cost of credit.

have2flushtwice

Im giving a student a bit of help on a project for a startup buisness.
if a farm of 100 acres was purchased for 550,000, which is a cost of above 5k per acre, (mixed good/bad land, incl some forestry) what is the cost of credit?
assuming the credit could be got, with a deposit of 50K, would it be in the region of 9% P.A.?
what would be a typical repayment timeframe?
what would the total cost of the investment end up at?

Tipp Man

Off the top of my head i think you are looking at annual repayments of 10k for every 100k borrowed for a 15 year term

LivInt20

have2flushtwice wrote: »

Im giving a student a bit of help on a project for a startup buisness.
if a farm of 100 acres was purchased for 550,000, which is a cost of above 5k per acre, (mixed good/bad land, incl some forestry) what is the cost of credit?
assuming the credit could be got, with a deposit of 50K, would it be in the region of 9% P.A.?
what would be a typical repayment timeframe?
what would the total cost of the investment end up at?

First of all you will need more than 50k deposit.

The deposit the bank will require will be closer to 25% of price of land, 137k. You then need to come up with the stamp duty and legal costs.

5 - 7% would be a more typical interest rate for farm land over 15 - 20 years.

Farmer Pudsey

have2flushtwice wrote: »

Im giving a student a bit of help on a project for a startup buisness.
if a farm of 100 acres was purchased for 550,000, which is a cost of above 5k per acre, (mixed good/bad land, incl some forestry) what is the cost of credit?
assuming the credit could be got, with a deposit of 50K, would it be in the region of 9% P.A.?
what would be a typical repayment timeframe?
what would the total cost of the investment end up at?

Asuming a good credit standing intrest rate should be about2-3% over ECB rate at present it is 1.5% over the lifetime this will probally average 5% easy enough to calculate as it is only a project I will not get into symantics about deposit or if it is feasible
The calucation is as follows the sum of money X( half the years X intrest rate) + sum of money
e,g 500,000( 20year /2 X .05) +500,000=250000+500000=total over 20 years= 750000
750000/20= 37500per year or 3125 per month
50000 deposit solicitor =3-4000 euro other fees 2500 euro and stamp duty

milkprofit

Google a mortage calculator it will tell you exactely
Dont forget capital 550.000 has to paid after tax intrest can be claimed
You will have to make 1.100.000 pay tax of 550,000 and capital of 550,000 aprox

Farmer Pudsey

milkprofit wrote: »

Google a mortage calculator it will tell you exactely
Dont forget capital 550.000 has to paid after tax intrest can be claimed
You will have to make 1.100.000 pay tax of 550,000 and capital of 550,000 aprox

Morgage calculator are ok if you can put in intrest rates yourself however intrest rates on land, houses and tractor are all different the way I shown above is fairly foolproof will be accurate to 1or 2% of your montly payment if you put in right information handy way to calculate on back of a cigerette box if you are ever stuck

PMU

milkprofit wrote: »

Google a mortage calculator it will tell you exactely
Dont forget capital 550.000 has to paid after tax intrest can be claimed
You will have to make 1.100.000 pay tax of 550,000 and capital of 550,000 aprox

could you explain this please?

dar31

PMU wrote: »

milkprofit wrote: »

Google a mortage calculator it will tell you exactely
Dont forget capital 550.000 has to paid after tax intrest can be claimed
You will have to make 1.100.000 pay tax of 550,000 and capital of 550,000 aprox

could you explain this please?

You can't claim capital repayments of land as an expense
So capital repayments must paid after tax
I assume the example above is based on a 42 % tax plus levies and USC bringing it to over 50% tax

Bodacious

dar31 wrote: »

You can't claim capital repayments of land as an expense
So capital repayments must paid after tax


im confused .. I bought land in 2013 and im wondering at the above statement.. I used my own money and a loan.. what part can I put down to the farm as a cost..just the interest? or do you spread total cost of purchase over x amount of coming years.. any advice much appreciated

epfff

Bodacious wrote: »

dar31 wrote: »

You can't claim capital repayments of land as an expense
So capital repayments must paid after tax


im confused .. I bought land in 2013 and im wondering at the above statement.. I used my own money and a loan.. what part can I put down to the farm as a cost..just the interest? or do you spread total cost of purchase over x amount of coming years.. any advice much appreciated

Sad to say just interest is tax deductible

Farmer Pudsey

Bodacious wrote: »

dar31 wrote: »

You can't claim capital repayments of land as an expense
So capital repayments must paid after tax


im confused .. I bought land in 2013 and im wondering at the above statement.. I used my own money and a loan.. what part can I put down to the farm as a cost..just the interest? or do you spread total cost of purchase over x amount of coming years.. any advice much appreciated

Interest only is Tax deductible. The bad new is that at present with low Interest rates you ill not get much tax relief :D. As a matter of interest what % of the price did you borrow, was it a substandcal sum and what sor of interest rate did you get. Was it put down as a land loan.

Bodacious

Farmer Pudsey wrote: »

Bodacious wrote: »

Interest only is Tax deductible. The bad new is that at present with low Interest rates you ill not get much tax relief :D. As a matter of interest what % of the price did you borrow, was it a substandcal sum and what sor of interest rate did you get. Was it put down as a land loan.

Put down 30% deposit.. Borrowed remainder Interest rate 5.075% Aib business rate loan .

So the only cost I can put down as a farm expense for land purchase in 2013 is the interest paid to the bank?!

dar31

Farmer Pudsey wrote: »

Bodacious wrote: »

Interest only is Tax deductible. The bad new is that at present with low Interest rates you ill not get much tax relief :D. As a matter of interest what % of the price did you borrow, was it a substandcal sum and what sor of interest rate did you get. Was it put down as a land loan.

borrowed a fair chunk of cnange, 100% borrowed, but they have plenty of security and guarantees up to their armpits.
good rate which i wont quote here, got offers from 3 banks and played from there

bob charles

dar31 wrote: »

borrowed a fair chunk of cnange, 100% borrowed, but they have plenty of security and guarantees up to their armpits.
good rate which i wont quote here, got offers from 3 banks and played from there

I fail to see why people put up allot of security and guarantees. Either the business stands on its own feet and borrows or im not borrowing. Personal guarantees are very dangerous If the sh*te hits the fan. Now putting up the land that is being bought as security is different

kevthegaff

i agree with ye bob but theyre always looking for security no matter how good the business is whn its a substantial loan. would you do if you were 100 percent sure you could pay it back?

milkprofit

tHE MORE SECURITY the lower u can squeeze interest rate
how much money did u get without personal guarantee

bob charles

kevthegaff wrote: »

i agree with ye bob but theyre always looking for security no matter how good the business is whn its a substantial loan. would you do if you were 100 percent sure you could pay it back?

They always push you for it as they want it for their balance sheet. Make them well aware from the off that its a non runner. Your 100% sure you can repay the money today but no one knows what might be the story tomorrow. God forbid you mightnt be able to work if you got injury or any number of events outside of your control. If im borrowing to invest in more animals and the business is able to make the repayments the animals are security in themselves. farmers always undervalue the worth their assets are to the bank for their balance sheet. Look at Dar saying that 3 banks wanted his business/assets. with high levels of assets if your going borrowing against the interest rate should be tiny.

maxxuumman

If it means being able to negociate better rates why not give them the security.

sheebadog

maxxuumman wrote: »

If it means being able to negociate better rates why not give them the security.

Bad business. IMO.