Gaul borrowed money and bought one-fourth of the cows after one year, then bought the rest of the herd just over a year later. Since then he has purchased equipment and added stalls, expanding the herd with homegrown heifers. He's been able to grow the herd fast due a low cull rate in the crossbred herd. Last winter he built a hoop building to house more cows and now milks about 110.

The pastures are divided into four-acre paddocks and cows are moved to new grass daily. After milking, they get a partial TMR of grain, minerals and a small amount of hay.

The herd averages about 15,000 lbs of milk. Though Gaul has paid less than the prevailing cash rent for the land and buildings, he's compensated by providing extra labor to improve the facilities, says Tranel.

He says the young farmer earned more than $147,000 in net farm income last year. Between 2003 and 2007, Gaul's net farm income averaged almost $92,000 a year, and he earned almost $35/hour for his labor.

“He's done a great job managing the operation, plus he was blessed with a milk price that averaged about $17/cwt over those five years, where in our early projections we were figuring about $13,” says Tranel.

Gaul recently signed a contract to stay on the farm two more years. But his herd has outgrown it, and he hopes to buy his own farm when this contract expires.

Tranel is okay with that. He considers his operation a start-up farm to be used by young people until they can afford their own places.

“The goal is to get them enough net worth so they can go out and get a loan,” he says.

When Gaul leaves, Tranel will look for another young tenant, and he encourages landlords and bankers to help young farmers get started in similar fashion.

While there's some financial risk, it can work if the right people are involved, he says. Good communication between landlord and tenant is one of the keys to success.

“You can't overemphasize the people part of the equation,” says Tranel.