Re-investing, and when to stop?

Username John

I was thinking of this last night, as it was kinda touched in in the "Making money in Beef" thread.

When do you stop investing in the farm?

I am part-time, so I am coming at this from an angle of being able to re-invest all farm profit back into the farm, at least for now.
But I guess the same question exists for full-time - at what point do you re-invest vs taking money out of the farm.

There are numerous reasons to re-invest - tax prob being the most cited one. And also the "adding value to an asset" Altho I question this, as this suggests people may sell one day, which I don't think most people want to. So adding value, is just a paper exercise in my mind...
But I wonder would we do it anyway?

As I said, the "Making money for beef" thread made me think of this. Regardless of the figures being discussed over there, I admire that the OP there is saying "I farm for profit, take as much as I can, and pay tax on it"

Recently, and this thread has really brought it to the front of my mind is I'm starting to ask myself questions like
When do I stop re-investing?
When will the farm start to pay money?

And then I thought - do I ever want the farm to pay (me) money?
Am I happy to spend time working on it, and for all money to go back into it?

Do people have set goals, and once they reach them, they will 'take out' the profit?
Maybe people take out a set amount every year, and then re-invest what's left?

Parishlad

Have been thinking a bit about this too lately. In much the same position as yourself, i.e. work full-time off farm, don't rely on the farm for any income.
I took over running the farm in 2012. There is an awful lot to do with it to get it to where I want it to be: improving herd quality/quantity, reseeding, fencing, clearing overgrown ditches, upgrading facilities, getting a few bits of machinery etc.
Biggest projects to date include putting up a slatted shed last year and have cleared some land that had gotten completely out of hand this year.

I'm not doing any of this for tax purposes to be honest. My main driver if I am to be honest is to restore a bit of pride in the place. But I also do believe, rightly or wrongly, that if I invest in the farm now it will pay dividends in the future in terms of generating some sort of profit and also by improving the set up I won't have to spend as long on 'normal' farming duties. Time will tell!
From early on I did have a ten year plan whereby everything earned would go straight back in. After that I would like to start taking something out of the farm. I am under no illusion that any profits will be small but if some money can be used to help with school, college etc. for the kids then I will be happy that the sacrifices being made now, especially interms of time missed out with my family, will be worth it.
I also do have a dream (and a dream it probably is) that I can get out of the office job a bit sooner than normal retiremant age and spend a few years doing something that I really love.
After all I have said above and to answer the original question, I believe that even for those of us not relying on the farm for income there should definitely come a point when you and your family should see some reward for all the work that goes in to a farm. Re-investment can/should still continue but it shouldn't be 100% forever.

AntrimGlens

Was thinking about this too recently and I suppose it's ironic that the first 3 posters on this are all full time workers and part time farmers. I was looking at the dairy thread were the boys all pay themselves a fixed wage, regardless of the milk price and it got me thinking about what i take from the farm or expect from it.
I don't rely on the farm for my or the familys income i have a full time job and a few other investments that pay all the bills.
I suppose i didn't have an actual financial goal when i came into farming for it to make X amount to pay me, this probably came from the father who always invested everything the farm made back into the farm after we were all fed and bills were paid. I still treat the farm as a business though and it has to pay to make a profit, now what i do with that profit is my call and at the minute it is reinvested back into the farm, either soil fertility, drainage, re-seeding or labour efficiency such as handling facilities and fencing.
I suppose i'm interested in improving the asset for whoever comes along after me, if they wish to sell it then it shall be reflected in the higher price that they may get for it, or if they wish to work it then hopefully it shall be in a better position than when i took it over. The father has made massive improvements to the place since he took it over and i would hope to build upon this.
Similar to others i would hope that i would be able to pack the job in whilst still able and return to the farm and spend a few years enjoying the benefits and fruits of my expenditure.

just do it

As with any investment it comes down to return on investment. When it's good you invest, when it's negative you don't invest.

Deano7

I'd agree that it's a heart over mind matter sometimes and you would wonder why the hell ya bother at it. What I want is to build a tidy farm that leaves a nice profit where I have my sons with me. I don't want to work full time, feed calves twice a day, plough the field at night and at the w-end milk the cows to give the full time milker a rest. It's all about balance.

larthehar

Again in a similar position to all of the above, the reason I reinvest is a) I don't depend on the income and b) when I decide to come back to farm fulltime that there will be a profitable, low labour system in place..
I am also of the opinion that farming is a way of life that is bred into us all, some lads like to play golf, climb mountains or some other interest.. we just love pawing the clay!
I feel that you do need an end point where the reinvestment slows to increase profit, you have ro look at your situation and define where this point is. There will always be a need for reinvesting...