Buying land

stop thelights

Has anyone on here bought land lately? There might land for sale near us in a year or two and I'm just wondering about a few things.

How much deposite does one need for land worth say around 300,000. What security is needed, over what time frame is the best and what is the current rate of interest?

vinne

10% deposit, security of 3 times the value of the land purchased, repayment over 15 years, interest rate of 4.5%

stop thelights

vinne wrote: »

10% deposit, security of 3 times the value of the land purchased, repayment over 15 years, interest rate of 4.5%

And If you had 20% deposit would you be foolish to use your cash rather than borrowing more? Or would that reduce the value if security needed?

vinne

If you could spare it, the less you borrow the better

delaval

vinne wrote: »

If you could spare it, the less you borrow the better

Why???

vermin99

delaval wrote: »

Why???

Sure you wouldn't be under pressure from banks to pay back loans and also you won't be paying interest if you save rather than getting a loan

Timmaay

vinne wrote: »

10% deposit, security of 3 times the value of the land purchased, repayment over 15 years, interest rate of 4.5%

Do all banks look for security 3 times the value? I'd hate to think how up sh*te creek you'd be if say you borrowed 300k for 30acres, and then yourown 90acres (3 times the value) would only just cover the value of that if there was a huge drop in land value, combined with something happening that you couldn't pay back the loan!

mahoney_j

delaval wrote: »

Why???

De laval is right be very slow to plough a lot of your own money into buying land or building,if u do that it is gone not to be got back .borrow full amount and if its a 15 year loan pay it back over 15 years.a bad year or two and you could be glad to have the cash

delaval

vermin99 wrote: »

Sure you wouldn't be under pressure from banks to pay back loans and also you won't be paying interest if you save rather than getting a loan

What happens if you hit a road block along the way ie. tb reactor, bad crop yield/price. All your reserves are gone and repayments still have to be made.

Negociate hard and put up as little cash of your own. The first thing they'll ask is what are you bringing to the deal. If you volunteer they will take. You may of course need to have more skin in the game but don't go in offering

eorna

Maybe I am a bit of a classic but in any loan the less you borrow the less you end up paying at the end, lower repayments and less pressure every month/year ( if you have the cash, that is ) and even if you have a bad year might be able to manage better anyway as lower repayments more money in your pocket every year..

RaggyDays

I`d be very slow in borrowing money to buy land especially the route farming is going here. It used to be hard enough to make a few pound on farming even with a good job, but now it seems that there feck all out of it for the effort. Cant see how you could make any form of repayments on land unless you have a good job to do it.
The banks know this too

Still if your suffering from the great Irish hunger..........

kevthegaff

the bottom line is most land loans are 5.7-6% interest, where are you gona get savings at that rate, also profit will be taxed.

kingdom fan

I bought 30 acres recently, 20 % deposit , 60 acres collateral , 4% interest,
I would b inclined to borrow as much as I can that way I always have a cash reserve and cash is king
The repayments on an extra 25k ( for eg) will be small in the long term , but an extra 25 k in d bank will sure ease the stress,

TEAT SQUEEZER

would for a long time have used my own reserves to finance any farm investments using the excuses of paying interest etc .... had a long conversation with a mate lately.. we both have kids to be thinking of...... he borrows prudently and does so with the view that the high tax rate means u only pay half of the interest in reality... therefore keeping your own money fluid allows you invest that and grow it (modestly i`m sure )... in the long run his theory that you cant lock your money intio something thats not beneficial to all your kids (not just your successor) is starting to rub off... i think my own lack of borrowing is down to the mesages my own folks would have given me with them paying 20% interest etc in the 80`s... its good to get another perspective...

Dampintheattic

TEAT SQUEEZER wrote: »

would for a long time have used my own reserves to finance any farm investments using the excuses of paying interest etc .... had a long conversation with a mate lately.. we both have kids to be thinking of.....I. he borrows prudently and does so with the view that the high tax rate means u only pay half of the interest in reality... therefore keeping your own money fluid allows you invest that and grow it (modestly i`m sure )... in the long run his theory that you cant lock your money intio something thats not beneficial to all your kids (not just your successor) is starting to rub off... i think my own lack of borrowing is down to the mesages my own folks would have given me with them paying 20% interest etc in the 80`s... its good to get another perspective...

Then again, banks can go pop overnight!
Can you imagine what might have happened, if the late Brian Lenihan, hadn't guaranteed the banks, back in 2008.
Your cash in the bank would have gone up in a puff of smoke!
On the other hand, your borrowings would still be your borrowings!!!!!

Cash on hand these times, is losing value every minute, of every hour, of every day!!!

TEAT SQUEEZER

Dampintheattic wrote: »

Then again, banks can go pop overnight!
Can you imagine what might have happened, if the late Brian Lenihan, hadn't guaranteed the banks, back in 2008.
Your cash in the bank would have gone up in a puff of smoke!
On the other hand, your borrowings would still be your borrowings!!!!!

Cash on hand these times, is losing value every minute, of every hour, of every day!!![/QUOTE

i`m just giving anothers perspective ... his view is that he cant break off a chunk of the milking machine and pay his daughters college fees with it

freetoall

Be careful for having a loan like this you have to get a return of 15,000 a year alone just to pay of any interest.

freetoall

One last point I don't think it will be long until they introduce taxes on land in Ireland. If they do this it will add another 1-2% every year.

jersey101

By the talk of all of ye you would swear loans were the worst thing ever. If loans didnt exist id still be stuck with 40ac and no machinery. Its tough paying back loans but in a few year ill be kicking myself wishing i didnt borrow more and to more work

Juniorhurler

freetoall wrote: »

One last point I don't think it will be long until they introduce taxes on land in Ireland. If they do this it will add another 1-2% every year.

I wouldn't see this coming for a long while. Food security is a huge issue and I would think that anything that might negatively impact on it may be unpalatable. I think they will go half way and look at a land tax for non active farmers or on un-utilized land to encourage it into production. Maybe I am wrong.

darragh_haven

Juniorhurler wrote: »

I wouldn't see this coming for a long while. Food security is a huge issue and I would think that anything that might negatively impact on it may be unpalatable. I think they will go half way and look at a land tax for non active farmers or on un-utilized land to encourage it into production. Maybe I am wrong.

That'd make sense.... so it definitely won't happen. Any government will do a blanket tax coz they want money, any money, any how, with the least amount of thought

Juniorhurler

darragh_haven wrote: »

That'd make sense.... so it definitely won't happen. Any government will do a blanket tax coz they want money, any money, any how, with the least amount of thought

True. Maybe I should run for the dail.

darragh_haven

Juniorhurler wrote: »

True. Maybe I should run for the dail.

They don't allow you in if you have ever shown any logical thought process....... sorry!

case885

How does it work for 1st time land buyers who have no land for security?

Farmer Pudsey

Do not know how much they charge at present. At 4% it is 3.5% above ECB rate. If you borrow try to link to either ECB or interbank rate. 4% would be the most I would expect to pay. Remind banks that farmers loans are best preforming part of the market they are low risk for the bank. As well they have security and the ability to collect all that is owed.

I would borrow as much as I could repay the reason being you can always repay early. The thing that catches most borrowers is secondary loans for cars , tractors cattle etc. Remember you have to stock and farm it to get a return on your investment. No point in not taking extra money now and going back to bank to borrow 20K for a car, tractor or cattle in a years time and paying 8-10% for unsecured money over five years. It is unsecured but banks will still collect.

20K over 5 years at 9% will cost 4900/year
20K over 20 years at 3.5% will cost 1350/year

the difference in interest is 2.5K so you have the money for 8 times longer for 2.5K. or 125 euro/year.

delaval

case885 wrote: »

How does it work for 1st time land buyers who have no land for security?

That is a difficult one. You may have a farm rented with say a herd of cows and doing a good job. Although you have good repayment capacity you are in a tight corner as regards getting agreement from a bank

While they say it's all about repayment capacity in reality you need good security and they wont take stock as security.I often wonder about all the people getting into farming with no land, only a small proportion will actually get to own any. Wheather that is a good or a bad thing is another discussion

Milked out

What are lads negotiating the interest rates down to?? Is 4% as low as lads are getting?? Was told by a few to borrow as much as you can for as long as you can, only thing is these days the banks are looking to be slow to give the whole lot esp if some of it is for facilities/infrastructure as well as land

keep going

I am surprised by the colateral being put down .i assumed that if you had 25% deposit the deeds of the new block would be enough but I stand to be corrected.cash generating potential of your bissiness has big effect onthings so I have been told

bbam

keep going wrote: »

I am surprised by the colateral being put down .i assumed that if you had 25% deposit the deeds of the new block would be enough but I stand to be corrected.cash generating potential of your bissiness has big effect onthings so I have been told

So in reality then Dairy is the only thing they will look at.

jersey101

I remember being told in college thats banks wont give ye a loan if your single farm payment is less than the repayments you have in a year.

mf240

Don't forget that only the interest is tax deductible not the principle.

A detailed discussion with your accountant is a must.

delaval

mf240 wrote: »

Don't forget that only the interest is tax deductible not the principle.

A detailed discussion with your accountant is a must.

Correct, the way the purchase is structured is as important as the rate

keep going

mf240 wrote: »

Don't forget that only the interest is tax deductible not the principle.

A detailed discussion with your accountant is a must.

Would someone buy land with out consulting their account or do some people exist in a different world to mine.

mf240

keep going wrote: »

Would someone buy land with out consulting their account or do some people exist in a different world to mine.

When you apply for a loan they will ask for your accounts, It is however very easy to get caught in the trap of just focusing on getting the money.

It's also an ideal time to look at the tax implications for the life of the loan, and to look at how you will approach the repayments from a cash flow and tax point of view.

kevthegaff

there doesnt seem many tax benefits from it

maxxuumman

kevthegaff wrote: »

there doesnt seem many tax benefits from it

Just that the interest is tax deductible, that's it.

Farmer Pudsey

keep going wrote: »

Would someone buy land with out consulting their account or do some people exist in a different world to mine.

Yes I would, you should not need to run to your accountant about every buisness decision you make. If you do not understand your buisness the margin you make and to a certain extent the tax implications then you will have limited ability to expand.

One of the biggest reasons that the country went broke during the boom was the inability of buisness people to make the right decision's. an accountant may not have that ability either. It is your ability to manage a buisness and its cashflow that decides how you can invest to expand.

The real ability to pay debt is at some stage in any long term loan you will come under pressure to make repayments. When this happens your accountant will not bail you out it will be your own ability to work hard manage the buisness and most importantly is not to get depressed about it ,that will get you through this phase of a loan

Farmer Pudsey

kevthegaff wrote: »

there doesnt seem many tax benefits from it

Tax benifits should have no material implications in buisness decisions

maxxuumman

Farmer Pudsey wrote: »

Tax benifits should have no material implications in buisness decisions

Tax could be costing you up to 50% of your profits, it has to be considered.

stanflt

I know a couple of high profile accountants that has had the receiver called on

hugo29

jersey101 wrote: »

I remember being told in college thats banks wont give ye a loan if your single farm payment is less than the repayments you have in a year.

yes i know a lad who told me when he approached his bank for a loan to purchase land (his farm is completely debt free) and he has an off farm job, he was surprised to learn they would not give him what he wanted as his combined payments coming in (SFP and DAS) were less that what his loan repayments would have been

Dont be daft

maxxuumman wrote: »

Tax could be costing you up to 50% of your profits, it has to be considered.

What I don't know about tax could fill a warehouse so bare with me here.

Can you not give yourself a wage out of the business and then pay 41% tax and use that after tax income for capital repayments?

Farmer Pudsey

maxxuumman wrote: »

Tax could be costing you up to 50% of your profits, it has to be considered.

First off the highest rate of tax is 41% and the lowest is 20%. Prsi is on top of that. However USC is charged on depreciated capital so it is cost neutral.

I have seen farmers and buisness men get so caught up in avoiding tax that in the longterm they lost a lot of money. The hotel investment sector during the noughties was a case in point where wealty builders in the main were using it as a way to avoid tax.

There accountants firstly advised them to invest in same while advising every other builder to do the same. They had no exit stragety in place. When all these hotels were available the next thing the builder found that nobody wanted them at the price there accountants imagined. So the accountants advised them to run the hotels themselves. When asked what to charge in resturants/bars etc they used the David Drumm method, they virtually picked the prices out of there hole. The employed the cheapest staff they could amd imagnined that they could charge 5 star prices for food, drink and rooms. All very good during the boom but it lead to an excess of hotel stock when the boom ended.

Avoiding tax is not the be all and end all, it is not the basis for a buisness. I see farmers changing tractors, buying fancy jeeps and cattle boxes just for there capital allowances. I see very few machinery operators which seem to be highly tax efficent becoming really wealty.

stop thelights

Alot of sound advise being given here. Tax would be the last thing on our minds to be honest. I was never a fan of getting 'gear' to avoid paying tax. The land in question would be long side us so its worth any money tbh.

mf240

stop thelights wrote: »

s so its worth any money tbh.

No it's not. You can buy gold too dear.

stop thelights

mf240 wrote: »

No it's not. You can buy gold too dear.

Ah come on... Land was 20,000 an acre and its after dropping to between 8 to 12 so I would think that this would be a good time to buy. Our borrowings are pretty non existant. Increasing your milking block is a huge advantage.

What's the go with getting the SFP on any land purchased does anyone know?

Farmer Pudsey

stop thelights wrote: »

Alot of sound advise being given here. Tax would be the last thing on our minds to be honest. I was never a fan of getting 'gear' to avoid paying tax. The land in question would be long side us so its worth any money tbh.

stop thelights wrote: »

Ah come on... Land was 20,000 an acre and its after dropping to between 8 to 12 so I would think that this would be a good time to buy. Our borrowings are pretty non existant. Increasing your milking block is a huge advantage.

What's the go with getting the SFP on any land purchased does anyone know?

No land is not worth any money. I would ignore the price of land during the boom and also ignore the doomsayers that it will fall in it backside in a while. No one knows what way the SFP will fall. However it may well be the situtation in the medium term that if you have a substancial SFP(over 400/HA) that you will be spreading it in effect on the extra land.

You have to do your calculation and you are right if the block is a joining you it will allow you to increase your milking platform. However you will have to make the decision and it is a buisness decision. On the other hand an ajoining block of land may never come up again and in milk production if you need little infractural changes it may be worth more to you than another farmer.

Timmaay

Farmer Pudsey wrote: »

On the other hand an ajoining block of land may never come up again and in milk production if you need little infractural changes it may be worth more to you than another farmer.

Have that dilemma at the second ha, too soon at this game though, and not nearly enough savings though. There is the "may never come up again" argument, but equally so other land nearby could comeup for rent etc soon after I buy it, which would be a better path to take for now! At the end of the day land is still overvalued for its agricultural potential, saying its worth "any money" is the typical Irish landownership misguided view.

maxxuumman

Farmer Pudsey wrote: »

First off the highest rate of tax is 41% and the lowest is 20%. Prsi is on top of that. However USC is charged on depreciated capital so it is cost neutral.

I have seen farmers and buisness men get so caught up in avoiding tax that in the longterm they lost a lot of money. The hotel investment sector during the noughties was a case in point where wealty builders in the main were using it as a way to avoid tax.

There accountants firstly advised them to invest in same while advising every other builder to do the same. They had no exit stragety in place. When all these hotels were available the next thing the builder found that nobody wanted them at the price there accountants imagined. So the accountants advised them to run the hotels themselves. When asked what to charge in resturants/bars etc they used the David Drumm method, they virtually picked the prices out of there hole. The employed the cheapest staff they could amd imagnined that they could charge 5 star prices for food, drink and rooms. All very good during the boom but it lead to an excess of hotel stock when the boom ended.

Avoiding tax is not the be all and end all, it is not the basis for a buisness. I see farmers changing tractors, buying fancy jeeps and cattle boxes just for there capital allowances. I see very few machinery operators which seem to be highly tax efficent becoming really wealty.

Where did I mention "fancy jeeps" or hotels. The discussion was in relation to land and loans. What I was referring to was where takes a large loan to purchase land, and fail to realize that as they pay down their loan and the capital becomes a larger portion of the repayments, at present tax rates they will be paying a hefty tax bill annually on top of their repayments.
The tax cost always has to be taken into consideration.

kingdom fan

There's some BS on this threat
Usually I stop reading boards when I see sh1te but this treat was of particular interest to me
1 No such thing as tracker anymore
2 only a fool will not trade different banks off each other , the first two quotes I got were over 8%
3 dairy is THE ONLY WAY TO GO ( unless ur a beef feed lot with a contract )
I am neither but got land Nextdoor
4 unless ur contracting, I can't see why anyone can justify borrowing for machinery , machinery costs money and nskes nout, in my opinion
5 if land comes up for sale next door and your interested in farming you can't rally pass the chance at all at any cost
6 accountants !! If you need to ask one of them anything you haven't a clue what you are at . How can a stranger tell you your business ( I am in the top rate of tax so I have an idea what I'm on about )

Farmer Pudsey

maxxuumman wrote: »

Where did I mention "fancy jeeps" or hotels. The discussion was in relation to land and loans. What I was referring to was where takes a large loan to purchase land, and fail to realize that as they pay down their loan and the capital becomes a larger portion of the repayments, at present tax rates they will be paying a hefty tax bill annually on top of their repayments.
The tax cost always has to be taken into consideration.

Tax fear is one of the biggest failure to create wealth. The reason I mentioned hotels was to show haw ill considered tax planning and the blind following of accountants advice can lead to a bad outcome. I gave the example of machinery and jeeps as an example as these are often used to avoid tax.

Yes you should be aware of the tax situation but usually at the end of a 20 year loan inflation should compensate for interest relief lost. You say that they will have a tax bill annually yes however if they have being generating the possibility of these repayments how have they avoided tax all along. To avoid that sort of tax often it may have lead to inefficient taxation policy on the part of the farmer.

kingdom fan wrote: »

There's some BS on this threat
Usually I stop reading boards when I see sh1te but this treat was of particular interest to me
1 No such thing as tracker anymore
2 only a fool will not trade different banks off each other , the first two quotes I got were over 8%
3 dairy is THE ONLY WAY TO GO ( unless ur a beef feed lot with a contract )
I am neither but got land Nextdoor
4 unless ur contracting, I can't see why anyone can justify borrowing for machinery , machinery costs money and nskes nout, in my opinion
5 if land comes up for sale next door and your interested in farming you can't rally pass the chance at all at any cost
6 accountants !! If you need to ask one of them anything you haven't a clue what you are at . How can a stranger tell you your business ( I am in the top rate of tax so I have an idea what I'm on about )

Not quite sure about that you will no longer get a commercial linked to 1.5% above base rate but 3% should be attainable. I be slow borrowing money off a bank with it not linked to something as they could put up rates willy/nilly. Also avoid cost of funds to the bank as some bank funding rates can skyrocket. Inter bank or ECB rate. ECB rate usually about 0.1% above interbank