term ramifications, we strongly recommend that you have lease agreements reviewed by an attorney to avoid unexpected surprises such as transfer of mineral rights or mandated renewal after the performance period expires,” he wrote. “Due diligence is required to avoid exaggerated claims of financial windfall or outright scams.”
For example, look closely at end-of-lease terms. The developer should be responsible for removing equipment and restoring your land at the end of the lease. You also need to consider tax implications, what will be possible on the land not rented out, and if the developer is obeying local laws and obtaining necessary approvals, among other factors.
The SEIA (Solar Energy Industries Association) has also published a guide for solar land leasing.
What to read next
JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
