Want to buy land?

bassets

A farm has come up for sale close by that I would be interested in purchasing. It comprises of a house, 40 acres and a couple of sheds. Land is of middling ground and has a small bit of road frontage. Problem is the home farm hasn't been transferred yet and although I have a small amount of stock presently its under the fathers herd number. I'm 37 now and haven't done the green cert so will I be able to buy this farm. I work full time off the farm and earn a good salary, with good savings and only debt is a mortgage with low monthly repayments and 15 years remaining.
How much would you expect to pay for land of this type based in west offaly?
I've contacted the bank to arrange to meet for a chat but in the meantime has anyone dealt with this scenario before and how did you get on. Probably looking to borrow 150-170 k. Thanks

Bass Reeves

Green cert is not an issue with buying land. It will prevent you from topping up BPS entitlements but that may not be an issue if there entitlements on the land and if they are abouve 300/HA in value. It only small money any way at 60/units IIRC so in your case it would amount to less than 1K/year.

If building sheds you will not qualify for 60% grant aids not sure what restriction are on the 40% rate previously as long as you were ''helping'' another farmer for 5 years this allowed you access.

On borrowing have alook at all senario's. By paying off the mortgage (if it a tracker I would not) it may allow you to access lending easier and be more tax efficient. Depending on condition of house the expected cost could be from 300-500K but I am not aware of land values in Offaly.

With good equity, and income you should be able to borrow at or around 4%. Remember to go to an accounts and sort accounts from the end of year one, losses are tax allowable for 3-4 years and capital allowances are always allowable.

Best of luck I am neary 15 years down the road from where you are starting

bassets

Bass Reeves, thanks for replying. There is no entitlements with the land and the house is valued at 40-50k. Paying off our mortgage is not an option as it is on a low tracker and the amount owing exceeds what savings we have.
Do you know are banks willing to lend based on off farm income as we would be new entrants and have no land at the moment that could be used for security? Will I need a business plan? Trying to get to grips with it all the moment as I don't want to go into bank completely naive. On purchasing I could either let the land for 5 years and house long term or combine it into existing farm but then I'd obviously need money to stock it. Auctioneer has 5-6 neighbours interested so if this drives the price up above what I'm comfortable with I will walk away.

The part time boy

OK I going to play devil's advocate here.

First off fair play for thinking about buying land . Always admire anyone who buys land especially at todays land values .

But the quistion I ask you is why are you buying land ?

You are on about walking away if the land goes very silly price which is a very smart way to look at it .

However you seem to have a very good job . Your talking about renting it for 5 years . What the long term aim . Do you want to give up the job and go full time farming when your dad decides to step down . Or do you want to farm the 40 acres in your own right as it may be a while utill your father steps down.

The return from buying land is very poor. Mostly people do it for other reasons that can make sense but if you staying in your good job and are going to get the home Farm soon I would invest my money in something with a better return .

bassets

The part time boy wrote: »

OK I going to play devil's advocate here.

First off fair play for thinking about buying land . Always admire anyone who buys land especially at todays land values .

But the quistion I ask you is why are you buying land ?

You are on about walking away if the land goes very silly price which is a very smart way to look at it .

However you seem to have a very good job . Your talking about renting it for 5 years . What the long term aim . Do you want to give up the job and go full time farming when your dad decides to step down . Or do you want to farm the 40 acres in your own right as it may be a while utill your father steps down.

The return from buying land is very poor. Mostly people do it for other reasons that can make sense but if you staying in your good job and are going to get the home Farm soon I would invest my money in something with a better return .

The long term aim would be to retire early and farm full time once all the children are put through college approx 9 years time. Currently have 60 acres so this would bring it to c100 acres also looking to the future for the child going to inherit eventually and would lime to put them in a better position. Letting it is only an option to raise some capital in order to further invest long term. If I pump all savings into a deposit to borrow I wouldn't have money to invest in stock and this would be a gradual process.
Is it likely in this scenario that banks will be open to lending, as apart from a good track record financially and 20-25% deposit I have no herd number or land transferred as of yet?

The part time boy

That sounds like a good plan. Seems like farming is something your drawn . Best of luck

sea12

bassets wrote: »

The long term aim would be to retire early and farm full time once all the children are put through college approx 9 years time. Currently have 60 acres so this would bring it to c100 acres also looking to the future for the child going to inherit eventually and would lime to put them in a better position. Letting it is only an option to raise some capital in order to further invest long term. If I pump all savings into a deposit to borrow I wouldn't have money to invest in stock and this would be a gradual process.
Is it likely in this scenario that banks will be open to lending, as apart from a good track record financially and 20-25% deposit I have no herd number or land transferred as of yet?

Bank will prob require 30% deposit and after that it's repayment capacity they are looking at.

lakill Farm

would your parents allow 8/10 acres of the home farm as security of the 40acres? that would be 20% deposit and as its going to be signed to you in time the bank in some cases allow this.

If so, you won't need a big cash deposit and maybe use your savings to clear the mortgage on your private residence and then your freeing up repayment capacity?

Going to the bank you need 3 years projections and a farm business plan.

land in west Offaly could be 3-10k an acre. big variation in quality , plus add in value of dwelling and yard into the mix

Bass Reeves

lakill Farm wrote: »

would your parents allow 8/10 acres of the home farm as security of the 40acres? that would be 20% deposit and as its going to be signed to you in time the bank in some cases allow this.

If so, you won't need a big cash deposit and maybe use your savings to clear the mortgage on your private residence and then your freeing up repayment capacity?

Going to the bank you need 3 years projections and a farm business plan.

land in west Offaly could be 3-10k an acre. big variation in quality , plus add in value of dwelling and yard into the mix

Not sure if I would let go of the tracker on the house, trackers at present are sub 2% and some are 1% and below. No way you will borrow money even after tax relief that cheap. I would go down the route of using 8-10 acres of your home farm as the 25% collateral if the bank is willing to allow you capital to start farming straight away.

If you have a good job tax benefits of farming out weight renting/leasing farm. Go to an accountant or consultant to do a business plan. If a bank see a viable plan in place they will let you borrow that few extra euro. Even on stocking going down the buying of Friesian weanling route in the autumn 15K would allow you to stock the farm if cattle prices are like last autumn.

ganmo

Bass Reeves wrote: »

I would go down the route of using 8-10 acres of your home farm as the 25% collateral if the bank is willing to allow you capital to start farming straight away.

but thats his dads farm...

Bass Reeves

ganmo wrote: »

Bass Reeves wrote: »

I would go down the route of using 8-10 acres of your home farm as the 25% collateral if the bank is willing to allow you capital to start farming straight away.

but thats his dads farm...

Lakhill suggested it as an option I was replying/ expanding to his post

sean_0

Bought 17 acres early last year. Had ~30% of the sale price in savings, borrowed the rest as a business loan at 5.5% over 10 years. It was all pretty straightforward really - as long as you prove you have the repayment capacity the banks are happy enough to lend. Proving this is more or less the same as a mortgage - P60s, statements, contract from my employer etc. Even had to provide my CV.

To answer some of your questions, they never even asked me about herd number, green cert etc. No business plan required. I assume this is because I've proved repayment capacity based on non-farm income (regular job). I'm not a full time farmer, and similar to you I am not on my Dad's herd number, nor have I completed the green cert. If you were to try to use the projected income from the land you buy as repayment capacity, that's a whole different story.

lakill Farm

Bass Reeves wrote: »

Not sure if I would let go of the tracker on the house, trackers at present are sub 2% and some are 1% and below. No way you will borrow money even after tax relief that cheap. I would go down the route of using 8-10 acres of your home farm as the 25% collateral if the bank is willing to allow you capital to start farming straight away.

If you have a good job tax benefits of farming out weight renting/leasing farm. Go to an accountant or consultant to do a business plan. If a bank see a viable plan in place they will let you borrow that few extra euro. Even on stocking going down the buying of Friesian weanling route in the autumn 15K would allow you to stock the farm if cattle prices are like last autumn.

I missed where the OP said it was a tracker.

lakill Farm

ganmo wrote: »

but thats his dads farm...

"the farm isn't transferred yet"

its only a matter of time so would be a very viable way other than 20/25% cash deposit. add into that stamp duty, legal fees etc and stock the 40 acres and you would want a serious cash sum behind you

(I note the OP said he has stock already on the home farm, so if its currently able to feed all stock you are looking at stocking an additional 40 acres)

The Cuban

The problem for you op is there will be some other lad down the road with the same idea. Those small plots of land are always the most expensive, they suit a number of people, from those like yourself, starter uppers, to the lad with huge savings who just wants to do something with his money.
But best of luck and hopefully you will not cripple yourself in debt like so many others.

Who2

You'll not get much at 6k an acre. A bit was sold not far from me that had been leased for years and it wasn't minded before that either, no sheds up a lane bounded by mature forestry and bought for 9k an acre, you'd need to spend another 3-4 to tidy it up and then put up housing, reseed, fence and stock it. You'd really want the money lying in the bank and nothing to do with it.

Who2

It all relative buying land is like riding a bicycle you have to have done it once.[/quote] done it and find it's only lately I question my sanity in doing so, but still I'd probably do the exact same thing again if the right piece came up.

Bass Reeves

Median or averages mean nothing in relation to land prices. Land varies in price depend on a huge number of factors. Forrestry has put a base under most land of 4-5k/ acre. You still have land valued below that which is mostly mountain or land that cannot be afforrested for one reason or another. After that you have commercial farm land the best of this suitable for dairying is making 10k+/ acre in some area's depending on demand. So median and averages are pointless you have to look at local value's and at what interest there will be in the land.

However I think a lot of the heat has gone out of the marketplace. In lots of cases good land is not making 10k/ acre but is remaining unsold at values between 6-8k/acre. However some sellers are unrealistic especially where access is an issue. Sales of sites are limited as well as costs in seeking planning permission are now prohibitive to a lot of ordinary workers. In reality you only know the value when the auctioneers gavel strikes the tables

bassets

Just a quick update, and thanks for your help so far. Met the bank manager for a chat and to see what options are available to me. To borrow in my own name I need to get a herd number or at least be in the process of getting one, I may be in a strong enough position to borrow alone or an option would be to put father as guarantor. If I can't obtain herd number then I could go for a joint application with father.
We may be able to use existing debt free land as deposit but this needs to be looked into more although they did say that our savings could easily fund deposit. Basically the manager is going to do some research and come back to me Monday with all my options.
Is it hard to get a herd number? I'd like to leave the father his and let him receive sfp etc. So could I get a second herd number on existing farm or do I need to rent land to apply? Can we share the same facilities if applying for second herd number? Thanks
They are lending on an agri loan at a rate of 5.5% over 10-15 years but if I wanted to buy without herd number I'd have to take a personal loan at a rate of 9+% over a max of 5 years.

The part time boy

Chicken and egg. You need the land to get herd number so don't know why bank are asking for it ..typical banks though .

Your options would be . Rent a farm and apply for herd number. Go into partnership with your father and put both your names on herd number or tell bank feck off.

You need a crush on the land to get herd number

lakill Farm

bassets wrote: »

Just a quick update, and thanks for your help so far. Met the bank manager for a chat and to see what options are available to me. To borrow in my own name I need to get a herd number or at least be in the process of getting one, I may be in a strong enough position to borrow alone or an option would be to put father as guarantor. If I can't obtain herd number then I could go for a joint application with father.
We may be able to use existing debt free land as deposit but this needs to be looked into more although they did say that our savings could easily fund deposit. Basically the manager is going to do some research and come back to me Monday with all my options.
Is it hard to get a herd number? I'd like to leave the father his and let him receive sfp etc. So could I get a second herd number on existing farm or do I need to rent land to apply? Can we share the same facilities if applying for second herd number? Thanks
They are lending on an agri loan at a rate of 5.5% over 10-15 years but if I wanted to buy without herd number I'd have to take a personal loan at a rate of 9+% over a max of 5 years.

Using some of your parents land is a good option as I said before and use your savings as working capital to stock the land.

Apply for the herd number based on buying the land and say to the district vets office its a requirement of the loan.
probably be a shed suitable for a sick animal bay already in the holding and a crush? if not a mobile crush and a 20ft shipping container would suffice as a quick method to satisfying the requirement. could sort in 1 day and cost 2k but easily sold again when permanent structure set up

abnormalnorman

sean_0 wrote: »

Bought 17 acres early last year. Had ~30% of the sale price in savings, borrowed the rest as a business loan at 5.5% over 10 years. It was all pretty straightforward really - as long as you prove you have the repayment capacity the banks are happy enough to lend. Proving this is more or less the same as a mortgage - P60s, statements, contract from my employer etc. Even had to provide my CV.

To answer some of your questions, they never even asked me about herd number, green cert etc. No business plan required. I assume this is because I've proved repayment capacity based on non-farm income (regular job). I'm not a full time farmer, and similar to you I am not on my Dad's herd number, nor have I completed the green cert. If you were to try to use the projected income from the land you buy as repayment capacity, that's a whole different story.

hi. im about to buy 18 acres. iv no other land. will the bank give me a business loan? spoke to a bank rep today and he said i would hardly get a business loan as iv no other land and hard to justify a business start up with 18 acres . is this correct? im only looking for 60k loan.

TooOldBoots

abnormalnorman wrote: »

hi. im about to buy 18 acres. iv no other land. will the bank give me a business loan? spoke to a bank rep today and he said i would hardly get a business loan as iv no other land and hard to justify a business start up with 18 acres . is this correct? im only looking for 60k loan.

Couldn't see them giving you a farm loan. you would be able to borrow the money but it will be a personal loan at a higher interest rate. Usually around 7.5-9% Thats reality of the banks.

Farm purchase loans are rare and usually the farmer already has most of the money in the bank, he just borrowing what he already has

Bass Reeves

abnormalnorman wrote: »

hi. im about to buy 18 acres. iv no other land. will the bank give me a business loan? spoke to a bank rep today and he said i would hardly get a business loan as iv no other land and hard to justify a business start up with 18 acres . is this correct? im only looking for 60k loan.

It is immaterial whether it is a business loan or not yon can still use it in accounts. The real question is can you get a secured loan on it and if it is worth your while. Three years ago I had the same decision to make about a 50K loan on a piece of property I was buying. I was borrowing over 7 years. Interest rate was 5% V 7.5%. However the with the secured loan I had to jump through hoops and pay the banks solicitor costs estimated at 2K. Interest over the 7 years was an extra 2.5K there would be other costs a small stamp duty cost and land registery fees to register loan on deeds. I went unsecured.

Fine Day

Bass Reeves wrote: »

It is immaterial whether it is a business loan or not yon can still use it in accounts. The real question is can you get a secured loan on it and if it is worth your while. Three years ago I had the same decision to make about a 50K loan on a piece of property I was buying. I was borrowing over 7 years. Interest rate was 5% V 7.5%. However the with the secured loan I had to jump through hoops and pay the banks solicitor costs estimated at 2K. Interest over the 7 years was an extra 2.5K there would be other costs a small stamp duty cost and land registery fees to register loan on deeds. I went unsecured.

Stamp duty now 5% on farm land since 2017 budget. Under 35 year old trained farmers are exempt. So for every100 k spent on land 5k goes to the taxman. Its classed as commercial property. Very hard to try buy land now knowing you have to pay 5% on top of everything else.

Dickie10

is there a site or two on it? dunno what sites are making in offaly, 3/4 acre site in south western meath is worth 50k without planning and maybe 70k with planning.

Bass Reeves

Theheff wrote: »

Stamp duty now 5% on farm land since 2017 budget. Under 35 year old trained farmers are exempt. So for every100 k spent on land 5k goes to the taxman. Its classed as commercial property. Very hard to try buy land now knowing you have to pay 5% on top of everything else.

It is immaterial if there is 0%, 5% or 15% stamp duty. What happens is the buyer factors in the stamp duty in how much he can pay for the land. What ever rate stamp duty is goes to the government rather than the seller. Biggest influence on land prices is tax exemption and inheritance law. It is now very attractive for people with wealth to transfer some of it into land to pass it on to the next generation. If you longterm lease it there may be no inheritance tax. In a way agriculture relief and tax free leasing is driving up the price of land.

Mad_maxx

Bass Reeves wrote: »

It is immaterial if there is 0%, 5% or 15% stamp duty. What happens is the buyer factors in the stamp duty in how much he can pay for the land. What ever rate stamp duty is goes to the government rather than the seller. Biggest influence on land prices is tax exemption and inheritance law. It is now very attractive for people with wealth to transfer some of it into land to pass it on to the next generation. If you longterm lease it there may be no inheritance tax. In a way agriculture relief and tax free leasing is driving up the price of land.

Has land increased in value since the stamp duty change?

Bass Reeves

Mad_maxx wrote: »

Has land increased in value since the stamp duty change?

Land goes up and down in price all the time depending on the strenght of the economy and he ability of people to pay for it.

Burning Tires

Theheff wrote: »

Stamp duty now 5% on farm land since 2017 budget. Under 35 year old trained farmers are exempt. So for every100 k spent on land 5k goes to the taxman. Its classed as commercial property. Very hard to try buy land now knowing you have to pay 5% on top of everything else.

I thought it was 6% on land. I know its a small difference, but can anyone confirm?

Mad_maxx

Bass Reeves wrote: »

Land goes up and down in price all the time depending on the strenght of the economy and he ability of people to pay for it.

True words there but any sign of the stamp duty changes specifically having had an effect, seems to be the case that the attractive lease arrangements have driven up prices a little.

Mad_maxx

Burning Tires wrote: »

I thought it was 6% on land. I know its a small difference, but can anyone confirm?

6% from what I have read?

Bass Reeves

Mad_maxx wrote: »

True words there but any sign of the stamp duty changes specifically having had an effect, seems to be the case that the attractive lease arrangements have driven up prices a little.

Yes stamp duty would tend to dampen prices while inheritance law and leasing tax exemptions would drive up prices

Fine Day

Mad_maxx wrote: »

6% from what I have read?

Your right. Extra 1% is an extra 1000 in every 100k spent. Go long way towards legal fees etc. Not sure what sales are like but from I see driving around, for sale signs are staying up a good long time.

148multi

bassets wrote: »

A farm has come up for sale close by that I would be interested in purchasing. It comprises of a house, 40 acres and a couple of sheds. Land is of middling ground and has a small bit of road frontage. Problem is the home farm hasn't been transferred yet and although I have a small amount of stock presently its under the fathers herd number. I'm 37 now and haven't done the green cert so will I be able to buy this farm. I work full time off the farm and earn a good salary, with good savings and only debt is a mortgage with low monthly repayments and 15 years remaining.
How much would you expect to pay for land of this type based in west offaly?
I've contacted the bank to arrange to meet for a chat but in the meantime has anyone dealt with this scenario before and how did you get on. Probably looking to borrow 150-170 k. Thanks

Think the first 1500 income per month is put towards living expenses for a couple, not sure but maybe 200 per month per child, then the rest at 4%to calculate repayment capacity.
Best of luck.