Reclaim or not before sale?

delaval

My sister has inherited a 25 acre parcel of land. The land is of average quality but would be good for grazing or silage not arable though a combine rests in one corner.

All the land surrounding seems has been reclaimed and is looking very well and being well farmed so I know that this can be very productive.

I needs drains cleaned and some shores put in as there are patches of rushes appearing.

This land will be offered for sale and I know that the two farmers either side will duel to the death for it. She doesn't want to sell for 5 years and has it set for €2500/year.

I feel that she should reclaim it as it will make it more attractive, probably the farmer in me. She is happy to let it sit but it will be in a bad way if nothing is done.

What do ye think do it or not?

mf240

If she doesent need to sell it (none of my business) what safer investment will she get.

I would reclaim it and resseed it and continue to rent it out but at a much higher rent.

delaval

mf240 wrote: »

If she doesent need to sell it (none of my business) what safer investment will she get.

I would reclaim it and resseed it and continue to rent it out but at a much higher rent.

She will sell, just she will need cash in about 5 yrs for education of kids etc. She wants to hold till then for your exact reasons.

1chippy

id reclaim it if it was mine but then again i wouldnt be selling it.

delaval

1chippy wrote: »

id reclaim it if it was mine but then again i wouldnt be selling it.

Yea but, would reclaiming add a lot of value?

1chippy

delaval wrote: »

Yea but, would reclaiming add a lot of value?

It should do, if lads are pushing themselves out to spend big money any excuse not to go that extra few quid might just hold them back from the last push. if its all cleaned up and can go straight into use you will have a lot more people vying for it.

kowtow

I think she should sell the combine, for a start.

maxxuumman

delaval wrote: »

Yea but, would reclaiming add a lot of value?

To protect her investment I would reclaim. If in 5 yrs time, land becomes hard to sell for what ever reasons ( stranger things have happened), she will have no time to dress it up to get a better price, at least by doing it now, she is putting a bit of an insurance policy on her investment.

mf240

Its amazing how much better a place looks when the ditches are pared in and nicely trimed and no rushes just grass.
no need to go overboard.
First impression last and when a place is looking its best you will always have more customers.

Conmaicne Mara

This is like going to mass and taking a poll on who believes in God.

+1 to reclaim

mf240

Conmaicne Mara wrote: »

This is like going to mass and taking a poll on who believes in God.
)

Im only here to pass myself.

Conmaicne Mara

mf240 wrote: »

Im only here to pass myself.

Lost me there.

Meant no offense, but a lot of the time farming and profit don't fit as we all have a love of the land and I'd guess selling land would be against most of our instincts on this forum A farmer will want to improve the land to get more from it.

mf240

Conmaicne Mara wrote: »

Lost me there.

Meant no offense, but a lot of the time farming and profit don't fit as we all have a love of the land and I'd guess selling land would be against most of our instincts on this forum A farmer will want to improve the land to get more from it.

I agree with you 100% .

My post was a joke, like you I didnt mean to offend anyone.

moy83

I dont know lads , reseeding 25 acres wont be cheap , and it could be well shook after five years of renting too .
Would she not be aswell getting whoever is renting it to make sure its kept in top order as part of the agreement by picking a good client ? Im sure delaval will help there .
Maybe keep it drained and trim the bushes herself alright .
But if two buckos are willing to get stuck into one another to buy it , it wont make much odds what condition its in (to a certain degree ) so long as they both have money at the time .
Ive seen brutal bits of land make great money around here just because two lads could afford to try and outdo each other .

Manoffeeling

delaval wrote: »

She will sell, just she will need cash in about 5 yrs for education of kids etc. She wants to hold till then for your exact reasons.

She is selling land to pay for education? That doesn't make sense

delaval

Manoffeeling wrote: »

She is selling land to pay for education? That doesn't make sense

She intends to sell because there will be a few in college together, well that's her intention at the moment

Manoffeeling

delaval wrote: »

She intends to sell because there will be a few in college together, well that's her intention at the moment

Sorry, but that is very poor management of money and assets. I am sure if she put the rent money into college along with a few adjustments, it would go along way towards the final figure. I don't know your sister, but she should keep it until she really needs money.
Do you agree with me?

longgonesilver

Be careful that the value of it does not affect college grants. If she is not a farmer the value of land might be taken into account. This only applies if she would be eligible for grants in the first place.

delaval

Manoffeeling wrote: »

Sorry, but that is very poor management of money and assets. I am sure if she put the rent money into college along with a few adjustments, it would go along way towards the final figure. I don't know your sister, but she should keep it until she really needs money.
Do you agree with me?

I could not agree more. I posted this deliberately to try and flesh it out for her. I really feel that reclaiming is the way to go and I'd be hoping that with increased income she might reconsider.
She thinks its the farmer in me wants to keep it and reclaim

To be fair it was a very recent and unexpected inheritance so I am sure she will change her mind as she is very switched on!

nashmach

Delaval, when you say it needs to be reclaimed, I guess it is a not a root and branch draining of every acre that is needed? A few large drains would probably sort most of it out? Only you/your sister know the answer to that question I'm afraid.

I'd be of the view to drain it or alternatively rent it to someone on a long term lease on the proviso that is drained for a slightly lower rent on either a 5 or 7 year term.

In that way, your sister won't have a large drainage bill outlay either.

delaval

nashmach wrote: »

Delaval, when you say it needs to be reclaimed, I guess it is a not a root and branch draining of every acre that is needed? A few large drains would probably sort most of it out? Only you/your sister know the answer to that question I'm afraid.

I'd be of the view to drain it or alternatively rent it to someone on a long term lease on the proviso that is drained for a slightly lower rent on either a 5 or 7 year term.

In that way, your sister won't have a large drainage bill outlay either.

Clean existing drains, cut hedges, fence and shore three or four spots. I'd actually say the reseeding would be the most expensive part.
If it was convenient to me I would fix up for her.

bob charles

whats the cost to reclaim - ball park. can she offset it against tax - assume not. if she does reclaim she will have to pay capital gains on top of the extra value. whats it worth today unreclaimed? will it bother two jealous farmers who will bid it up to spite one another? do these guys even have the price of it. just because a guy is right beside it doesnt mean he first has the means of buying it and secondly his farming enterprise maybe doing crap and he has no interest. Assumptions are the mother of all f up. why not sell now which in my view are still way too high land prices and stick it in a bank and get have 15% more in 5/6 years time. bit of deflation and it would look like a very smart move. I would see no problem liquidating an asset that she never taught she had to reinvest in her kids. Thats me done talking through my ......

delaval

bob charles wrote: »

whats the cost to reclaim - ball park. can she offset it against tax - assume not. if she does reclaim she will have to pay capital gains on top of the extra value. whats it worth today unreclaimed? will it bother two jealous farmers who will bid it up to spite one another? do these guys even have the price of it. just because a guy is right beside it doesnt mean he first has the means of buying it and secondly his farming enterprise maybe doing crap and he has no interest. Assumptions are the mother of all f up. why not sell now which in my view are still way too high land prices and stick it in a bank and get have 15% more in 5/6 years time. bit of deflation and it would look like a very smart move. I would see no problem liquidating an asset that she never taught she had to reinvest in her kids. Thats me done talking through my ......

Agreed dangerous to make plans based on what someone else may or may not do.
These are all the things that need to be considered. It really is like a small lotto win as in she never expected to have it.
As you know with lump sums of money perceived pressure comes on the temptation is there to use this money.
While it is in land a bit slower to liquidate.

caseman

bob charles wrote: »

whats the cost to reclaim - ball park. can she offset it against tax - assume not. if she does reclaim she will have to pay capital gains on top of the extra value. whats it worth today unreclaimed? will it bother two jealous farmers who will bid it up to spite one another? do these guys even have the price of it. just because a guy is right beside it doesnt mean he first has the means of buying it and secondly his farming enterprise maybe doing crap and he has no interest. Assumptions are the mother of all f up. why not sell now which in my view are still way too high land prices and stick it in a bank and get have 15% more in 5/6 years time. bit of deflation and it would look like a very smart move. I would see no problem liquidating an asset that she never taught she had to reinvest in her kids. Thats me done talking through my ......

Agree with above.sell now and buy a house she could collect 40 grand in five years from house rental.

Viewtodiefor

caseman wrote: »

Agree with above.sell now and buy a house she could collect 40 grand in five years from house rental.

This is a very interesting idea. Looks like somewhere in the next ten yrs there will be a shortage of housing as we have not built any considerable number of houses in the last five, if we apply logic to that then now is the time to buy when no one wants them! Then again is she prepared to roll the dice? Probably not. The decision really depends on where you think land values will be in 5 yrs. I'm not sure she will get the value out of it by reseeding/reclaiming now. She has to spen say for argument Best delete my number mate then u won't be wasting ur time!ten grand. Then wait 5 yrs hope prices have risen enough to offset the 10k plus the added value of the land against tax. I don't think it will happen as land is too expensive as is. But I may be wrong

Manoffeeling

caseman wrote: »

Agree with above.sell now and buy a house she could collect 40 grand in five years from house rental.

Do you read the papers or know what is going on? We have a house set that is mortgage free and it ain't all all rosey

JohnBoy

a bit of spit an polish should pay dividends, but done 12 months before sale, not 5 years I reckon.

clean the drains, cut the ditches, spray the rushes and seriously consider selling next spring when the place will be looking fresh.

Rent @ 150 an acre = 3750 per annum

Sell @10,000 an acre and lodge the cash @1.5% = 3750 per annum


A more qualified person than me can weigh up the tax implications of the different options, but having the lump sum, and a similar revenue stream from it with no effort doesnt seem like a bad deal to me.

land is only of value to farmers.

jomoloney

bob charles wrote: »

whats the cost to reclaim - ball park. can she offset it against tax - assume not. if she does reclaim she will have to pay capital gains on top of the extra value. whats it worth today unreclaimed? will it bother two jealous farmers who will bid it up to spite one another? do these guys even have the price of it. just because a guy is right beside it doesnt mean he first has the means of buying it and secondly his farming enterprise maybe doing crap and he has no interest. Assumptions are the mother of all f up. why not sell now which in my view are still way too high land prices and stick it in a bank and get have 15% more in 5/6 years time. bit of deflation and it would look like a very smart move. I would see no problem liquidating an asset that she never taught she had to reinvest in her kids. Thats me done talking through my ......

most sensible post of the thread

yellow50HX

what are the tax implications of her selling now rather then 5 years time? Assuming inherinatance tax is already paid what will she be hit with on capital gains? it may make more sense to sell now as the money she'll spend on the land may get swallowed up.

not a tax expert but said i'd throw it into the mix

caseman

Manoffeeling wrote: »

Do you read the papers or know what is going on? We have a house set that is mortgage free and it ain't all all rosey

Yes l can read that's what happened last time to many clever people that read to much.
Your house is probably in small arse town that should never have being build.
Also nothing rosey about renting land or houses it's all hard work .

iverjohnston

:DNow Now, girls, play nicely!:D

Username John

yellow50HX wrote: »

what are the tax implications of her selling now rather then 5 years time? Assuming inherinatance tax is already paid what will she be hit with on capital gains? it may make more sense to sell now as the money she'll spend on the land may get swallowed up.

not a tax expert but said i'd throw it into the mix

I think a chat with an accountant is prob the best thing to do... The outcome of this conversation will most determine what the best course of action is, not whether the place is reclaimed or not...

As per 50HX above, something else to consider is what do you think the taxes on sales of such land will be in 5 years? I think I read somewhere that Labour are looking to increase inheritance tax...

Having done this, go to a local auctioneer - ask him how much its worth. Then ask how much it would be worth if it were reclaimed. (not really sure they will be able to answer to be honest)
But I imagine his answer will be along the lines of "if two people want it, then it doesn't matter"

I think it is the farmer in you trying to push for it to reclaimed Delaval

I am not sure it would necessarily increase the selling price, it should increase the rental price, but maybe not enough to justify the spend...

I say "no to reclaim"

(we should have a poll)

Manoffeeling

caseman wrote: »

Your house is probably in small arse town that should never have being build.

lakill Farm

depending on the inheritance, but CGT is 33%.

then pay fees for solicitor, auctioneer, engineer and tax return.

You are down to receiving 60-62% of hammer price.

just do it

Did she inherit entitlements with it? They need to be factored into income and how to get the most out of the SFP should be considered.

delaval

lakill Farm wrote: »

depending on the inheritance, but CGT is 33%.

then pay fees for solicitor, auctioneer, engineer and tax return.

You are down to receiving 60-62% of hammer price.

You only pay CGT on the gain not the total

delaval

just do it wrote: »

Did she inherit entitlements with it? They need to be factored into income and how to get the most out of the SFP should be considered.

No SFP

amens

delaval wrote: »

You only pay CGT on the gain not the total

That's right. An asset inherited is valued at the date of death of the deceased and for later CGT purposes this value is taken to be the one at which the asset was acquired even though the person getting it never paid that amount so you would only be paying CGT tax on the difference between this and the sale price.

bob charles

am I right in saying she pays CAT now or in the near future @ 33% and CGT on the change in value between the CAT amount and the sale value in the future of 33%. Maybe Im totally wrong as im never got a penny from anyone:)

CGT @ 33% just shows how ****e an investment in land can be

iverjohnston

It depends who she inherited from, and how close a relative this was (if a relative at all) if not a blood relative she could perhaps claim "favourite nephew" status. And also if she has already received other inheritance. Perhaps all this already sorted out. But we are getting off the point. I would say rent and bank the rent . Her choice in the end.

bob charles wrote: »

am I right in saying she pays CAT now or in the near future @ 33% and CGT on the change in value between the CAT amount and the sale value in the future of 33%. Maybe Im totally wrong as im never got a penny from anyone:)

CGT @ 33% just shows how ****e an investment in land can be

delaval

Tax is not an issue.
CGT is on the gain only, auctioneer not required in this case and legal fees will be minimal

The question is, will reclaiming add much % value to the sale price?

just do it

delaval wrote: »

No SFP

She could be a new entrant and get some entitlements. (Don't know how that works by the way). As a farmer then she could have a "manager" doing the work for her, possibly someone she knows... someone like a brother?! One enterprise she could look at is contract rearing heifers for a dairy farmer she knows. Moving cattle from one herd number into another doesn't confer ownership of the animals, it only means they are on the holding associated with the herd number;).

Edit - some figures. 25ac = ~10ha. Average SFP is €267 or something close to that. Lets just say as a new entrant she get entitlements to the value of €200/ha, that's an annual payment of €2,000.

bob charles

delaval wrote: »

Tax is not an issue.
CGT is on the gain only, auctioneer not required in this case and legal fees will be minimal

The question is, will reclaiming add much % value to the sale price?

NO, do I have to shout . just take the farmer out of yourself and look at this realistically. Reclaiming is expensive business as I have done enough of it. Bigger question is if this is the time to sell or not. I think land will be a bear in the not so distant future.

Also worth considering the two farmers bounding it are at.

just do it

In answer to the original question I think she should hold onto it as an asset and as a fallback should she ever desperately need an emergency injection of cash. It's a much better asset than a house. Then she should look at how best to extract an annual income from it. If the payback period of the reclamation work is only 2-3yrs, then it is a no brainer. However if the rental value will only increase nominally then don't reclaim.

Another way to look at it is to annually expend the amount of tax she will be due to pay on the rent. Although I think if she enters into a 5yr rental agreement that is tax free income? Open to correction on this.

bob charles

just do it wrote: »

In answer to the original question I think she should hold onto it as an asset and as a fallback should she ever desperately need an emergency injection of cash. It's a much better asset than a house. Then she should look at how best to extract an annual income from it. If the payback period of the reclamation work is only 2-3yrs, then it is a no brainer. However if the rental value will only increase nominally then don't reclaim.

Another way to look at it is to annually expend the amount of tax she will be due to pay on the rent. Although I think if she enters into a 5yr rental agreement that is tax free income? Open to correction on this.

big danger is that land isnt a very liquid asset if she was to need the money at short notice. by the time the pole goes up to have money in the bank account will take the bones of 6 months and thats if there is even an interested party.

Good loser

If she can get a good price now, say €10k per acre, would be inclined to take it. Could always have an auction, withdraw, and continue renting. I reckon over 5/10 years prices for land won't increase. Would not spend on reclaiming beyond (maybe) hedge cutting.

Where kids expect to go to college (say Dublin) buy a decent apartment now for half the sale price and keep the other half. Rent out the apartment until her kids need it - she will have to keep an eye on maintenance. Preferably an apartment with a car space.

lakill Farm

delaval wrote: »

Tax is not an issue.
CGT is on the gain only, auctioneer not required in this case and legal fees will be minimal

The question is, will reclaiming add much % value to the sale price?

Why not look at land in your locality and see what reclaimed well maintained land is making and what uncared for land is making.

Was renting 14 acres of at best ok land in 2010. Auld lad sold it to pay for nursing home.

At the time good land around me was making €7k an acre.

the 2 lands wither side set there sights on it. Both are dry stock. Make €9,750 an acre

lakill Farm

delaval wrote: »

You only pay CGT on the gain not the total

Yes hence why i said depending on the inheritance .

CAT is paid on receiving the assets.

kowtow

bob charles wrote: »

I think land will be a bear in the not so distant future.

+1 to that.

At least in real terms, and there are easier ways for a non-farmer to hedge inflation than digging drains.

bob charles

kowtow wrote: »

+1 to that.

At least in real terms, and there are easier ways for a non-farmer to hedge inflation than digging drains.