Agriculture Investment

Discussion in 'Caveat Emptor (Buyer Beware)' started by Reality Cheque, 27th Apr, 2015.

  1. Reality Cheque

    Reality Cheque Member

    Joined:
    8th Jun, 2009
    Messages:
    261
    Location:
    Rural NSW
    Hi Everyone,

    Just putting an idea out there to gauge interest and get feedback.

    I'm looking to invest in farm land. I've narrowed my search down to certain areas where I believe land prices represent good value at the moment for what the country is capable of producing.

    I have a farming background and own a property which I operate part time but due to other interests I dont have the time or the desire to go farming full time.

    I'm looking at buying a property and then leasing it out on a long term basis(5years min with the option of another 5) and I already have a party interested in leasing a property in the areas I'm looking.

    To purchase the property myself was my original plan but that will then drain funds from other areas and reduce the diversification that I'm trying to achieve.

    I'm interested in hearing from any like minded investors who can see the opportunity in agriculture at the moment and may be interested in looking further into forming a syndicate to purchase farm land to diversify their investments.

    Any feedback welcome.

    RC
     
  2. bumblegoodie

    bumblegoodie Call me BG

    Joined:
    22nd Sep, 2014
    Messages:
    206
    Location:
    Sydney, NSW
    Hi RC,

    For investments, it all comes down to numbers.

    Would you be able to share the numbers?

    Always interested in agriculture, especially the price of fruit and vegetables are increasing in price due to supply and demand of growing population.

    BG
     
  3. Reality Cheque

    Reality Cheque Member

    Joined:
    8th Jun, 2009
    Messages:
    261
    Location:
    Rural NSW
    Hi BG,

    Will PM you some more info.

    The figures I'm looking at are basically comparable to commercial/ industrial property. Similar yield with long leases but with the diversification of agriculture.

    Rgds

    RC
     
  4. lazibones

    lazibones Member

    Joined:
    11th Apr, 2015
    Messages:
    49
    Location:
    Vic
    I agree it just depends on the numbers on the individual property and what your strategy and financial position is. Only you and a savy accountant can have an answer to work out the pros and cons. You will probably only get an LVR of 60% and have to pay over +1% interest. If you want to take on more risk you could increase your gains by share farming and taking say 25% of the produce , selling it in a suitable tax year and at high price points. you could also add value by feed lotting with your share. Share farming may enable you to use FMDs for tax advantages. At the moment with high rural land prices and high residential rents residential investment looks better for me. Of course it depends on demand in the particular area some farmers have their capital tied up in machinery and want to cost average their cost per hectare down by leasing, and leasing has tax advantages for them, the lease is fully tax deductible. I have averaged 8% CG p/a but yields on current values are only about 5% but I suppose that is alright with low interest rates, the good thing is the only expense is the council rates. You can negotiate who pays the rates.
     
  5. Reality Cheque

    Reality Cheque Member

    Joined:
    8th Jun, 2009
    Messages:
    261
    Location:
    Rural NSW
    Thanks for the feedback lazibones,

    Agree with pretty much all that you have said there.

    Yields do vary quite a bit. In my local area you can get about 5% leasing to someone from out of the area that doesn't know what the country is capable of but I know from personal experience you cant make money paying 5% for this country so it's not going to be sustainable long term. More a short term fix for a lack of feed.

    I reckon 8% net is achievable long term on the country I'm currently looking at. I think I'd be wanting at least 7% nett to be worth considering.

    Rgds

    RC