44 BULLETIN 874, U. S. DEPARTMENT OF AGRICULTURE. 



Thus, the average farm income in 1918 of owners in the Tama dis- 

 trict was $4,272, and in the Warren district, $1,997, besides living 

 obtained from the farm and such income as may be attributed to the 

 labor of the farm family. 



However, even supposing an owner to be clear of debt, he would 

 obtain a larger income by selling his farm property and becoming a 

 tenant, investing the surplus wealth not needed for operating capital 

 in sound bonds or mortgages. Thus, the owner of the average farm 

 capital of $S8,404 could invest $7,081 as farm operating capital, and 

 under the conditions of 1918 could earn a labor income of $3,053 

 after paying rent, besides 5 per cent interest on the $7,081 invested 

 amounting to $354. The remaining capital, $81,323, invested at 

 5 per cent would yield $4,066.15. Thus the total income obtained 

 by this method would be $7,473.15 in addition to living obtained 

 from the farm and such income as was credited to the labor of the 

 farm family. 



The above analysis assumes that the farmer owns outright the 

 total amount of the farm capitalization. If half the capital value 

 as of August, 1919, were borrowed at hh per cent, only $1,841 of the 

 farm income in the Tama district would remain, and this under the 

 favorable conditions with respect to crops and prices in 1918. In 

 the Warren district such an owner would have had only $784.80 

 left, after paying his interest, from which to live and reduce the prin- 

 cipal of the loan. If the debt had amounted to three-fourths the 

 value of the investment — and one-fourth of the sales involved at 

 least this per cent of indebtedness — the remaining income after 

 paying interest would have been $626 in the Tama district and $179 

 in the Warren district. 



By inference from the above analysis we may derive the relation 

 of the present high level of land values to the status of a tenant. 

 It was shown clearly that even if a farmer has sufficient wealth to 

 purchase a farm outright, he can obtain a larger total income by re- 

 maining a tenant and investing in bonds or mortgages the remainder 

 of his wealth, above the amount needed for operating capital. Hence, 

 there is a financial premium on remaining a tenant rather than . 

 becoming an owner. 



On the other hand, even if the tenant desires to become an owner, 

 the financial handicap of paying 5 per cent or more on borrowed 

 capital to purchase land which will yield 3 per cent or less on the 

 investment demands serious consideration, with special attention 

 to the possibility that prices of farm products may decline. Finally, 

 it is obvious, since the average net worth of the tenant is so small 

 as compared with the total value of the farm investment required 

 to operate as an owner— about 1 1 per cent — that at least 89 per cent 

 of the total investment must be borrowed by the tenant who buys 



