Asides the use of land for residential purposes, the commercial and industrial uses of land are recognized in real estate. Agriculture is a commercial activity that offers a lot of opportunities for individual investors and economic development . As the basic requirement for production of crops and livestock, land availability affects the scale of farming operation and efficiency of the other resources you use on the farm. Its scarcity may severely limit future expansion opportunities of farming business. While owning land has many advantages such as: provision of accumulated land equity which can be collateralized; sole right of ownership and management; hedging against inflation, the draw backs of land ownership lie in: the possibility tying up of operational capital in land purchases; lower return to land compared to many other capital items like machinery, livestock, and annual operating inputs; inefficiency of management especially when large expanse of land is involved .
On the other hand, leasing the land afford the lessee certain advantages. It is considered the best option where land is quite expensive. More so, new farmers may enjoy opportunity of leveraging on the management skills from a knowledgeable landlord who already has experienced farming on the land. Lease holding provide a more flexible financial obligation as opposed to mortgages in which terms and conditions cannot be renegotiated through renewal. But, lease holding comes with the challenge of uncertainty of long-term holding and the impact of losing the lease in a short time. Lease holding also limit the extent to which farm operators can use their initiative for improvement of their operations since a tenant is not usually justified for making certain improvement on the lessor’s property .
Although, both means of land acquisition have their pros and cons, farmers’ decision on either of them should be context-driven. In a situation where a farmer can take solace in owning land as a means to cross the collateral hurdle in accessing fund from the bank, he considers leasing land as counter-productive. However in a situation of scarcity of land or when the farmer is a beginner, leasing land may be the best bet given the opportunity of getting base line information about the land for productive decision making.
. Investopedia Real Estate Definition. Retrieved 23/04/2019. https://www.investopedia.com/terms/r/realestate.asp
. Agricultural alternatives, Penn State Extension. Owning and Leasing Agricultural Real Estate. Retrieved 23/04/2019. https://www.extension.psu.edu/owning-and-leasing-agricultural-real- estate.pdf.