Buying Land

kevthegaff

Im thinking of buying land in the future, what do u payin relation to stamp duty, who pays the autioneer? interest rates, solicitor fees etc

ABlur

kevthegaff wrote: »

Im thinking of buying land in the future, what do u payin relation to stamp duty, who pays the autioneer? interest rates, solicitor fees etc

Stamp duty of 2% on land. Seller pays auctioneer, but you pay a deposit to the auctioneer to secure it. 15 year loans about 8% I think. You get your own solicitor haggle for a fee and include land registry and sundry fees. Good luck!

bbam

Ouch.
So for every €100k borrowed that would be €1k a month repayments.

weekendfarmer

The banks are firing out money to buy land at the moment. Lets hope the do not do to the farming community what they the property market ....

Then again what kind of lunatic gives 12k an acre for farming only land

pakalasa

weekendfarmer wrote: »

The banks are firing out money to buy land at the moment. Lets hope the do not do to the farming community what they the property market ....

Then again what kind of lunatic gives 12k an acre for farming only land

Well, teagasc quoted €2,000 per hectare gross margin for holstein bull calf recently.

JOAT

weekendfarmer wrote: »

The banks are firing out money to buy land at the moment. Lets hope the do not do to the farming community what they the property market ....

Then again what kind of lunatic gives 12k an acre for farming only land

A lunatic giving 12k an acre?? What about the poor f****r tryna pay this off??! Surely a mistake somewhere!

Edit. Had a screen grab of a 13 acre field in Kerry for sale on done deal but can't upload it! Asking price of 325k!! Madness

Tipp Man

weekendfarmer wrote: »

The banks are firing out money to buy land at the moment. Lets hope the do not do to the farming community what they the property market ....

Then again what kind of lunatic gives 12k an acre for farming only land

Sorry but this is rubbish

Banks are looking for a minimum 25% deposit AND good numbers to go with it before they will lend any sizeable amount for land

The reason it is making 12k is supply and demand, demand is high and supply is low. Its that simple

weekendfarmer

think we all know to take teagasc with a grain of salt at this stage ....

they have 360 how many times ???

weekendfarmer

Tipp Man wrote: »

Sorry but this is rubbish

Banks are looking for a minimum 25% deposit AND good numbers to go with it before they will lend any sizeable amount for land

The reason it is making 12k is supply and demand, demand is high and supply is low. Its that simple

And your saying they wont use existing farm for the 25% ? :rolleyes:

Tipp Man

weekendfarmer wrote: »

And your saying they wont use existing farm for the 25% ? :rolleyes:

Are you trying to say that they will give you 100% of the loan for new land:rolleyes:

You're dreaming if you think they will

weekendfarmer

Tipp Man wrote: »

Are you trying to say that they will give you 100% of the loan for new land:rolleyes:

You're dreaming if you think they will

Never said that ...

weekendfarmer

but if they give you 50% for land that's double its true value ... whats that

Tipp Man

weekendfarmer wrote: »

but if they give you 50% for land that's double its true value ... whats that

And what do you class as it's true value?

Tipp Man

Reality is you need cold hard cash and/or some other very strong form of collateral and good accounts to get money for land

weekendfarmer

Every asset should pay for it self within 12 -15 years .... all costs included

weekendfarmer

take a way the subsidies and the nostalgics

Tipp Man

weekendfarmer wrote: »

Every asset should pay for it self within 12 -15 years .... all costs included

So why do you own any farm land at all then??

weekendfarmer

subsidies and I am a nostalgic ..... plus got it for free ... took 0 years to pay for it

Tipp Man

Farm land doesn't work like a typical asset

weekendfarmer

exactly ... if you want to make money in your life time, land will not do it

kevthegaff

im under 35 does that reduce stamp duty or any tax incentives

weekendfarmer

no , but for leasing

There is a complete exemption from tax subject to certain limits for the long term leasing of farm land. From 2004 onwards the owner of the land must be 40 years of age or over. For earlier tax years the owner had to be at least 55. There is no age limit where the owner is permanently incapacitated. The lease must be in writing and for a definite term and the lessor and lessee must not be related. There are three different levels of income exemption depending on the length of the lease term as follows: Income Exemption Limits 2003 2004 2005 2006 2007/08/09/10/11 5 – 7 Years €5,079 €7,500 €7,500 €12,000 €12,000 7 – 10 Years €7,618 €10,000 €10,000 €15,000 €15,000 10 Years + €7,618 €10,000 €10,000 €15,000 €20,000 · Each spouse of a married couple is entitled to their own individual exemption threshold. For the year 2007 onwards a married couple who jointly lease farm land can qualify for income tax exemption on income up to €40,000 per annum. If the farm land to be leased is owned in one name only, consideration should be given to transferring it into joint names to avail of the greater tax relief. This can be done without incurring any tax charges.

Massey10

kevthegaff wrote: »

im under 35 does that reduce stamp duty or any tax incentives

As far as i know there is no stamp duty if your under 35

maxxuumman

ABlur wrote: »

Stamp duty of 2% on land. Seller pays auctioneer, but you pay a deposit to the auctioneer to secure it. 15 year loans about 8% I think. You get your own solicitor haggle for a fee and include land registry and sundry fees. Good luck!

AIB for land 4.6% over 20 yrs
BoI for land 5.2% over 20 yrs
Been quoted these rates recently. New customer to both, but you will need very good security i.e greater than 200% value to loan

bbam

maxxuumman wrote: »

AIB for land 4.6% over 20 yrs
BoI for land 5.2% over 20 yrs
Been quoted these rates recently. New customer to both, but you will need very good security i.e greater than 200% value to loan

Much better rates and term too !
~€660 per month per €100k borrowed, not small money either

Conmaicne Mara

Tipp Man wrote: »

Reality is you need cold hard cash and/or some other very strong form of collateral and good accounts to get money for land

And that's just how it should be. Giving out money like confetti is a big part of what got us to where we are today. Can't make it pay? Don't borrow to do it, simple.

delaval

kevthegaff wrote: »

Im thinking of buying land in the future, what do u payin relation to stamp duty, who pays the autioneer? interest rates, solicitor fees etc

Banks are only interested in repayment capacity and your track record at the moment. The days of loans based on asset values are gone.
Costs approx. €9500/€100k over 15 yrs. One big problem is that there is no tax relief on capital repayment, this adds a considerable amount to your repayments.
I would suggest that you build a relationship with your bank. They need to see that you are good at managing your money. When you borrow a small amount of money be sure to repay on time with no surprises, they hate surprises.
It astonishes me how little bankers know about the business world but as they are lending you must play by their rules. If you have a proposal be sure to have meeting in your office/kitchen. You must show that you can excel in your business.

Above all best of luck and be careful do not over stretch

keep going

maxxuumman wrote: »

AIB for land 4.6% over 20 yrs
BoI for land 5.2% over 20 yrs
Been quoted these rates recently. New customer to both, but you will need very good security i.e greater than 200% value to loan

my accountant in forms me that most land loans are 12 years with the odd one 15 years.whatever about using the "home"farm to increase security they wont accept it as a means to lower dept/loan ratio.they love and demand a high cash percentage as in if someone dosent have 25 to 30% in cash already they are likely to struggle to make repayments anyway.when you say you were quoted theses rates ,were you actually doing a deal or just enquiring- two different things.

maxxuumman

keep going wrote: »

my accountant in forms me that most land loans are 12 years with the odd one 15 years.whatever about using the "home"farm to increase security they wont accept it as a means to lower dept/loan ratio.they love and demand a high cash percentage as in if someone dosent have 25 to 30% in cash already they are likely to struggle to make repayments anyway.when you say you were quoted theses rates ,were you actually doing a deal or just enquiring- two different things.

Deal. As was said ability to pay is what they really want to see. I am moving from PTSB where I had a large 10 yr loan that was just cleared. So they could see that there was an ability to pay there. No cash percentage was included in the new loan.

delaval

maxxuumman wrote: »

Deal. As was said ability to pay is what they really want to see. I am moving from PTSB where I had a large 10 yr loan that was just cleared. So they could see that there was an ability to pay there. No cash percentage was included in the new loan.

Best of luck. As I said it's all about repayment capacity.
Did it take long to organise money. I am putting deal together at the moment and find that they are much slower than heretofore.

keep going

maxxuumman wrote: »

Deal. As was said ability to pay is what they really want to see. I am moving from PTSB where I had a large 10 yr loan that was just cleared. So they could see that there was an ability to pay there. No cash percentage was included in the new loan.

feel free to tell me to f**k off but roughly how much per year per 100k(my guess 7k) what fraction of that is capital for the first few years.hope it works out

kevthegaff

i duno lads if there was 30 acres of land decent at 7000 an acre, instead of renting 200/acre around here, entitlements 300/hectare so 3600+6000 per anumm 9600 per acre and the value of extra nitrates. i dont think its that bad if it can greatly improve your farm, if its near enough for silage

bob charles

kevthegaff wrote: »

i duno lads if there was 30 acres of land decent at 7000 an acre, instead of renting 200/acre around here, entitlements 300/hectare so 3600+6000 per anumm 9600 per acre and the value of extra nitrates. i dont think its that bad if it can greatly improve your farm, if its near enough for silage

your interest bill alone is X 2 the rental costs.

Timmaay

bob charles wrote: »

your interest bill alone is X 2 the rental costs.

Yep, Land is never ever going to be worth 7k per ac from an agricultural use as oppose to renting it, no matter how you try to skew the current rental/sfp figures. The only way buying makes sense in my view is taking the gamble on land values going up, going out of your way to borrow money on this gamble is similar to the building boom where people remortgaged their houses to buy more property. I myself am actually in a similar situation, decent chunk of land forsale beside me, in a bit of a rush of blood to the head when it came up for sale, I tried to justify and skew the figures to see if it was ever worth while considering buying it, I could take the view of use it as a retirement investment etc etc, but the sums just never added up from a cashflow point of view unless I got it for like 3k/acre ha! My accountant told me to take out a pension now, if for no other reason than from a tax point of view, so I took the easy option and just opened a pension fund!

kevthegaff

i agree with ye lads its expensive, but im milking 100 cows single, i would hope to pay it back quicker. I have no interest in other investments, i have a profitable enterprise and my loans which amount to over 40k per anumm are finished in 3 yrs, down to 24k repayments this year. its gone crazy around here for rental and buying land so id prefer not to be relying on looking for silage/rental in the future. I also have no mortgage or kids so that would help:D

kevthegaff

oh ya lads i see myself farming for another 50 yrs health permitting!

Juniorhurler

I would rather buy land than invest in a pension fund. The biggest robbers in this country run them and it is all legal. You can access money from the land any time by selling. Your pension is tied up until you are retirement age. You can now access 33% of it once off, but all your tax allowances will have to be repaid to the exchequer.
A fund manager told a neighbour who sold land he could double his money. The neighbour gave him €50, told him to put it in his fund and when it had doubled to come back for more.
I will also add I have a pension from work which is compulsory and is defined benefit, but I would not take one of the others.

Juniorhurler

I would rather buy land than invest in a pension fund. The biggest robbers in this country run them and it is all legal. You can access money from the land any time by selling. Your pension is tied up until you are retirement age. You can now access 33% of it once off, but all your tax allowances will have to be repaid to the exchequer.
A fund manager told a neighbour who sold land he could double his money. The neighbour gave him €50, told him to put it in his fund and when it had doubled to come back for more.
I will also add I have a pension from work which is compulsory and is defined benefit, but I would not take one of the others.

bob charles

kevthegaff wrote: »

I also have no mortgage or kids so that would help:D

You mightnt have time for mortgage or kids if slaving paying for an asset also.

kowtow

Timmaay wrote: »

Yep, Land is never ever going to be worth 7k per ac from an agricultural use as oppose to renting it, no matter how you try to skew the current rental/sfp figures.

Which is the real threat facing agriculture in Ireland.

Grassland in Ireland is still double or even triple the price of it's UK equivalent for one reason only - that farmers in Ireland are granted, from time to time, planning permission to develop sites. In the UK this is virtually unheard of nowadays - it's difficult enough for a farmer to get permission to build or convert a house for himself, even with an agricultural tie so that it can never be sold to the public at full value.

But the experience of Irish farming families - over generations - tends to be that they "never lost money owning land" - and as a result every acre bought and sold includes an element of "hope" value that somewhere on the block, one day, a permission will be granted and a site created.

The net effect of this is that land purchase is rarely an economically competitive alternative to land rental - and the SFP situation as presently laid out only complicates this further. The implications for young farmers and new entrants, and the industry as a whole with 2015 looming, hardly bear thinking about...

maxxuumman

If 30 good acres came up beside me, I would consider it worth really going for.
On the rental value of land, I remember a man saying to me once if you can give 100€ for a ton of meal and you can't give 100€ to rent an acre there is something wrong. As with the price of meal and fert, rental prices are only going to go one way.
If you have the money, or can afford the repayments, land in Ireland is an excellent investment. Europe is going through the worst recession it has had in decades, and aside from a spike in land prices in 07-08, land is back higher in price than it ever was. Investors will go out a buy gold and silver, that has no return other than that it is a safe investment. And it can be used as security at some stage if needed. You can get a return on your investment with land and it is an extremely safe investment.
Okay 30 acres at 10000, looks a lot of money 300k. Go out and try a buy a decent new tractor in the morning, 50,000€ or more.

Edit. Good land in the UK is making 10000 sterling

kowtow

maxxuumman wrote: »

As with the price of meal and fert, rental prices are only going to go one way.
If you have the money, or can afford the repayments, land in Ireland is an excellent investment.

Your post touches an important point.

Who is going to pay these higher rental prices? Unless we have a constant and considerable milk price increase, its difficult to believe it will be the dairy farmer - he would need a drop in the price of ration to have the surplus available. And if that happened, he might well buy more ration instead of renting more land.

In the end, rental is only supported by agricultural / commercial return the land can generate. And as everyone here knows only too well, that has its limits.

If you believe that input costs will continue to rise, and will be funded by an adequate rise in output costs, then you are right that the returns on land will continue to increase - although that doesn't mean that capital values will - at 3% or less they are already mighty compressed. And, if it's investment you are after, you could buy into the same return with much less transaction cost and a more liquid investment by simply buying other inputs like grain, oil, whatever you choose..

Comparison with gold is a common one - but misplaced, gold is divisible, fungible, liquid, and transportable unlike farmland - and transaction costs are also slim. It's true that even at 3% farmland represents a yielding investment at a time when yield is scarce, but unless you believe that interest rates are going to remain close to nil for the next twenty years or so you may find that you - or the buyers you need to prop up the future value - can find better returns at the local bank. The future status of SFP also has some bearing here.

Irish farmland prices are only supported by what farmers are, or will, be able to pay in rent (which in turn depends on other inputs and outputs) and by the likely value of building sites which may or may not appear on the land in future years. That is it, end of story.

kevthegaff

there are two commodoties oil and food that are gona be the most important factors with rising populations and scarcity of both in the future. I duno but i think land is gona go up in price, and i think wel see more foreign investers buying forrestry and agriculture land from now on. Once it doesnt drop considerably u can always sell it:)

kowtow

I think we'd all be guilty of going overboard to try and get the piece of land next door; and even if not doing so was a wise decision at the time we'd kick ourselves later. That much is human nature - but you can only pay up for land if you have the profitability or reserves to support it, and the real question is how many small farms in particular will have that in the years to come.

But there are real risks attendant in Irish land from an investment point of view - re denomination risk and/or an interest rate shock spring to mind.

As someone who spent too much of my life away from the land, around banks, and in trading rooms if you asked me what the supportable value of land was in the next decade I'd say 15-20 times what a sober farmer would pay in rent for a five year contract the year after next, and not a penny more (assuming of course that I don't believe in the planning fairy..). The real question is what would a sober farmer be likely to be willing to pay?

Damo810

bbam wrote: »

Much better rates and term too !
~€660 per month per €100k borrowed, not small money either

If i'm working it out right, it's €638 P/M which adds up to 53K in interest?!? Seems mad money. 61K if you take the rate at 5.2%. How long would it be before the land returns 60K in profit?

Farmer Pudsey

Damo810 wrote: »

If i'm working it out right, it's €638 P/M which adds up to 53K in interest?!? Seems mad money. 61K if you take the rate at 5.2%. How long would it be before the land returns 60K in profit?

You have got to remember that interest is total tax deductible. If you taught that you would have a tax issue for the next 10 years it might land purchase might be an option rather than looking at company status. I know that capital repayments that are not deductible but interest is.

If you are on the high rate this halves the actual tax rate. Lads seem to have no issue carrying a couple hundred thousand in borrowing for machinery but are afraid of buying land. I have seen farmers that have been borrowing for machinery for the last twenty and still if they want to but a machine have to borrow again. Remember that at the end of 15 or 20 years you own the land.

Look at framers that have bought land in your area as opposed to farmers that bought machinery over the last 20 years who are the best off. Also land will still generate an income after it is paid off.

kevthegaff

machinery depreciates, land doesnt. its all the lads that are driving second hand cars and tractors that are buying land around here, it also increased the overall value of your business. if u never buy land that will put pressure on your own son to make a living from it

Timmaay

Can anyone see sense in borrow money for land with the view to only service the interest payments? Say 7k/acre, and 5% interest PA, that's basically a rent price of 350euros/acre per year. Steep yes, but from the view of its a long term lease without all the hassle of landlords etc. Obvious danger is that interest rates increase in the future! However I gather this is very common in mainland Europe, and NZ also, to the point that it does skew the high borrowings/cow figures there!

Tipp Man

Timmaay wrote: »

Can anyone see sense in borrow money for land with the view to only service the interest payments? Say 7k/acre, and 5% interest PA, that's basically a rent price of 350euros/acre per year. Steep yes, but from the view of its a long term lease without all the hassle of landlords etc. Obvious danger is that interest rates increase in the future! However I gather this is very common in mainland Europe, and NZ also, to the point that it does skew the high borrowings/cow figures there!

Pure madness

That was tried with housing in the 2000's and it ended in tears, it was madness for housing and it would be madness for land

If you can't afford the loan, then stay away from it

Anyway the banks are stupid enough to give out those loans for land, at least i hope they aren't

mf240

Timmaay wrote: »

Can anyone see sense in borrow money for land with the view to only service the interest payments? Say 7k/acre, and 5% interest PA, that's basically a rent price of 350euros/acre per year. Steep yes, but from the view of its a long term lease without all the hassle of landlords etc. Obvious danger is that interest rates increase in the future! However I gather this is very common in mainland Europe, and NZ also, to the point that it does skew the high borrowings/cow figures there!

Don't know tim not really getting anywhere though.

You say its like a long term leases and it is to a point but without the ability to walk away at the end of a set term.

I would like to be plugging away at the principal at much as possible and Be getting it paid for at least youd be growing your net worth.

Farmer Pudsey

Timmaay wrote: »

Can anyone see sense in borrow money for land with the view to only service the interest payments? Say 7k/acre, and 5% interest PA, that's basically a rent price of 350euros/acre per year. Steep yes, but from the view of its a long term lease without all the hassle of landlords etc. Obvious danger is that interest rates increase in the future! However I gather this is very common in mainland Europe, and NZ also, to the point that it does skew the high borrowings/cow figures there!

That is not what kevthegaff proposes he seems to be quite comfortable with the repayments. The questions is that at the present price is land going to get more expensive or will it fall in value. All the pointers are that it will continue to rise in value. Unless the world goes nuclear in the next twenty years the demand for energy will cause food prices to rise.

This will be incremental over the next twenty plus years. Posters are comparing present day rental prices to land prices yields. Rent could go down however they could also go up. Land may well be a good medium to long term investment. However it is like anything else if you pay too much you may get stung.