Farm Banking advice..

farmer symth

Hi all first time poster, long time lurcher. Just looking for advice if anybody has been in a similar situation to mine?

My father is farming 65 acres (25 poor quailty) owned and another 40 acres leased (poor marginal land). We have 40 suckler cows autumn caving, mainly sold as weanlings and a few of the poorer weanlings kept on as forward stores when they put on weight and sold on.The farm needs a bit of investment, there is a 3 bay hayshed with 2 lean twos off of it and and another loose 3 bay lean two. All loose straw sheds and the dungstead is just a whole in the ground with clay banks, Some cattle have to be outwintered every winter and place cut up as result.. Co.co would have a field day lol.


Owned land would need lime and some reseeding with 25 acres needing a lot of drainage lime and reseeding.I am the only son and help out as much as i can. I work full time off farm as a nurse.



The problem is my father land in 2004 by remortgaging the home house and between losing his off farm job and the herd getting wiped out with TB in 2010 he could only go to interest only repayments for 3 years back on ful payments at the moment. Mortgage is now in control of "vulture fund" and the interest rate and pentalties are rising dramatically..(130K)


As a result my father said i should take out a mortgage/farm loan in my own name and buy the place off him, however i have a mortgage already (150k) with my wife and a child on the way. I am 32 but only 2 years qualified and salary/wage isnt fantastic.


Would I be mad to take on my fathers debt on considering how much the farm requires for re-investment and the mortgage i already have?
The Father is 62 and want to keep farming until he is both 70 and then retire and sign over the farm. I myself love farming its just the figures don't add to much profit.


Apologies for such a long winded first post and any advice or solutions to the above greatly appreciated.

rangler1

farmer symth wrote: »

Hi all first time poster, long time lurcher. Just looking for advice if anybody has been in a similar situation to mine?

My father is farming 65 acres (25 poor quailty) owned and another 40 acres leased (poor marginal land). We have 40 suckler cows autumn caving, mainly sold as weanlings and a few of the poorer weanlings kept on as forward stores when they put on weight and sold on.The farm needs a bit of investment, there is a 3 bay hayshed with 2 lean twos off of it and and another loose 3 bay lean two. All loose straw sheds and the dungstead is just a whole in the ground with clay banks, Some cattle have to be outwintered every winter and place cut up as result.. Co.co would have a field day lol.


Owned land would need lime and some reseeding with 25 acres needing a lot of drainage lime and reseeding.I am the only son and help out as much as i can. I work full time off farm as a nurse.



The problem is my father land in 2004 by remortgaging the home house and between losing his off farm job and the herd getting wiped out with TB in 2010 he could only go to interest only repayments for 3 years back on ful payments at the moment. Mortgage is now in control of "vulture fund" and the interest rate and pentalties are rising dramatically..(130K)


As a result my father said i should take out a mortgage/farm loan in my own name and buy the place off him, however i have a mortgage already (150k) with my wife and a child on the way. I am 32 but only 2 years qualified and salary/wage isnt fantastic.


Would I be mad to take on my fathers debt on considering how much the farm requires for re-investment and the mortgage i already have?
The Father is 62 and want to keep farming until he is both 70 and then retire and sign over the farm. I myself love farming its just the figures don't add to much profit.


Apologies for such a long winded first post and any advice or solutions to the above greatly appreciated.

Be very careful, you've a lot going for you, job, wife, child on the way, but things can go wrong, and a second mortgage could be the last straw.
That's just my thoughts, you only get one run at this life, don't ruin it by being over borrowed. If you do go for it, make sure your wife is fully behind the idea

Belongamick

Easier said than done to take on a loan of that nature when starting a young family but all is not lost.
Best thing to do is perhaps establish how much profit or loss the farm is currently making or not as the case may be. If over the last three years the 40 cows are producing top quality U and R grade cattle, plus your grants coming in (less expenses) is turing a tidy profit then maybe consider applying for a loan to take on the debt.
On the other side, if the 40 cows are producing poor quality calves and the grant income is poor generating an overall loss then it is very difficult to work 100 hours per week on the farm to turn it around. plus your own job, plus young family.
It will probably need an independant accountant to find is there a return for your time and money or not.
Another way to look at it is, if you were to buy and rent another small house for the money involved it would generate a rental income.

Timmaay

Agreed, thread very carefully. It's a very difficult situation for your father I know, but ultimately farming is a business, if this was any other business like a shop etc, and there was that sort of debts should he expect you to make a life changing decision also to keep it afloat.

Milked out

I would say talk to a good accountant, and go thru every option that's available. As the lads said you'll have a lot on with the family too so that has to be priority.

J DEERE

Hard give advice without knowing the full details.

Where in the country is the land located?

Is your father claiming SFP and how much is it worth?

Is your wife working or does she have a career of some sort?

How much a year are u paying for the rented ground?

What quality are Ur weanlings and cows?

How much is ur father looking for you to buy the farm for?

jaymla627

Realistically if your 25 acres owned is as bad as you say it's market value is circa 130,000 euro, you mentioned a figure of 130k which I assume is thy total owed, so your in a situation where you might aswell be Joe bloggs coming in of the street to buy the ground...
For your own good given their's no real chance of turning the place around without more substantial investment on top of the mortgage required to buy the land I would run for the hills for want of a better word mighten be what you want to hear and certainly won't sit well with your father but long term if you did manage to get the money from the bank you would be crippled financially

farmer symth

J DEERE wrote: »

Hard give advice without knowing the full details.

Where in the country is the land located?

Is your father claiming SFP and how much is it worth?

Is your wife working or does she have a career of some sort?

How much a year are u paying for the rented ground?

What quality are Ur weanlings and cows?

How much is ur father looking for you to buy the farm for?

The farm is located in North westmeath. The fathers sfp and areos is around 16k however new bps and with aeos gone this year that will be reduced.

The wife works in administration nd gets 35k a year gross.

Land leased for years 15+ at handy money 4k ish, no entitlements and poor quality tho.

Cattle are mixture of a few U=/U- and R+ lime, bulls and heifers sold at 400/500kg, the few stores then at 550 kg+.


Fairly good cattle for the shed men but not export quality either, main expenses are silage and straw.

farmer symth

Thanks for all replies and advice so far.

dzer2

welcome op

Tough place to be

Make sure you have all the details of any debts

Be very careful.
The first step is to talk to your missus if the lady has any inhibitions about what you are going to do forget about it.

Go to the bank and talk to them what we done here many yrs ago was get a joint account which helped the bank to allow the father to stay farming and get a handle on debts (college fees mostly). I got all siblings signed out of the farm at this stage.

Make sure all debts incurred are attached to the farm including your mortgage. leaving your income and house freehold. Ease any pressure from the missus.

Have an actual plan ie get rid of cattle and rented ground if it is not profitable.
Think about all the extra work that you are about to take on.

Be prepared to lose the farm if needs be.

Best of luck

J DEERE

farmer symth wrote: »

The farm is located in North westmeath. The fathers sfp and areos is around 16k however new bps and with aeos gone this year that will be reduced.

The wife works in administration nd gets 35k a year gross.

Land leased for years 15+ at handy money 4k ish, no entitlements and poor quality tho.

Cattle are mixture of a few U=/U- and R+ lime, bulls and heifers sold at 400/500kg, the few stores then at 550 kg+.


Fairly good cattle for the shed men but not export quality either, main expenses are silage and straw.

I'd say you could make it work but if you're buying the farm from your father it has to be on your terms. No way would I get a mortgage and not have him sign the place over straight away as proposed.

U could throw up the rented ground and sell the 40 cows at say 1500 a piece maybe more at current prices with calves at foot. Too much time and effort with sucklers especially if ur working and baby on the way. That's 60k. Drainage, reseeding etc 300/acre is 7500 but you would have more grass growing on that 25 acres than you probably are right now on 65.

Buy in calves or weanlings, whichever u prefer. 25 acres would hold 40-50 calves easily or 30-35 weanlings. No need to invest in sheds as stocking pressure would be off.

Just say if you put 20k back into the place after selling the sucklers you would have 40-50k to knock off the mortgage leaving u at 80-90k with 16k in payments coming in, 25 acres completely drained, reseeded and productive, sheds and stock. U would have a farm worth anywhere between 180-220k for an expense of 80-90k. Not a bad deal if ur father agrees to it

You would Prob be entitled to something from the National Reserve too. U need to have a good chat with a good farm advisor

farmer symth

J DEERE wrote: »

I'd say you could make it work but if you're buying the farm from your father it has to be on your terms. No way would I get a mortgage and not have him sign the place over straight away as proposed.

U could throw up the rented ground and sell the 40 cows at say 1500 a piece maybe more at current prices with calves at foot. Too much time and effort with sucklers especially if ur working and baby on the way. That's 60k. Drainage, reseeding etc 300/acre is 7500 but you would have more grass growing on that 25 acres than you probably are right now on 65.

Buy in calves or weanlings, whichever u prefer. 25 acres would hold 40-50 calves easily or 30-35 weanlings. No need to invest in sheds as stocking pressure would be off.

Just say if you put 20k back into the place after selling the sucklers you would have 40-50k to knock off the mortgage leaving u at 80-90k with 16k in payments coming in, 25 acres completely drained, reseeded and productive, sheds and stock. U would have a farm worth anywhere between 180-220k for an expense of 80-90k. Not a bad deal if ur father agrees to it

You would Prob be entitled to something from the National Reserve too. U need to have a good chat with a good farm advisor

I wrote the first post wrong, tis 25 bad acres and 40 acres fairly good owned and 40 bad acres leased.

We had Frxaa calves reared from 3months to 26-30 month stores, however the father would reckon they are to expensive as calves at the moment and that the sucklers leave a bit more after them for the land type we have

J DEERE

farmer symth wrote: »

I wrote the first post wrong, tis 25 bad acres and 40 acres fairly good owned and 40 bad acres leased.

We had Frxaa calves reared from 3months to 26-30 month stores, however the father would reckon they are to expensive as calves at the moment and that the sucklers leave a bit more after them for the land type we have

Well then your 40 good acres better off than I had factored in. 300-400k better off

Bullocks

farmer symth wrote: »

I wrote the first post wrong, tis 25 bad acres and 40 acres fairly good owned and 40 bad acres leased.

We had Frxaa calves reared from 3months to 26-30 month stores, however the father would reckon they are to expensive as calves at the moment and that the sucklers leave a bit more after them for the land type we have

Would it be easier calf in Feb /March and have all calves sold in Nov /Dec to avoid wintering too much stock if you haven't proper sheds .
Drop the rented ground and spend the rent money on improving the home farm (unless the rented ground is better to out winter on .
Maybe a mad idea but if you're getting a second mortgage to buy the farm would it be possible to move into the fathers house on the farm and rent out your own house to service debt (don't know how well it would pan out with wife and child though )
I wouldn't mortgage the farm that's already in debt in the hope that it would be signed over in another 10 yrs no matter how well I got on with the father . It's your money you're putting in so you will have make the decisions controlling how it's paid back

jimmy G M

J DEERE wrote: »

U could throw up the rented ground and sell the 40 cows at say 1500 a piece maybe more at current prices with calves at foot. Too much time and effort with sucklers especially if ur working and baby on the way. That's 60k.

Be careful with this. €60k in extra sales in a year will cause a serious increase in tax bill.

Another option on the finance side would be to try and get your father refinanced with a home loan or farm mortgage from a main street lender at regular rates. If you went in as a joint borrower on this it would allow the debt to be borrowed over a longer period of time than just your Dad on his own. It also means that your Dad would continue to make repayments on the loan so less of a burden on you. In 8 or 10 years time, you could take on full ownership and full responsibility.

Can ye sell some land to reduce the debt? I think the debt was run up through land purchase.

I think you need to re-organise the farm enterprise also to keep costs to a minimum, maximise profits, little or no re-investment and using existing facilities and reduced labour load. A couple of good suggestions from other posters already.

You need to get good advice from a good accountant / advisor possibly one with good links to lenders for refinance options.

Realistically, its going to take 15+ years for this farm enterprise to repay that €130K debt, so working for the bank for nxt 15 yrs? Land sale of 5 or 7 acres make it a lot easier, but some lads wouldn't contemplate same.

Base price

jimmy G M wrote: »

Be careful with this. €60k in extra sales in a year will cause a serious increase in tax bill.

Another option on the finance side would be to try and get your father refinanced with a home loan or farm mortgage from a main street lender at regular rates. If you went in as a joint borrower on this it would allow the debt to be borrowed over a longer period of time than just your Dad on his own. It also means that your Dad would continue to make repayments on the loan so less of a burden on you. In 8 or 10 years time, you could take on full ownership and full responsibility.

Can ye sell some land to reduce the debt? I think the debt was run up through land purchase.

I think you need to re-organise the farm enterprise also to keep costs to a minimum, maximise profits, little or no re-investment and using existing facilities and reduced labour load. A couple of good suggestions from other posters already.

You need to get good advice from a good accountant / advisor possibly one with good links to lenders for refinance options.

Realistically, its going to take 15+ years for this farm enterprise to repay that €130K debt, so working for the bank for nxt 15 yrs? Land sale of 5 or 7 acres make it a lot easier, but some lads wouldn't contemplate same.

I know it is only 5 or 6 acres but would OP's father not incur CGT on it, which I think is 33%, assuming it has increased in value since original purchase. Stand corrected.

imitation

If you Dad needs to retire early, what kind of situation does that leave you in, would you quit the job or rent it out or is that an option at all ?

Good loser

Tricky.

Your father is over 55 and farming last 10 years so think CGT would not arise.

He should sell 5/6 acres rather than you.

If 40 acres of poor rented land costs €100 per acre it doesn't seem value unless its adding to Govt/EU payments.

Like most drystock farms it is probably trading at a loss; any income comes from the payments.

The most you could reasonably expect from trading on the land is €150 per acre net per annum.

Peter Young of the Farmers Journal would be a good person to contact in your situation.

I doubt if sucklers would leave more than dry cattle/calves and there's significantly more work. (I don't run sucklers)