Buying Land in the Country

[Oynas]

I am thinking of buying land in the country and maybe renting it out to farmers.

If I buy a house in the city (in Melbourne) I will have to save around $400,000. However, I can buy land in the country with as little as $40,000.

Many people here say that investing in property is better than investing in the share market. However, most property in cities are correlated to stock market performance (source House Prices Fall in Top Suburbs). This makes sense since property prices there are directly related to wages, which in turn, are related to business profits, which drive share market prices. Houses in cities are used mainly as places to stay in order to be close to work. If wages from work goes down or if unemployment increases, the value of these properties will decline.

Would buying only country land be a good idea?

 

[The Y-man]

LVR allowed for rural properties may differ from residential.

Cheers,

The Y-man

 

[RumpledElf]

Isn't 6 acres a bit small for a farmer? I have cowfarming friends with a farmlet too small to turn more than a few dollars profit and they have several acres of their own and rent another 40 from the council and they wouldn't have more than 2 dozen animals, tops. You need a lot of space for a farm.

6 acres is hobby farm "lifestyle" size. On a block like that, assuming it is actually *near* something, you could break it up, build one of the very nice large transportables on each block, supply septic and rainwater connections to each, and resell them as lifestyle treechange 2 acre properties. If you have the cash to do it.

 

[atti]

IF U WANT TO BE FARMER YES farmers dont rent most inherit their land already.

 

[our obsession]

G'day Oynas

I'm not sure why you think you would need to save all of the $400,000 to buy in Melbourne/surburbia, if you are able to get a loan there are varying degrees of (far less) funds or savings you maybe required to contribute.

The figure of $400,000 is also a query, have you had a look on the real estate for sale sites to get a gauge of the variety of asking prices for properties?

The 6 acres at Amphitheatre looks to be an old gold fossick site, the fences that I could see were in an unacceptable state for keeping in/out livestock, so who would pay (and do) the fencing?

I also did not see any water supply, a dam and/or mention of water piped.

The land of a small area would be a headache to try and sow down, say lucerne even, it is scarred by the old mine sites, they maybe gravel type soil, I am not sure that any farmers would be that interested, I'm not sure also, if you realise how "rural" the area is?

Depending on how far out, or close to the very small town of Amphitheatre, you may or may not get permission to run stock on it-just so you know.

As Yman mentioned, rural funding/loans can be challenging, lvr's, will they even lend in that place?

http://en.wikipedia.org/wiki/Amphitheatre,_Victoria

It is a very small town, yes, near other towns and rural cities but double the $40,000=make it $80,000, $90,000 a $100,000 and you may buy well a tidy little IP, already to roll, to rent, or even with a tenant. IF you wanted to be investing in towns?

Lots of good quality regional cities to do some diligence on if you think you might be outpriced on getting into the metro market....but until you have found out what you can actually borrow, it's all hypothetical...

I live in a rural area, the farms (averageish) size(s) are 3200 hectares plus, (8000 acres), farm businesses will do "share farm" and leases etc, but usually for much larger land parcels than 6 acres, that's not to say someone may find it useful for something..

 

[sparky23]

Not to mention massively reducing your rental pool!

 

[Lamingtons]

Erm.. why do you have to save $400,000 for Melb cbd?
Are you not wanting to pay for a mortgage?

 

[Oynas]

Erm.. why do you have to save $400,000 for Melb cbd?
Are you not wanting to pay for a mortgage?

I asked whether that was a good idea at http://www.somersoft.com/forums/showthread.php?t=48343

if I buy small amounts of land then I wouldn't need to get a mortgage, which means I save on interest.

 

[jroth]

.

edit: Nevermind, PT_Bear already explained the benefits of leveraging into property in the thread you linked. I do suggest re-reading his response.

 

[tubs]

What are you planning to do with it?

You can't rent it, because there's no house. You're just buying it and letting it sit there.

If its so far away from anything, can't be farmed or grazed then what would drive capital growth?

The only interest in this kind of place would be someone who wanted to build a house away from everything.

 

[our obsession]

Price per acre...

...also, I did forget to mention, the land works out at $6666 per acre, which seems to me, to be quite an inflated price per acre. For what I can understand about it, and just looking at it.

However on the flipside have you spoken to anyone about what was mined there? Only out of curiousity.

Also, some of the area around there can hold reasonable bore water, our friends over near Maryborough, (similar geology/terrain), on a farm, was suffering from hardship, poor yeilds, little pasture for stock (from ongoing drought), explored/sunk a bore (I think it cost all up, $120,000 to do), and now he grows lucerne, runs sheep, makes hay and sells beautiful quality lucerne and oaten hay.. makes a good living, 2 adults, 3 children, he does have a couple of thousand acres though, big difference to 6.

 

[Gools]

If I buy small amounts of land then I wouldn't need to get a mortgage, which means I save on interest.

Just because it is cheap and you wouldn't have to pay much interest doesn't make it good value. I can't believe you would think farmers would want to "rent" 6 acres off you. To get a 5% yield from it you would need to get $40/week for it + rates + maintenance.....

It just isn't a real investment. Start with a cheap unit returning 7% near a CBD.

Thanks for the laugh though.....

 

[Oynas]

It just isn't a real investment. Start with a cheap unit returning 7% near a CBD.

A unit near the city relies on employment. Employment is related to share market performance since companies with higher profits can pay workers more and hire more workers. I want my property investments to be uncorrelated to the share market.

 

[tobe]

I started off my property portfolio with a small vacant block near ballarat. It showed pretty good capital growth purchased for 12k sold for 40k 6 yrs later, however it didnt help me leverage into other properties, and I wasnt able to generate an income, either renting to farmers, dirt bike riders, shooters etc, so the interest wasn't tax deductable. I got an 80% mortgage, which is still possible with some lenders. I loved having my own place to garden and get away from it all, but all in all, it wasn't a great economic investment. The deposit and cashflow would have been much better utilised in an income producing assett.

 

[keithj]

I want my property investments to be uncorrelated to the share market.

That's a pretty weird idea - are you suffering from analysis paralysis ? Do you think the share market will ever go up again ? Are you saying you want your (uncorrelated) property to go down when shares go up ?

Maybe give us a list of ALL your investment criteria along with how important you think each one is ?

Most peoples strategy is to make money by buying property that is/will be desirable to other people and cause capital growth...... what's yours ?