Kawa said:
:lol: I knew that would happen, thanks Pelican. (sarcasm) :lol:
There was a spam post just after yours, I reported it to The Pelican. All's good kawa
Farmland Investing
- Thread starter zargor
- Start date
:lol: I knew that would happen, thanks Pelican. (sarcasm) :lol:
There was a spam post just after yours, I reported it to The Pelican. All's good kawa
Hi guys,
I too have been thinking about farmland investing.
As in PMs, I like the physical aspect of it (land does not magically disappear into thin air) and I believe these will always be in need, especially as the world population grows and the food demand from china and India will keep rising in the years to come as the quality of lifestyle over there improves.
Now, that's all good and all but I do not intend to be a farmer myself, not to move to the country (at least for now, later might be very different!) so if I ever was to attempt this, I would need to lease the land to someone.
*Question: how hard would that be? what sorts of yield and lease are common practice? I would think that most farmers own their own land though - is that a correct assumption?
- I am sure it depends on the type of soil, weather, water on site, the location, infrastructure around, farm infrastructure itself and probably a whole more stuff I know nothing about. Which brings me to my next question:
* How to go about buying a quality land for someone who has no agricultural knowledge whatsoever? Are there some sort of buying agents out there?
A couple of years ago I considered this form of investment but reminded myself not to invest in something I do not understand. Unfortunately, this is very much the case with farmland (and I am sure I am not the only one here), but yet I see arable land as an asset that will always be in demand and that will always carry value. I wish I knew what to look for.
Any thoughts?
I too have been thinking about farmland investing.
As in PMs, I like the physical aspect of it (land does not magically disappear into thin air) and I believe these will always be in need, especially as the world population grows and the food demand from china and India will keep rising in the years to come as the quality of lifestyle over there improves.
Now, that's all good and all but I do not intend to be a farmer myself, not to move to the country (at least for now, later might be very different!) so if I ever was to attempt this, I would need to lease the land to someone.
*Question: how hard would that be? what sorts of yield and lease are common practice? I would think that most farmers own their own land though - is that a correct assumption?
- I am sure it depends on the type of soil, weather, water on site, the location, infrastructure around, farm infrastructure itself and probably a whole more stuff I know nothing about. Which brings me to my next question:
* How to go about buying a quality land for someone who has no agricultural knowledge whatsoever? Are there some sort of buying agents out there?
A couple of years ago I considered this form of investment but reminded myself not to invest in something I do not understand. Unfortunately, this is very much the case with farmland (and I am sure I am not the only one here), but yet I see arable land as an asset that will always be in demand and that will always carry value. I wish I knew what to look for.
Any thoughts?
Rubbing Elbows
Active Member
Phiber said:
I would work out which location you would like to buy your farmland, then research the going rate per sqm, then advertise in that area, be it gumtree, the local shops, direct mail to the owners, asking if there were any farmers that would like to sell, then immediately lease back the land. I know several buyers who have done this successfully, the farmer has released their capital but still get to work the land.
Make yourself aware of how these types of lease agreements are drafted, who pays the insurances, water etc etc
Familiarise yourself with how the water is provided i.e. bore, water delivery right, water license etc... as water delivery can be different to each allotment and can potentially be quite costly should you or the farmer not even use any water.
And definitely make sure you don't buy an allotment that is land locked.
You may also need to register for GST depending on the yearly amount payable, speak to an account if you are serious as GST may or may not be applicable on the purchase.
Beware the bank treat these investments differently to a traditional residential loan, so you could potentially only be able to borrow up to 50% LVR, speak to a good broker before approaching any potential seller as you may get embarrassed asking to buy the land, then not being able to obtain the finance.
AngloSaxon
Active Member
I was looking at Land Tax today, I note that in NSW at least there is no land tax payable on land used for primary production.
Rubbing Elbows said:
One of my major concerns about leasing farmland to someone is that they will flog the living christ out of it. Does anyone have any first hand experience? Of course it would depend on the tenant, but if I was a farmer I'd rather flog my landlord's land than my own.
Hi Rubbing,
Thanks for the feedback good info in there.
Anglo> That's a good thing. I have no specific idea of where I would like to own a farmland but I'm thinking NSW would be pretty good: in between the warmer qld and the colder vic.
I know there are plenty of different kinds of farming. Do you guys have any suggestions as to what to avoid? Again I guess it would depend on the area itself.
I feel I would need the help from a local farmer who would be able to tell what land is good for what.
Mmmm ... I really like the idea, but the chances of getting it wrong seem pretty high at this stage. And getting a lemon could prove a real nightmare to sell down the road if needed. I think the liquidity of a farmland is not very high already, but a lemon won't be worth much at all.
And Shiney, you do have a good point, however a farmer in it for the long run will let the land rest as it should if he wants to get good production in the years to follow.
Thanks for the feedback good info in there.
Anglo> That's a good thing. I have no specific idea of where I would like to own a farmland but I'm thinking NSW would be pretty good: in between the warmer qld and the colder vic.
I know there are plenty of different kinds of farming. Do you guys have any suggestions as to what to avoid? Again I guess it would depend on the area itself.
I feel I would need the help from a local farmer who would be able to tell what land is good for what.
Mmmm ... I really like the idea, but the chances of getting it wrong seem pretty high at this stage. And getting a lemon could prove a real nightmare to sell down the road if needed. I think the liquidity of a farmland is not very high already, but a lemon won't be worth much at all.
And Shiney, you do have a good point, however a farmer in it for the long run will let the land rest as it should if he wants to get good production in the years to follow.
Contrarian
New Member
Phiber said:
Bear in mind that farmland has followed the residential property boom in that prices are ridiculously high and yields very low. I have both farmland and residential property and as an investment residential property wins hands down. Around 2-3% higher yeild, income steadily rises, predictable income and the big one.....NO WORK.
Most people only stick at farming for the love of the lifestyle or the capital gain but with such low return on capital at current land prices who is going to keep pushing the price of farms higher? The answer is....... people who dont know what they're doing. Dont be one of these people! In my line of work I regularly see people that aren't from farming backgrounds pay way too much for land and then don't have a hope in hell of even covering the interest. When rural property is put on the market in the first instance it is usually priced to catch out a fool from the city who doesn't know what they're doing. (not implying that you're a fool!) It is only if that fails then they start to get realistic offers from farmers who know what the country is worth based on what it is capable of producing.
If a farmer agrees to sell you his property and then lease it back it's usually because he's not getting a good enough return on his capital. Just remember that in this situation you're return is going to be even less than his was.
Farmland may well end up being one of the best investments in the future, but there is also no bigger minefield. Even experienced farmers can make huge mistakes in evaluating the productive capacity of land that they aren't familiar with.
All I can say is BEWARE. The biggest problem is if you don't have farming experience then you dont know what to beware of.
C
Hi Contrarian,
Thanks for the reply - good to have this sort of feedback.
Look, you have pointed out the exact same concerns I have about being able to elect a suitable land. I think I might just stay clear of farmland for now... :/ It's better than getting into something that's not right
Appreciate your insight
cheers
Thanks for the reply - good to have this sort of feedback.
Look, you have pointed out the exact same concerns I have about being able to elect a suitable land. I think I might just stay clear of farmland for now... :/ It's better than getting into something that's not right
Appreciate your insight
cheers
Contrarian
New Member
Phiber said:
Now that I've scared you off I should point out that what you are wanting to do is not impossible if you know what you are doing.
With land prices so high and a lot of farm returns so low it is pretty much impossible for a young farmer to start up from scratch and borrow the money to go out and buy a farm. This means that there are plenty of people looking to lease country. The trick is knowing what the productive capacity of the land is, how much someone would be able to afford to pay in lease based on that productive capacity and then securing a property that will be in demand and at a price that will give you a satisfactory return on your investment.
Timing is also important. I know people who have leased their country out when things were good and then prices have dropped or the season turn bad and they end up getting more in lease than they could have made off it themselves. The downside is that the leasee is slowly going broke so this situation never lasts for long.
For what it's worth, I like the idea of landbanking rural land. Buying farm land with the potential for future subdivision into residential/lifestyle blocks is a good way to compensate yourself for the years of low returns and hard work. Although I love farming, just generic capital gain alone does not compensate you enough. I know it probably defeats the purpose of investing in food production but I have doubts that food production will ever be highly lucrative.
Markets are rigged and farmers are at the bottom of the food chain. The price of everything inflates over time except the value of the commodities that farmers produce. Some farmers are getting less for their commodities today than they were 20 years ago. Look at how much their costs would have risen over the last 20 years and it's not just the farmers direct costs. Everyone in the whole supply chain passes their increased costs on and the poor old farmer at the end of the line ends up wearing the lot.
In theory food production should be the best investment there is but I doubt that it ever will be. There are just too many fingers in the pie and the farmer only gets left with the crumbs.
C
I have a mid sized Sugar Cane farm in my SMSF with other assets and it is run under "management" which means that I sub contract the heavy machinery work out.For 2012 crop I achieved a 7.9% NET yield.
I have no debt on it and quite happy to accept a yield like that.If you invest in farms you need very very low borrowings or ideally none.
If you want to go this way you will be surprised who will contract for you.If you treat them well and communicate weekly and show interest you will find a new network open up for you.
Country people are the best IMO.
I have no debt on it and quite happy to accept a yield like that.If you invest in farms you need very very low borrowings or ideally none.
If you want to go this way you will be surprised who will contract for you.If you treat them well and communicate weekly and show interest you will find a new network open up for you.
Country people are the best IMO.
I agree country people are great all my relatives are bumpkins we are the first to grow up in the city Its a shame a lot of them are bad business people .Kawa said:
I am amazed at the amount of farmers crying poor about being broke & they have the latest machinery sometimes worth more than their house & sheds full of old machinery . They collect it & cant bear to see it go instead of selling it & using the capital .
@R
I can totally relate to what you say .The sugar industry though has definately evolved into areas of specialization.Most quality cane area's have farmers that dont plant or harvest theselves.All done by contractors using the maximum from very very expensive large scale machinery.
The farmers I know have an incredible knowledge of their farms though.
You can quickly learn from them if you get amongst it from time to time.
I also believe that investing in farms requires a slightly different view of the world.You do need some affinity with the land IMO.
Personally I love the concept of producing a crop and getting to understand the cycles of production and weather etc.
If you dont have this affiliation you may be best seeking other investments.
I can totally relate to what you say .The sugar industry though has definately evolved into areas of specialization.Most quality cane area's have farmers that dont plant or harvest theselves.All done by contractors using the maximum from very very expensive large scale machinery.
The farmers I know have an incredible knowledge of their farms though.
You can quickly learn from them if you get amongst it from time to time.
I also believe that investing in farms requires a slightly different view of the world.You do need some affinity with the land IMO.
Personally I love the concept of producing a crop and getting to understand the cycles of production and weather etc.
If you dont have this affiliation you may be best seeking other investments.
Contrarian
New Member
Kawa said:
7.9% net, I'm coming sugar cane farming.
Grazing yeilds for many this year will be negative. Even an average over the last 5 years would be around 3%. That's an average over hundreds of clients that I deal with.
C
Cane Framing can be very good if you have no debt and spend the money that needs to be spent at the right time.In this area of Farming you must have irrigation ( water allocations).Contrarian said:
You need cash reserves to pay quite large power and water bills up front over a 6 month period.However once you get into the payment cycle with the Mill it's becomes quite easy.
You have to keep good cash reserves to cover unexpected stuff...eg
nly got a call today from my contractor that said that one of the irrigation hoses was done and a new one is 5K.No big deal however you have to run these farms with padding..they cant be tensioned 100%.
For those that want some idea of the machinery the contractors use in Sugar.These guys can harvest 1500 Tons in one day with this gear.
http://www.youtube.com/watch?v=YAeHl8P1Z2c
Planting
http://www.youtube.com/watch?v=hmxV2X5XSWI
http://www.youtube.com/watch?v=YAeHl8P1Z2c
Planting
http://www.youtube.com/watch?v=hmxV2X5XSWI
There are adverts around for land of about 10 to 30 Acres, and I wonder if they would actually be suitable for a self sustaining type farm?
The main thing, as mentioned above, is water.
The adverts often have:
Dams. Are they just holes in the ground that are essentially rainwater tanks?
Seasonal creeks. Sounds risky, as I'm sure you need the water when it's dry, not when it's wet?
Spring fed dams. Do they actually exist reliably? I suspect it depends on where.
The thing is, most of these are under $100,000, and are very tempting for that peace of mind feeling, knowing you can retreat there.
But where, and will it work, is the question. Australia is a large dry place!
The main thing, as mentioned above, is water.
The adverts often have:
Dams. Are they just holes in the ground that are essentially rainwater tanks?
Seasonal creeks. Sounds risky, as I'm sure you need the water when it's dry, not when it's wet?
Spring fed dams. Do they actually exist reliably? I suspect it depends on where.
The thing is, most of these are under $100,000, and are very tempting for that peace of mind feeling, knowing you can retreat there.
But where, and will it work, is the question. Australia is a large dry place!
hyphenated
Active Member
Generally, preparing land for farming a is a great deal of work - and it takes several seasons to know your land and what it will grow (and what is profitable, and what is vulnerable to pests...).
Purchasing an ex-farm will get you a large amount of practical improvements (and sometimes infrastructure and machinery) that often will cost a great deal less than the effort or capital replacement value. However, you have to go in with eyes open. Buying an old tobacco farm, for example, will secure land with probably heavy metal contamination, but might net you thousands of dollars worth of ridiculously good timber making up the lined storage sheds. Small farms are cheaper because they may no longer be economic for large production, or too much for retiring farmers. Up here, Lychee farms, old tobacco, Mango, all come up. $750k will get you something on 20 acres or so, probably, with water. Check Mareeba farms as a start point. If you do buy, get as much information as you can from the seller on what works (and what does not), and change very little until you understand how it works.
Purchasing an ex-farm will get you a large amount of practical improvements (and sometimes infrastructure and machinery) that often will cost a great deal less than the effort or capital replacement value. However, you have to go in with eyes open. Buying an old tobacco farm, for example, will secure land with probably heavy metal contamination, but might net you thousands of dollars worth of ridiculously good timber making up the lined storage sheds. Small farms are cheaper because they may no longer be economic for large production, or too much for retiring farmers. Up here, Lychee farms, old tobacco, Mango, all come up. $750k will get you something on 20 acres or so, probably, with water. Check Mareeba farms as a start point. If you do buy, get as much information as you can from the seller on what works (and what does not), and change very little until you understand how it works.
Bargain Hunter
Active Member
Kawa I suspect that 7.9% net yield obtained from sugar farming is because of the current high sugar prices. How confident are you that sugar prices will stay this high? If sugar prices dropped 50% and stayed down for 3 or 4 years would the cane farm you currently own still be profitable?
