Inherited dairy farm - living in US - should I sell now or will prices continue to go

SeekingAlpha

Hello,
First post on here and hoping I might get some advice.

Originally from Ireland and living in US outside San Francisco these last 15 years or thereabouts. Wife, kids, job etc. is here and very happy out here with no plans or thoughts to go back to Ireland.

Just very recently I inherited a farm in Ireland. It's about 210 acres of supposedly top dairy land and has all of the buildings, machinery, milk parlors etc. The man who lived there was a perfectionist and an incredibly hard worker so the place is in top notch condition.... I think this put him in an early grave if all is said and done, RIP.

Even if I was in Ireland I am not a farmer and have no delusions about my trying to farm it ... I tip my hat to you who do this every day. I will be selling it but should I do it now or later?

So, it seems that good dairy land prices are very high right now. I talked to an auctioneer in the area and he said there would be great interest given the location and the condition and should fetch top price. Of course he might say that anyway to get his commission. A cousin of mine said to hold off as he thinks prices are going to go way up with end of quota. I looked into rental income but is pretty poor compared with the value of the land.

My question for those of you with a land price crystal ball is will land prices go up substantially after quota and should I just rent it out and wait until then .... or should I just sell now.

Thanks for reading

kevthegaff

Im not sure whether it will increase dramaticaly, banks are very hard to deal with for that type of money, would ye have any interest in leasing or getting a farm manager. it does sound like the ideal dairy farm tho

maxxuumman

Can't see land dramatically rising or falling in the near future. But if it was me I'd be selling ASAP,'while the gloss is still on the no quota-era. The bottom might fall out of milk price, and land price will go down.
Also if you don't sell now, what are you going to do, rent it out? If the farm was looked after as good as what you say, it might be at its most valuable now.

Conmaicne Mara

Agree with Maxxuumman, if post quota things don't work out as rosy as expected there could be a lot of depressed dairy farmers around. At the moment there are a lot of existing and new entrant dairy farmers falling all over each other for land. If it were my decision I would sell now.

Greengrass1

Also land might not be looked after as good as your relative did and that might affect the price a bit

frazzledhome

Where is this farm located?

freedominacup

frazzledhome wrote: »

Where is this farm located?

It's hardly in laois or North kilkenny.

munkus

freedominacup wrote: »

It's hardly in laois or North kilkenny.

Sounds like it's up around the Burren....

Farmer Pudsey

If the land and buildings are well maintained and in good nick sell now. No point in waiting for a small or mediun price rise. If you rent/lease lads that has it will try to make as much as possible in the short to medium term. The other isuse is collecting the lease/rental. At 200/Acre this is 40K/year as you will not be in Ireland any messing will be hard to sort out.

I am not sure as you are residance in the us will you face inheritance tax, in Ireland as you do not intend farming it this might equate to more than 500K (rate33% assuming lads will make 10K/Acre).

At present the confidane is in the market if it saps it could drop 1-2K/acre in a few months.

I always remember a motto a lad told me once there has to be somthing for the next man when you are selling

royalmeath

210 acres will net about 2 million. Sell it in the summer and secure your family for the rest of your life.

Farmer Pudsey

royalmeath wrote: »

210 acres will net about 2 million. Sell it in the summer and secure your family for the rest of your life.

Do not wait for the summer, sell now so that who ever buys has time to sort out SFP etc after may it is worth 3-500/acre less to the buyer. Also milk prices are at the max now they can only start to drop a bit from now on. Farms are best sold in the Spring or end of year. However if I was selling I be moving fast.

patjack

kevthegaff wrote: »

Im not sure whether it will increase dramaticaly, banks are very hard to deal with for that type of money, would ye have any interest in leasing or getting a farm manager. it does sound like the ideal dairy farm tho

Agree with Kev, option of getting a farm manager is definately worth looking into in this scenario. It would allow you to retain your capital i.e. the land and property and generate a decent income. The key to making this a success would be essentially sourcing a good farm manager. There are some excellent guys out there. They could also be incentivised by profit sharing. If the land is top quality and you have 210 acres I don't see it ever devaluing too much, so my advice would be don't sell unless you have too, and try generating an income from it first, if done right, it could generate (obviously a lot of variables in this statement and unknowns to us) a large portion of the money your expecting from the sale, through a steady income flow over 20-25 years. I would definately look into this before selling.

Farmer Pudsey

patjack wrote: »

Agree with Kev, option of getting a farm manager is definately worth looking into in this scenario. It would allow you to retain your capital i.e. the land and property and generate a decent income. The key to making this a success would be essentially sourcing a good farm manager. There are some excellent guys out there. They could also be incentivised by profit sharing. If the land is top quality and you have 210 acres I don't see it ever devaluing too much, so my advice would be don't sell unless you have too, and try generating an income from it first, if done right, it could generate (obviously a lot of variables in this statement and unknowns to us) a large portion of the money your expecting from the sale, through a steady income flow over 20-25 years. I would definately look into this before selling.

IMO he is too far away in the states, if along the east coast of the US it would not be hassle flying over once or twice a year to have alook and check the way thing are working. Also he is 15 years away from this the risks far out weigh the benifits. Labour is not cheap. Best case senario is that he will take the equivlent of the rental income out.

If there are Inheritance tax (CAT) implications here or the US he is facing a 500K bill minimum he will have to fund that.In a leaseing and favoured nephew this may not apply provided he fullfil the criteria. You need to understand a buisness to work in a partnership other wise the partner can rob you blind no matter how bright you think you are. Risks far out weight the rewards.

If you end uo with 1-1.5 million in cash invest in buisness'syou understand.

patjack

Farmer Pudsey wrote: »

IMO he is too far away in the states, if along the east coast of the US it would not be hassle flying over once or twice a year to have alook and check the way thing are working. Also he is 15 years away from this the risks far out weigh the benifits. Labour is not cheap. Best case senario is that he will take the equivlent of the rental income out.

If there are Inheritance tax (CAT) implications here or the US he is facing a 500K bill minimum he will have to fund that.In a leaseing and favoured nephew this may not apply provided he fullfil the criteria. You need to understand a buisness to work in a partnership other wise the partner can rob you blind no matter how bright you think you are. Risks far out weight the rewards.

If you end uo with 1-1.5 million in cash invest in buisness'syou understand.

Do you not think some one could gain far too much enjoyment from netting 1-1.5 million from land proceeds? I mean land in Ireland isn't designed for providing that leisure. Only messing of course

maxxuumman

Wonder what end of the country is it in?

Greengrass1

I reckon it would be worth closer to 3 million lads. If the farm is in ttip top condition And milked 200 cows. Plus a yard and milking machine.
It sounds like its fully setup and ready to go which is rare in Ireland. Thus could make big money. As the cows might still be there and someone might buy the whole lot

Farmer Pudsey

Greengrass1 wrote: »

I reckon it would be worth closer to 3 million lads. If the farm is in ttip top condition And milked 200 cows. Plus a yard and milking machine.
It sounds like its fully setup and ready to go which is rare in Ireland. Thus could make big money. As the cows might still be there and someone might buy the whole lot

I agree Greengrass, I would expect that it would gross well in excess of 2 million. However I was working off conservtive figures.

hfallada

OP you need to get onto a tax advisor ASAP to minimise your tax liability. There is nothing worse than inheriting something and losing most of it to taxes

KCTK

Farmer Pudsey wrote: »

If there are Inheritance tax (CAT) implications here or the US he is facing a 500K bill minimum he will have to fund that.In a leaseing and favoured nephew this may not apply provided he fullfil the criteria. You need to understand a buisness to work in a partnership other wise the partner can rob you blind no matter how bright you think you are. Risks far out weight the rewards.

If you end uo with 1-1.5 million in cash invest in buisness'syou understand.

favourite nephew could not apply in this instance as must have worked a substantial amount of the previous 5years for the disponer to avail of this relief, also agriculture relief will not apply as must be resident in Ireland for 3 years after receiving the farm to avoid clawback (never mind asset test). So he will be facing a large tax bill for cat on date the farm becomes his, if its valued correctly for this transfer then subsequent sale should not really cause any further tax bill (ie value of farm inherited rouhly equals price received
on selling farm). Use of Double Tax Agreement between Ireland and US should ensure tax only payable here in Ireland where the physical asset is located then.

mf240

A bird in the hand is worth two in the bush.

If you,leased it out though you would have the option of spending your retirement there.

whitebriar

Sadly, the cost of funding the managers,staff,bank loans for cat etc means anything other than selling is hassle and a money pit not an income stream.
If it's as good a place as you say,then it's worth up to 3 million or more at 15k an acre Inc buildings etc-so that's a 900k Euro or 1.2 million dollar min cat bill! Not 500k.

Username John

OP - get the proper advise on the tax bill sould be your first port of call, as this influence what you decide to do (if hit with a 900k tax bill, then selling now is really the only option)

One item to keep in mind maybe to keep a field. It might be nice to keep a few acres, if you or your kids ever wanted it in the future.
Keeping a few acres wouldn't affect the sale price too much. You could let it to someone you trust for marginal rent, just they look after it. And it would always be there when you retire, or your kinds grow up, etc.
Just an idea...

Farmer Pudsey

whitebriar wrote: »

Sadly, the cost of funding the managers,staff,bank loans for cat etc means anything other than selling is hassle and a money pit not an income stream.
If it's as good a place as you say,then it's worth up to 3 million or more at 15k an acre Inc buildings etc-so that's a 900k Euro or 1.2 million dollar min cat bill! Not 500k.

It is also 2 million into the hand. Not sure if he can opt to pay the CAT in the US which may be lower. An accountant/solicitor is necessary toadvise on this. Ig you look at my posts I used consertive figure lads talking about 15K/acre are assuming that this is well setup anh has not been rented for a few years. Op has been in the US for 15 years things may have changed in his time away. I doubt if 3 million is a runner maybe it is but when you go above 500K in land purchassers there is always only a few bidders at over 2 million you will monly have a few savvy inviduals. TBH you should deal with conservitive figure not some Pie in the sky figures. There are also costs in selling (minimal in the context of the overall value but none the lessthey are there).

My own estimation is 12K/acre is a realistic any money more on less will depend on quality of land and buildings, quota. It is unlikly that his late uncle was milking 200 cows. it could well have been a dairy and beef or tillage operation with maybe only 70-80 cows. It may well have been a top class farm 15-20 years ago but now may be an average run of the mill dairy farm that may well need 500K in investment to maximise dairy o/p.

having said that 10-12K/acre may well be a good ballpark figure.

KCTK

whitebriar wrote: »

Sadly, the cost of funding the managers,staff,bank loans for cat etc means anything other than selling is hassle and a money pit not an income stream.
If it's as good a place as you say,then it's worth up to 3 million or more at 15k an acre Inc buildings etc-so that's a 900k Euro or 1.2 million dollar min cat bill! Not 500k.

Ya if liable to CAT then roughly 33% of total value so large bill. Even though Agri relief not available if the person retains the farm in the medium term and leases out/puts manager in place the CAT bill could be significantly reduced. OP may have no interest in doing this but for c.€700/€800k it could be worth considering all options. Needs to talk with a Chartered Tax Advisor before doing anything (ie me!!!)

Base price

OP from your post you appear to be well settled and happy in the US, but I would take a different view of your situation from the others. I see that you have cousins here in Ireland. Do any of them farm and if so would the be interested in leasing the farm from you. You will still receive a nice income from the lease and since they are family they hopefully would maintain the land well.
In addition if you ever become bored of the US or your circumstances change, you still have a good farm to come back to whether you are interested in farming it now or not - or maybe some of your children would like to live here in time.

grazeaway

Username John wrote: »

OP - get the proper advise on the tax bill sould be your first port of call, as this influence what you decide to do (if hit with a 900k tax bill, then selling now is really the only option)

One item to keep in mind maybe to keep a field. It might be nice to keep a few acres, if you or your kids ever wanted it in the future.
Keeping a few acres wouldn't affect the sale price too much. You could let it to someone you trust for marginal rent, just they look after it. And it would always be there when you retire, or your kinds grow up, etc.
Just an idea...

Agree totally, get proper legal advice before making any quick decisions. Taking the quick buck may not actually be the most efficient thing. You will need to take into account your tax implication both here and in the USA. Also take into account the effects of other family members, there may be other claims on the farm espically as you have no plans to farm it.

I'm not sure on the tax but as the others say it might be worth getting a farm manager or leasing to one someone who is looking for expansion farming post quota.

Most important thing is to get proper legal and tax advice.

sheebadog

Have you any intention of ever going back to Ireland ?
The reason why I ask is it gives two good options.
Pm me if interested.
The other point about is this a good time to sell. It's always a good time when you inherit and have another life. Land is not going to skyrocket in price because the banks are broke and unable to fund anything not to mind agri land boom.
My advice is to sell now and quick- milk price high dairy farmers full confidence etc.
I will bet not many on here have speculated much on agri land.

royalmeath

I have never heard of anything so crazy as the notion thisguy should appoint a farm manager to run a buisness he has no knowledge of and no inerest in. First you would have to get a top operator with the best credentials given that he lives over 4000 miles away. secondly what on earth would he hold on to a field for, the lad has zero interest in returning home.

Farmer Pudsey

royalmeath wrote: »

I have never heard of anything so crazy as the notion thisguy should appoint a farm manager to run a buisness he has no knowledge of and no inerest in. First you would have to get a top operator with the best credentials given that he lives over 4000 miles away. secondly what on earth would he hold on to a field for, the lad has zero interest in returning home.

I would have no issue with holding onto a field or if there was an old cottage that was viable to seperate. But agree with rest of the thinking big time

frazzledhome

freedominacup wrote: »

It's hardly in laois or North kilkenny.

????????

freedominacup

frazzledhome wrote: »

????????

Don't mind me:rolleyes:. Assumption is the mother of all fcuk ups:D.

moy83

freedominacup wrote: »

Don't mind me:rolleyes:. Assumption is the mother of all fcuk ups:D.

I thought you were onto something there too freedom

cute geoge

Base price wrote: »

OP from your post you appear to be well settled and happy in the US, but I would take a different view of your situation from the others. I see that you have cousins here in Ireland. Do any of them farm and if so would the be interested in leasing the farm from you. You will still receive a nice income from the lease and since they are family they hopefully would maintain the land well.
In addition if you ever become bored of the US or your circumstances change, you still have a good farm to come back to whether you are interested in farming it now or not - or maybe some of your children would like to live here in time.

In my book the only sensible bit of advice that u have got so far
Grand if it bog get rid asap but if its good dry land u would be mad to even think about selling .Many the man a few years after selling up were dead sorry at the very least give your cousins a chance to lease it if interested .It is very easy to rent land for good money to someone else who will mind YOUR land also .Dont forget your ancesters had to slave hard to build up a farm of this size ,not for you to sell once you got your hands on it

Farmer Pudsey

cute geoge wrote: »

In my book the only sensible bit of advice that u have got so far
Grand if it bog get rid asap but if its good dry land u would be mad to even think about selling .Many the man a few years after selling up were dead sorry at the very least give your cousins a chance to lease it if interested .It is very easy to rent land for good money to someone else who will mind YOUR land also .Dont forget your ancesters had to slave hard to build up a farm of this size ,not for you to sell once you got your hands on it

If the farm is in good condition it will only be regressing if leased for 10-20 year. Op will have a CAT bill of 500K valuing it at 7K/acre. I prefer to see a farm sold and new ownerslooking after it rather than leasing and going downhill. If Op intended to return to Ireland and farm grand but if not selling is the most realistic option.

PS I have bought land and would prefer that it is sold rather than rented by a future generation if they are not interested in farming

international xl

Should one sell government will take a good piece of the proceeds at the same time it is impossible to farm when so far away seen many family have sold with the next generation loving to have gone at it .If the farm is as good as one says it is a business just waiting for the right manager with you been the share holder it will provide one with a good revenue stream especially if set up in company format and leaving one self with options going into the future .Get your cousin involved a business is only as good as it,s staff and land in Ireland always hold value it,s a good place to be and wish you the best.

Farmer Pudsey

international xl wrote: »

Should one sell government will take a good piece of the proceeds at the same time it is impossible to farm when so far away seen many family have sold with the next generation loving to have gone at it .If the farm is as good as one says it is a business just waiting for the right manager with you been the share holder it will provide one with a good revenue stream especially if set up in company format and leaving one self with options going into the future .Get your cousin involved a business is only as good as it,s staff and land in Ireland always hold value it,s a good place to be and wish you the best.

It matters little whether OP farms or sells he will have to pay CAT @33% on the value of the farm. The bill for this will be around 500K. OP will have to fund this. Farming cannot take fulltime labour costs. The only farms that are successfully are owner-managed. Managing From afar this type of operation is not possible if op taught he had the skills he hardly be asking you or me

keep going

They say you should never invest in a business you dont understand and by not selling you are effectively investing in it .so unless you have some understanding of farming dont dream of taking on a manager and running it.secondly unless you have someone in mind forget entering into a partnership.you say you have awell setup dairy operation but if you rent for period all you will is a farm of ground and not a business .so unless you have some emotional attachment the best option is to sell it and invest wisely which if you do means coming home at any stage is not going to be a problem to find some where to live.as regards future land values as ever thats very hard to say but my six pence worth is if dairying takes off and the banks come right yes you will probably get more money in 3 to 5 years time or it could be longer but the problem you have is you will not be selling the same thing in 5 years that you are selling now.by the way there is still a bit of development money around for marquee farms.

Muckit

Sell sell sell!

donegal11

If you don't sell how are you going to afford the tax bill? presuming you don't qualify for relief

royalmeath

cute geoge wrote: »

In my book the only sensible bit of advice that u have got so far
Grand if it bog get rid asap but if its good dry land u would be mad to even think about selling .Many the man a few years after selling up were dead sorry at the very least give your cousins a chance to lease it if interested .It is very easy to rent land for good money to someone else who will mind YOUR land also .Dont forget your ancesters had to slave hard to build up a farm of this size ,not for you to sell once you got your hands on it

DEAR BULL MCCABE
Thats crap talk about his ancestors, they did what they saw fit and lived their lives in their own way. There are alot of farmers out there who are indoctrinated with the same crap you have spewed out in your post now, who are manfully hanging on to bits of farms because of the guilt trip they would be put through if they manned up and sold up and made a better life for themselves. Everyone in rural Ireland knows it people would whisper thats the one who sold the land. Big deal one day we here will all be ancestors and I would like to think that my children or their childrens children would be able to make their own decisions about where there life is going. Bill Gates built Microsoft up from nothing so does that mean seven generations from now his ancestors will still have to run it.

cute geoge

Each to his own ,is there not a value in tradition
Imo he has no chance of holding on to any of it due to inheritance tax

Conmaicne Mara

royalmeath wrote: »

DEAR BULL MCCABE

It's the yanks field now Bull :pac:

royalmeath

Conmaicne Mara wrote: »

It's the yanks field now Bull :pac:

Classic!

royalmeath

cute geoge wrote: »

Each to his own ,is there not a value in tradition
Tradition never paid a bill.

royalmeath

cute geoge wrote: »

In my book the only sensible bit of advice that u have got so far
.Many the man a few years after selling up were dead sorry at the very least give your cousins a chance to lease it if interested .It is very easy to rent land for good money to someone else who will mind YOUR land also .Dont forget your ancesters had to slave hard to build up a farm of this size ,not for you to sell once you got your hands on it

You dont have any cousins in San francisco who have just come into a bit of land by any chance?

cute geoge

royalmeath wrote: »

You dont have any cousins in San francisco who have just come into a bit of land by any chance?

I WISH
The only ancesters that left me anything was a bill from the undertaker to bury them

Sam Kade

So the op posted 3 days ago and didn't reply since, I smell a rat

maxxuumman

Sam Kade wrote: »

So the op posted 3 days ago and didn't reply since, I smell a rat

A bit of trolling me thinks

Username John

cute geoge wrote: »

Each to his own ,is there not a value in tradition
Imo he has no chance of holding on to any of it due to inheritance tax

Ah, would you go way.

Is farming a tradition, that you should keep on, even if you have no interest?

I assume you are still following tradition - auch as milking in an old stall, a new parlour wouldn't very traditional.
Oh - not sure a tractor is traditional, I woul say you should stick to the horse...

Reggie.

Sam Kade wrote: »

So the op posted 3 days ago and didn't reply since, I smell a rat

Mmmm my thoughts exactly

irish_bhoy09

Reggie. wrote: »

Mmmm my thoughts exactly

Ill look after that fa for u:-)