Borrowing for land

patjack

I know this has been covered on here before, but looking for most recent opinion and requirements for borrowing for land.

Not in the position to do so myself, but if the opportunity arose down the line would like to be able to consider it at least.

So I know it all depends on the individual situation and land type and how many acres, but if anyone knows what banks are typically looking for when deciding on lending for land, what is it?

Timmaay

Security and repayment capacity.

Nettleman

patjack wrote: »

I know this has been covered on here before, but looking for most recent opinion and requirements for borrowing for land.

Not in the position to do so myself, but if the opportunity arose down the line would like to be able to consider it at least.

So I know it all depends on the individual situation and land type and how many acres, but if anyone knows what banks are typically looking for when deciding on lending for land, what is it?

From what I hear, 30% deposit and you pay their legal fees as well as your own-not all make you pay their legal fees, but most. 7 to 10 year term is what I hear

patjack

Nettleman wrote: »

From what I hear, 30% deposit and you pay their legal fees as well as your own-not all make you pay their legal fees, but most. 7 to 10 year term is what I hear

Yea, that would probably rule me out down the line.

For the average suckler/beef/sheep farmers is buying land something we do for the next generation more so than for ourselves?

farmerjj

Nettleman wrote: »

From what I hear, 30% deposit and you pay their legal fees as well as your own-not all make you pay their legal fees, but most. 7 to 10 year term is what I hear

Who are you listening 2 :eek:. Never heard of having to have 30% deposit,its more like 10%or some other security.

Bullocks

patjack wrote: »

Yea, that would probably rule me out down the line.

For the average suckler/beef/sheep farmers is buying land something we do for the next generation more so than for ourselves?

Personally I wouldn't buy for the next generation. Wait and see if they want to farm first and when they are old enough to be gathering money for it then I would help them out if I could .
A mate of mine has had land bought for him and everything signed over when he was 20 . He has about 400 acres of good land but he ducked off to Oz a few years ago rented over half out for tillage and the old parents are milking his cows on the rest . The parents aren't fit for milking but are hanging in there hoping he will come home to realise their ambitions for him .

I think the banks are all about repayment capacity now

Toplink

patjack wrote: »

Yea, that would probably rule me out down the line.

For the average suckler/beef/sheep farmers is buying land something we do for the next generation more so than for ourselves?

Absolutely.

Life is short lad, borrowing for land to be used for suckler farming is fantasy stuff in my opinion. That said I see plenty lads doing it around me doing it so maybe I am missing something.

Nettleman

Toplink wrote: »

Absolutely.

Life is short lad, borrowing for land to be used for suckler farming is fantasy stuff in my opinion. That said I see plenty lads doing it around me doing it so maybe I am missing something.

I see lads saying its for the next generation, but truth is, they are buying for status for themselves, and saying its for next generation...land for suckling is a difficult investment to justify in many situations. I would never give a bank security over and above the new purchased land- I would prefer to scrape the 30% deposit together

farmerjj

Nettleman wrote: »

I see lads saying its for the next generation, but truth is, they are buying for status for themselves, and saying its for next generation...land for suckling is a difficult investment to justify in many situations. I would never give a bank security over and above the new purchased land- I would prefer to scrape the 30% deposit together

That's a bit harsh saying its for "status", some people wanna do well and if they need and can afford to buy land then fair play to them. Feck the begrudgers

patjack

I know I used the term "for the next generation" but I wouldn't be doing it myself.
In my situation I would only do it if I could make the repayments from income generated from the current piece of ground and potential purchased piece of ground.

Even at that I would need the off farm job to keep any sort of living standard.

viztopia

I was in with local boi manager last week and he told me 30% security

farmerjj wrote: »

Who are you listening 2 :eek:. Never heard of having to have 30% deposit,its more like 10%or some other security.

Connemara Farmer

Bullocks wrote: »

The parents aren't fit for milking but are hanging in there hoping he will come home to realise their ambitions for him .

Long story short, fella I know when questioned on his opinion about a situation where land was left to someone no one predicted said "If you want to do someone long term harm leave them a farm".

Seems it works both ways.

Does farming do this to people, or is it the type of person who farms has it in them already?

Buford T. Justice XIX

viztopia wrote: »

I was in with local boi manager last week and he told me 30% security

Yeah, was at a BOI seminar recently and that was the figure they were talking about and a term of 15 years max.

Connemara Farmer

Buford T. Justice V wrote: »

Yeah, was at a BOI seminar recently and that was the figure they were talking about and a term of 15 years max.

30% and that term sounds like a good idea tbh, anyone remember 120% mortgages.

Buford T. Justice XIX

Connemara Farmer wrote: »

30% and that term sounds like a good idea tbh, anyone remember 120% mortgages.

Land round here is making in excess of 13k an acre for good land and 8k+ for land needing work.

I don't think i will be looking to buy a few acres for a while:D

farmerjj

Buford T. Justice V wrote: »

Land round here is making in excess of 13k an acre for good land and 8k+ for land needing work.

I don't think i will be looking to buy a few acres for a while:D

Cant remember where I read it last week, but agricultural land in Ireland is the dearest in a world at the moment, mental

MFdaveIreland

lad, what would you say was realistic for a first time purchase of land, ie size and price, obviously length of string princicple as everyones different, but what realisticaly would you buy from scratch?

Panch18

farmerjj wrote: »

Who are you listening 2 :eek:. Never heard of having to have 30% deposit,its more like 10%or some other security.

Who are you listening 2????

It's typically 30% deposit - its very rare that its not.

and its definitely not 10%

djmc

Yep 30% + security when I enquired

farmerjj

Panch18 wrote: »

Who are you listening 2????

It's typically 30% deposit - its very rare that its not.

and its definitely not 10%

Ok I just got a lucky break so with the bank

keep going

farmerjj wrote: »

Ok I just got a lucky break so with the bank

Or you were giving other land as well for security, 20 years is available but alot comes down to individuals situation.i know of 2 individual s dealing with same bank at the same time who got two completely different offers,more than 1.5 %different in the rates

farmerjj

keep going wrote: »

Or you were giving other land as well for security, 20 years is available but alot comes down to individuals situation.i know of 2 individual s dealing with same bank at the same time who got two completely different offers,more than 1.5 %different in the rates

No no security,only the land that was bought, did you buy land lately?

Panch18

farmerjj wrote: »

Ok I just got a lucky break so with the bank

you must have

What did you buy relative to what you already owned??

farmerjj

Panch18 wrote: »

you must have

What did you buy relative to what you already owned??

I suppose like I said earlier I,v never heard of 30% up front, if someone is stretching themselves to the max of course a bank will want other security but saying everyone needs 30% os nonsense

Panch18

farmerjj wrote: »

I suppose like I said earlier I,v never heard of 30% up front, if someone is stretching themselves to the max of course a bank will want other security but saying everyone needs 30% os nonsense

You seem to be the only person suggesting that 30% isn't needed, everybody else is saying its the norm

Have you bought land recently yourself where this was the case??

farmerjj

Panch18 wrote: »

You seem to be the only person suggesting that 30% isn't needed, everybody else is saying its the norm

Have you bought land recently yourself where this was the case??

Ya bought land in the height of recession, have you bought land recently?

kevthegaff

I bought land lately with only a 10 percent deposit and that land as security

Panch18

farmerjj wrote: »

Ya bought land in the height of recession, have you bought land recently?

Brother bought 65 acres 3 years ago

And he is in the process of buying either 25 or 30 acres at the moment, depending on which one we get.

Plenty of shopping around done and no bank is offering land loans with a 10% deposit

farmerjj

Well never heard of 30% up front, could be something to do with ability to repay only thing I could think of

Panch18

farmerjj wrote: »

Well never heard of 30% up front, could be something to do with ability to repay only thing I could think of

Well we don't actually need the bank for the 25 or 30 acres that we are hoping to get in the next few weeks so I don't think it's ability to repay.

So what did you buy?

Farmer Pudsey

Banks lend on your ability to repay and on your ability to buy at the right price. Have bought lad twice first time they wanted 30%deposit next time i got stamp duty as well.

Enquired 18 months ago about how much I could borrow they would give me a X amount of money it was immaterial how much the place cost. If land cost X I could draw down X, if it cost X+1 I could get X and if it cost X-1 I could drawn down X if I wanted to do some work on the place. I did not push but I think if land cost X+1 I might have got more. Interest rate was sticking point with me

Not too much land is making over 10K/acre and land can still be got around 8/acre and maybe less depending on access. Access determines land value rather than anything else.

Banks will do the deal on your ability to pay and your record of paying loans. If you have no other loans, tractor, car washing machines you are in a stronger positions than if you have a few micky mouse loans tying up disposable money. Good capital allowances help as it allows you to draw income without incurring serious tax.

viztopia

I think it would be totall madness for someone to try and buy and with any less than 30% deposit. You would need to be growing drugs on the land to pay for it if you were looking for a 100% loan.

Farmer Pudsey

viztopia wrote: »

I think it would be totall madness for someone to try and buy and with any less than 30% deposit. You would need to be growing drugs on the land to pay for it if you were looking for a 100% loan.

You are not going to do it with suckler cows.

kevthegaff

Panch18 wrote: »

Brother bought 65 acres 3 years ago

And he is in the process of buying either 25 or 30 acres at the moment, depending on which one we get.

Plenty of shopping around done and no bank is offering land loans with a 10% deposit

Well panch i got a loan from boi in december with only 10% deposit and v good security

cute geoge

kevthegaff wrote: »

Well panch i got a loan from boi in december with only 10% deposit and v good security

But at a cost

viztopia

viztopia wrote: »

I think it would be totall madness for someone to try and buy and with any less than 30% deposit. You would need to be growing drugs on the land to pay for it if you were looking for a 100% loan.

Unfortunately, there are enough totally mad people around to ensure that land here is pricest the dearest in the world.

Grueller

Ther must come a point where evwry man says enough is enough re land price. However, I am twenty years listening ro some lads saying land is too dear, even when it was £2500 an acre. These lads never bought anything and the lads that were supposedly mad for the prices they paid have all expanded, moved on and left the other lads behind.
Who is right? The guy that lived comfortably with what he had or the lad that pushed himself and bought? Different strokes for different folks really.

Miname

Farmer Pudsey wrote: »

You are not going to do it with suckler cows.

Why can't it be done with sucklers puds, you've a desperate set on suckler farmers. Some people can still make a turn on them. I bought a bit last year and and hopefully go on another bit soon enough. While I don't need to take anything from the farm, it still has to pay for everything that's done on it. Do you reckon beef will pay for it?

Farmer Pudsey

viztopia wrote: »

I think it would be totall madness for someone to try and buy and with any less than 30% deposit. You would need to be growing drugs on the land to pay for it if you were looking for a 100% loan.

Why so would it be total madness. It all depends on amount borrowed not on percentage borrowed. It is ability to repay a loan.

cute geoge wrote: »

But at a cost

I say Kev paid a very low rate sub 4% and maybe nearer 2% than 4%. Cost of a loan depends on the banks believe in your ability to repay and also on your borrowing record.

Deleted User wrote: »

Unfortunately, there are enough totally mad people around to ensure that land here is pricest the dearest in the world.

As far as I know land in New Zealand is making 8K+ an acre . Yes some land is making crazy money but not all. I saw a 56 farm with an ok house in a good location make 590K last year. I taught it was value

Grueller wrote: »

Ther must come a point where evwry man says enough is enough re land price. However, I am twenty years listening ro some lads saying land is too dear, even when it was £2500 an acre. These lads never bought anything and the lads that were supposedly mad for the prices they paid have all expanded, moved on and left the other lads behind.
Who is right? The guy that lived comfortably with what he had or the lad that pushed himself and bought? Different strokes for different folks really.

As you say Grueller it is really down to the individual. It is down to there ability to manage the repayments. Some lads could not pay back for a bath tub other lads can manage significent loans fairly easily on the same income. No matter what you do you do it for the next generation to an extent. If you have children first you work to put bread on the table, then for there education ( why put your nose to the grindstone to educate them) and some may also try to leave a little after themselves for the next generation

Miname wrote: »

Why can't it be done with sucklers puds, you've a desperate set on suckler farmers. Some people can still make a turn on them. I bought a bit last year and and hopefully go on another bit soon enough. While I don't need to take anything from the farm, it still has to pay for everything that's done on it. Do you reckon beef will pay for it?

Yes Miname I have a bit of a set on them. I suppose a lot is down to I think there is a higher proportion of suckler farmers than any other type of farmer not making money. Another issue lots of lads go for sucklers because of there inability to manage money. In that I mean if a beef/finisher farmers gets a large cheque he knows that a very small proportion is his. He needs X amount to replace stock and Y to cover costs and the smaller proportion Z is his profit.

viztopia

Farmer Pudsey wrote: »

Why so would it be total madness. It all depends on amount borrowed not on percentage borrowed. It is ability to repay a loan.

that is exactly the point that I was making. take for example some one who buys 20 acres at €10,000 per acre repaying over 15 years at 4%. that would be €1,479 per month or €17,748 per anum for 15 years. please tell me what farming enterprise can make these payments!

farmerjj

viztopia wrote: »

that is exactly the point that I was making. take for example some one who buys 20 acres at €10,000 per acre repaying over 15 years at 4%. that would be €1,479 per month or €17,748 per anum for 15 years. please tell me what farming enterprise can make these payments!

Dairying for one, and I,m paying more than that a month. Every farm is different very hard to say what is too much for someone to borrow.

kevthegaff

Im paying 50k this year in repayments 32 nxt 20 ghe following not inc rental. It can be achieved easily if you invest in the right parts of your dairy farm

Dawggone

farmerjj wrote: »

Dairying for one, and I,m paying more than that a month. Every farm is different very hard to say what is too much for someone to borrow.

That's a bit arrogant...:)
Why not wipe their nose on it!







Btw. Ireland has NOT got the most expensive land in the world.
Holland is much dearer. There are probably more ....

sob1467

Dawggone wrote: »

Btw. Ireland has NOT got the most expensive land in the world.
Holland is much dearer. There are probably more ....

Ireland actually is one the most expensive places to buy land, according to the Independent:

Ireland is the dearest place in the world to buy farming land according to a recent survey by the Financial Times in London.
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The global land price survey, shows that the average price of farming land in Ireland is €9364/ac.
It is noteworthy that the next most expensive country in the world to buy land is New Zealand (€8532/ac) where the agriculture sector is dominated by dairying.
The next dearest European location to purchase land is Denmark at €7,934/ac followed by Britain at €5,448/ac.
Poland, France, Canada, Brazil, Romania, Hungary, the United States and Canada, all recorded a price per acre below €4,000 in the Financial Times survey while land in Australia is currently changing hands for as low as €482/ac.
The Financial Times figure for Irish land prices is broadly in line with the quarterly Irish Land Market Review published this week by Sherry Fitzgerald auctioneers.
It found that the average price per acre paid for farming land in Ireland in the last quarter increased by 2.7% to €9,550.
Economists and auctioneers believe the value placed by landowners and farmers on their land is essentially historic. However, they also agreed that this has been inflated over the past couple of years by demand for land ahead of the EU's abolition of milk quotas next year.
Economist Jim Power told the Farming Independent that the main reason for high farm land prices in Ireland is down to the low turnover of land in the country.
"There is a very limited supply of land in Ireland and an incredibly low turnover of land, which in turn creates a demand that in turn affects the price of land," he said.
"There is also a 'caste system' operating within Irish agriculture with the dairy farmers at the top, tillage farmers- depending on the weather-in the middle, with beef and sheep farmers at the bottom. It will always be the case.
"But the post milk quota situation in 2015 is creating a demand for land and dairy farmers at the moment will buy anything that moves," he said.
"What we are seeing now is an artificially strong demand for land with bank lending to agriculture centred almost entirely on the dairy sector – at the expense of the other farming sectors. This is because of the predicted long term prospects when milk quotas are abolished."
Power, however, believes this is a "short term approach to farm investment'' which will not be good for the long term viability of Irish agriculture.
"What happens when dairy margins tighten and these borrowings have to be paid off?"
Kildare-based auctioneer Paddy Jordan says he would not disagree with the findings of the Financial Times' survey.
Turnover
"The low turnover of land in Ireland is mainly the cause of high land prices'', he says.
"You must remember the recent statistic about land in Ireland. Apparently land in France is sold once in every 70 years while land in Ireland is sold only once in 400 to 500 years.
"I recently sold 108 acres of good tillage land at €16,500 an acre. That is above the number you are quoting, but most of the recent transactions would be within an ass's roar of the figure,'' he says.
New buyers are a mixture of dairy farmers who "would buy outside the ditch anyway'' and farmers buying land as a long term investment.
"There are a lot of cash buyers who are interested in land because interest rates on deposit accounts are so low," says Jordan.
"Many of them are farmers who sold land near towns for huge sums during the boom. You must remember that not all of them used the boom time money to invest in AIB and Anglo Irish.
"They still have the money to invest and when you buy land you know the land is still going to be there tomorrow morning.
"They are getting two bites of the cherry – land which they can farm now and land which they can use as an investment for the next generation who will have no memory of the economic crash.
"I suppose it's all a question of supply and demand but you have to remember there is a lot of good land in Ireland compared to the USA where there is an awful lot of bad land,'' he added.
Border region sees the only decrease in land values

The average price of Irish farmland rose by 2.7pc from €9,300 to €9,550 per acre during the first quarter of the year, according to the Irish Land Market Review just published by auctioneers Sherry Fitzgerald.
The review is based on actual prices or prices likely to be achieved by Sherry Fitzgerald's network of 56 agents nationwide and covers sales of grassland, prime tillage land, marginal grassland and forestry land.
Land prices in Cork increased by 9pc contributing to a 7.1pc rise in land values in the south west, where prices increased from €9,550 to €10,650/ac during the quarter.
Land values in the midlands increased by 3.9pc and values in the mid east region rose by 3.1pc. Both the Dublin and south-east land markets remained stable during the quarter, but land values in the Border region dropped by 0.7pc. The average value of grassland increased by 3pc ( €10,500 to €10,750/ac) with the highest values recorded in the Dublin region (€13,500/ac). Dublin is followed by the south west where grassland values grew by 7pc to €11,700/ac, driven by strong demand and sales in Cork.
Grassland values in the mid east region increased by 6pc to €11,600/ac, but the Border region showed a marginal decrease of 1.5pc.
Looking at the overall national picture, grassland values vary from more than €15,000/ac in the right locations to as low as €5,000 in counties like Leitrim and Roscommon, where demand is weaker.
The average price per acre for tillage land increased by 3.2pc in the first quarter to €11,600.
Values in the south west region were up 7.1pc with Cork again the star in the salesroom. Tillage land prices increased there by 9.3pc.
The value of tillage land in the mid west region grew by 4.8pc during the first three months of the year with the midlands and mid east markets growing by 4pc and 4.2pc respectively.
The average value of prime tillage land in Dublin was €18,000 /ac.
Prices nationally for marginal grassland averaged €6, 750/ac – a rise of 1.5pc on the previous quarter.
The south west and midlands saw the largest increases (9.2pc) with Longford and Laois driving the increase in the Midlands.
Mature forestry of 25 years or more is selling at €3,700/ac – up 2.2pc with a notable uplift in prices (8.1pc) in the Border region.
While farmers remain the principle buyers in the markets, the authors note that cash investors and returning emigrants are also prominent. The report also warns that access to bank finance remains an issue for dairy farmers who are very active in the market.
Indo Farming

http://www.independent.ie/business/farming/irish-farming-land-is-tops-in-global-price-ranking-30377296.html

frazzledhome

It's all about repayment capacity. That's all the bank are interested in ATM.

One very big issue regarding the purchase of land with borrowed money is income tax. Only the interest is offset able against tax. How one sets themselves up from a tax point of view is crucial.

A poster said earlier how you'd have x to repay but that's to the bank. Every cent paid off the principal is taxable

Dawggone

sob1467 wrote: »

Ireland actually is one the most expensive places to buy land, according to the Independent:



http://www.independent.ie/business/farming/irish-farming-land-is-tops-in-global-price-ranking-30377296.html

Apologies SOB, but I couldn't be arsed reading through you're post.
Been there done that.


Dairy farmers will grow up...

Farmer Pudsey

Everybody knows land is only dear the day you buy it

Zoo4m8

Buford T. Justice V wrote: »

Land round here is making in excess of 13k an acre for good land and 8k+ for land needing work.

I don't think i will be looking to buy a few acres for a while:D

You must live near me, I paid just over 11k for a place last autumn and was delighted to get it..no house (didn't want one) good sheds, slopes at the back, nice road frontage to a minor road and water in a couple parts.
Myself and a couple other lads were hanging on by our fingertips at around 13k for a fine place a while back, then we heard one of the opposition had sent in her gardener to look the place over..we knew then we were bet!
She has since kept the original granite yard and completely demolished the modern yard..big slatted units, silage pits , everything gone..crying shame, but each to their own I guess.

C0N0R

sob1467 wrote: »

Ireland actually is one the most expensive places to buy land, according to the Independent:



http://www.independent.ie/business/farming/irish-farming-land-is-tops-in-global-price-ranking-30377296.html

I know of potential dairy land in nz that went for more than 15k an acre, the thing that drives their average price down is massive hill blocks that sell for nothing.

kowtow

Looking at land and stock prices we appear to think that a dairy cow can sustain the interest payments on / fund about €25,000 of capital investment after, of course, covering her own variable cost of production.

And on top of that provide some kind of income

At 30c odd a litre and yield less than 7K litres that seems a bit of a stretch, but what do I know?

Dawggone

kowtow wrote: »

Looking at land and stock prices we appear to think that a dairy cow can sustain the interest payments on / fund about €25,000 of capital investment after, of course, covering her own variable cost of production.

And on top of that provide some kind of income

At 30c odd a litre and yield less than 7K litres that seems a bit of a stretch, but what do I know?

Are you factoring-in the "laying hen"?