Hobby Farm Profits?

abnormalnorman

Hi,

Thinking of buying a farm for sale near me - 25 acre, average land, with 3 col hay barn and few old sheds, crush etc. As a hobby farm only. I work full time.

Il need to take a loan of about 100k for this.

My questions is, will this farm actually make money for me to repay the 100k with?

consider no other expenses (I have access to all machinery etc), and wont be doing any further buildings until all borrowings paid back.

epfff

No

https://www.boards.ie/discussion/comment/121025869#Comment_121025869

I would agree, unless you diversify and specialise in a niche or three.

Danzy

No, unfortunately.

minerleague

Does it have entitlements? Would take a long time for 25 acres to repay 100k + interest. If you rented it out at 200/ acre + BISS part of entitlement ( ? 50 ?? ) would bring in 6250 tax free - 25 years ?. Just an example of what's possible. If farming yourself ( what type interests you? ) join acres, organic, ANC, etc and if you are in for long haul (very long) I think it could be done.

Donald Trump

https://www.boards.ie/discussion/comment/121026002#Comment_121026002

OP is borrowing 100k. What is the interest rate for loans for land these days? It must be north of 6%. The last time I looked was well over a year ago and I think it was over 5% at that time.

OP don't forget about stamp duty

abnormalnorman

https://www.boards.ie/discussion/comment/121026031#Comment_121026031

god!! thought now that it would at least pay off the loan. then how do some families live off just twice as much land?

how much is stamp duty?

Donald Trump

https://www.boards.ie/discussion/comment/121026052#Comment_121026052

7.5%. You probably want to be allowing 10% for SD + legal costs etc.

There would be very few "living" off 50 acres. Maybe a few old bachelor types subsisting. Unless they are into something intensive.

BTW OP, if you are not familiar with matters agricultural, beware the auctioneer shoving articles at you about lads paying 600 an acre to rent it. That did happen a little over the past year or two but was likely (hopefully) an aberration. Don't rush in headfirst and be thinking that that is a floor on the income from your investment

abnormalnorman

https://www.boards.ie/discussion/comment/121026068#Comment_121026068

thanks. so whats land being rented for on average these days? are land prices going to go down a bit since the dairy sector is now coming back to reality?! or is dairy expected to "take off" again in the near future?

Donald Trump

https://www.boards.ie/discussion/comment/121026137#Comment_121026137

I can't answer any of those questions with certainty.

Land is basically rented for the calendar year. I mean in the sense that you won't really find any for rent starting 1st Sept for example. People might be looking for it already for next year but in reality the money will be paid next year. I would have to guess that 250 per acre would be a more realistic ceiling next year. But I could be wrong. Depends on how silly and desperate people are. You'll also always get more to rent it for certain purposes, such as spuds/veg, but that is for a reason too.

As regards sale price, there are other buyers of land other than farmers. There have been a few threads online about randomers wanting to buy land for some reason. Maybe they have money and don't want to put it into housing. Maybe it's speculation. Wealthy people might buy agricultural land for inheritance tax purposes. Auctioneer in this area has a few small parcels up for sale around the place and appears to be asking in the region of 20k an acre for them. So I don't think they are targeting active farmers. None really have site potential as far as I can see either.

abnormalnorman

https://www.boards.ie/discussion/comment/121025986#Comment_121025986

so without a niche, say just buying in yearlings for the summer, would you expect to make any profit at all?!

Donald Trump

https://www.boards.ie/discussion/comment/121026209#Comment_121026209

You'd make a few quid. But I think your question was more along the lines of paying back the loan and then some?

abnormalnorman

https://www.boards.ie/discussion/comment/121026215#Comment_121026215

thanks. yes, i was hoping that it might be able to just pay back the loan repayments of the 100k loan that I would need to purchase it, so cover its self basically over the 20 or whatever loan repayment period?

Donald Trump

https://www.boards.ie/discussion/comment/121026238#Comment_121026238

You might be able to leverage off the investment to make it worth your while in other ways rather than income stream such as being able to put down things as expenses or use the income to build up the place. You can make a loss some years on paper to reduce your income tax bill too. I'm not talking about dodgy accounts but genuinely spending money to improve the place.

You can't write capital cost off against your tax btw. Interest cost you can

If you want the land and can pay for it, then fire away and buy it. You'll always have it.

abnormalnorman

https://www.boards.ie/discussion/comment/121026238#Comment_121026238

could you make say 10k a year profit out of it?

abnormalnorman

https://www.boards.ie/discussion/comment/121026002#Comment_121026002

no entitlements.

Donald Trump

https://www.boards.ie/discussion/comment/121026249#Comment_121026249

Possibly. But you could also make a loss.

There is a poster on here that posts accounts whowing he makes 30k gross margin from cattle on more than double the acres what you are talking about. But they know what they are doing. And the reason they post their accounts is that other posters were skeptical about their numbers.

Stationmaster

Don't forget also, even if you just make in a year enough to pay the repayments, you may still have a tax bill on top of that if you're working fulltime elsewhere and this could affect your cash flow - the capital repayments on the loan will not be tax deductible - only the intertest.

epfff

https://www.boards.ie/discussion/comment/121026283#Comment_121026283

You haven't the sheds etc to replicate that poster.

You would also need another 20k to stock 25 acres.

The big think for me is you have to get the 100k back after tax. If you im high tax bracket it means you need to earn approx 210k to pay the capital alone. That's nearly 1k/ha/yr for 20 yrs part-time farming. Now that is Walter Mitty stuff.

If the land was in an area where it would command high rent the renters would have it at an unaffordable price trying to buy it themselves already. So rule that out also.

https://www.boards.ie/discussion/comment/121026052#Comment_121026052

I don't know now any family getting living farming x10 that amount of land at the moment(ex dairy and market garden). If I rule out retired/money made elsewhere or a bachelor existing not living.

https://www.boards.ie/discussion/comment/121026249#Comment_121026249

Weanling to store/weanling to beef at that scale will do well to break even unless you have great knowledge of industry and way with people to get them to sell to you cheap and buy from you dear.

Danzy

https://www.boards.ie/discussion/comment/121026283#Comment_121026283

He is a top class handler, on top class land and buying animals at very competitive prices.

He had Cattle out in February or early march this year 😲

How long is the winter locally OP.

There are good handlers who make next to nothing off animals as well.

It's a tough game op Even owning it already.

Rusheseverywhere

https://www.boards.ie/discussion/comment/121026238#Comment_121026238

Have a land loan, the max I could get was 15 years. Think that was kinda standard. Interest rate is 9% now, remember this is commercial land, commmercial rates etc. From what I see very good land making no more than €240 an acre unless Dairy lad wants it has it. also I assume you are puttin money towards it as you will not get 25 acres at 100k. Epfff post is spot on. Farms eat money my own hedge cutting, diggers for cleaning drains, fencing etc, 1000s every year and just pure cost. Even simple things like insurance spoke to a lad with 50 acres and his insurance nearly same as mine.

80sDiesel

Hobby farm , borrowed money and profit don’t go hand in hand.

But if you can ,go for it. I did it a few years ago and whilst it doesn’t make any money ( biodiversity project) I am glad to have it as I will probably enjoy it a lot when I retire.

Sometimes a parcel of land only comes up for sale once in a generation or more so if it suits ,consider it ,because there might not be a next train.

Donald Trump

https://www.boards.ie/discussion/comment/121026386#Comment_121026386

I was responding to the OP asking whether he could make 10k off it. I was pointing out that someone who knows what he is doing doesn't make a lot more than that. And also mentioned that people are even skeptical that the other makes that as it would be unusually high. i.e. the OP shouldn't be assuming anything as regards "profit"

Donald Trump

https://www.boards.ie/discussion/comment/121026685#Comment_121026685

9%. Mental given the prices land is going for. I hope you either locked in a fixed rate or got it back at a decent price. Auctioneer looking for 20k an acre round here. That would be about 2k per year in interest for every acre financed (price + SD etc would be ~ 22k an acre)

If it's across the ditch then we all know that madness can prevail. But non-farmers randomly buying land must be mental if financing any sizeable amount of it. An expensive hedge (no pun intended)

Furze99

https://www.boards.ie/discussion/comment/121026052#Comment_121026052

They own the land in the first place.

Donald Trump

The OP appears to have started a lot of similar threads over the years to be still asking basics about stamp duty

Sheep breeder

https://www.boards.ie/discussion/comment/121027256#Comment_121027256

who is going to give a 100k loan with out some sort of business plan and away of paying the loan off, coming on the farming forum to see could money be made out of 25 acres and everything to be purchased stock, gear, buildings and sheds etc.😇😇😇

mickdw

Plenty people with healthy off farm incomes will get the cash with little questions asked.

anthony500_1

https://www.boards.ie/discussion/2058310786/hobby-farm-profits

Ive just under double the acres what your thinking of buying. No loans etc on the farm. I've a Good full time off farm job but don't put any of my own money into the farm. What the farm makes, it makes win lose or draw. I'm strict on this as I've a mortgage and a young family so they come first.

In my situation I've fairly rough ground and keep sucklers....... This could be my first problem.

I do make a profit year on year but I'd do well to have 7 or 8k at the end of every year left over to pay off a land loan the likes your talking about, without any major purchases or unexpected bills on machinery.

that is with drawing down a single farm payment and an ANC payment but not signed up to any extra schemes up untill this year as I was not eligible. I'm gone into the new acres scheme which should add another 5k profit to my topline going forward. The figures I'm given are before tax and I'm in the high tax bracket so I'll let you figure out the rest.

In my humble opinion the land itself won't pay for itself without an outside financial input. If you can afford to pay for the loan from your off farm job and forget the idea the farm will pay for itself it's probably the best way to look at it. Profit and small farms don't generally go hand in hand.

Aravo

https://www.boards.ie/discussion/comment/121027256#Comment_121027256

The OP also started a tread a while back "sick of propping up non performing farms". They are going the 180 degrees.

Rusheseverywhere

https://www.boards.ie/discussion/comment/121027208#Comment_121027208

No is is variable. Still owe 90k, have just over 100k paid back. Last year or two very tempted to sell the lot and give brother and sister there share. Head abroad and open a bar; the ironic thing is I have guts of 1.5 million in land and it makes SFA. Most land I see selling locally is to businessmen who are multimillionaires ie own pubs, in building game etc. Apart from dairy very few farmers buying land at moment. 20k is stupid money even if was best of land in Carlow.

Danzy

https://www.boards.ie/discussion/comment/121027683#Comment_121027683

He is not well, his wife is not well.

I'd like to see him run 3 beef finishing farms in 3 countries, not easy or cheap.

epfff

https://www.boards.ie/discussion/comment/121027753#Comment_121027753

You should try doing it with 3 big tractors.

It's not easy

Aravo

https://www.boards.ie/discussion/comment/121027753#Comment_121027753

Oh Gaybo you had me worried there for a moment. Off OP's topic slightly, I actually read TG's book written by Frank Connolly. Well worth a read. TG was a great fella. RIP.

Danzy

https://www.boards.ie/discussion/comment/121027824#Comment_121027824

Tom was a great fellow

893bet

Profit? You be farming unicorns then?

kk.man

https://www.boards.ie/discussion/comment/121027824#Comment_121027824

Yes I did too. Its a real eye opener to our little banna Republic.

Bass Reeves

OP

It's tough making a margin on 25 acres. First thing it not all about making a profit. You are allowed to farm at a loss for three years and write off losses against PAYE income.

You should definately do accounts. You can allow phone, electricity, car expenses......even cat and dog food against your business accounts.

You can do your own accounts but if you have all receipts in order an accountant might do them for 400 ish euro ( tax deductible as well).

Technically you do not need to buy entitlement for all you land units ( hectares), you can draw, greening and CRISS with a single bliss entitlement

They will amount to about 100-110/ unit or 40/ acre( 1.1k in total approx). If the lad is in a disadvantaged area you will get another 100 ish/ HA or another 1k.

It's very hard ( but not impossible) to make money on a summer grazing system. Most lads hold until late in the autumn, I be more inclined to have grass in February/ March and get cattle into your land early and start to sell in Late August/ September and have grass for early the following year.

Buy light runners in January/ February,around 180-220kgs and summer graze. You can do paddocks with pigtails and reels. A few posts here and there for strainers, put your water troughs in the middle of the fields. Cattle need to go into fresh grass every 4-6 days.

It's all about weight gain. You need to buy hungry runners and put 200 kgs on them.

I bought Friesians in late January ( mind you I have a shed and finish cattle so they did not get priority access to grass during the spring ( did not get to grass until late March) They were 280 ish ( a bit too well done for my liking) and are probably above 450 kgs at present. Dosing is important. I started to use the multi-min injection this year it's seems to be an effective injection and it improves growth IMO. It's expensive at 4.5/ head approx

It takes time to buy cattle but LSL is great when you get used to it.

On repayments. The CU is about your best bet. Interest will be 6-7%, it will probably be better to tell them.its for house improvements as it may be easier to get. Repayments about 13-13.5k/year. Highly unlikely you will earn the repayments to pay it off.

abnormalnorman

https://www.boards.ie/discussion/comment/121027753#Comment_121027753

what are you talking about??!??!!?

abnormalnorman

https://www.boards.ie/discussion/comment/121031682#Comment_121031682

Thank you very much Bass Reeves. your post is extremely helpful.

Peregrinus

https://www.boards.ie/discussion/2058310786/hobby-farm-profits

There's a bit of a clue in the term "hobby farm". It if were economically viable, it wouldn't be a hobby farm.

Others who scratch a living from small farms (though not as small as 25 acres) likely inherited or married them. They are not carrying, and trying to service, a purchase debt.

abnormalnorman

https://www.boards.ie/discussion/comment/121027683#Comment_121027683

so what? these are topics for discussion that I am raising out of interest. doesn't have to be real life.!!

(ps - Aravo this may shock you, but my name is actually not abnormalnorman also 😲)

Jack98

https://www.boards.ie/discussion/comment/121036973#Comment_121036973

Pretty straight forward. You started a thread saying you were sick of propping up non performing farms. You now are proposing to buy a farm that will undoubtedly be a non performing farm which you will need government supports to turn any kind of profit.

Can you not see the irony in this…180 degrees as Aravo said lol

straight

https://www.boards.ie/discussion/comment/121037053#Comment_121037053

Not to be pedantic but it's 360 degrees and not 180. I've made that mistake myself in the past.

Jack98

https://www.boards.ie/discussion/comment/121037070#Comment_121037070

180 degrees is to change your mind completely or direction so to speak, 360 degrees turn would leave you where you started so your opinion wouldn’t have changed. I think I’m correct on that one.

abnormalnorman

https://www.boards.ie/discussion/comment/121037053#Comment_121037053

yes but shur they are 2 different topics for discussion. nothing to say that a person cant get opinions on each side of the coin. Doesn't mean I have to or are doing any of these 2 things. dont believe everything you read?!

Jack98

https://www.boards.ie/discussion/comment/121037131#Comment_121037131

You stated in that thread you had issue with non performing farmers being supplemented with government supports and now you want to become the farmers you criticized.

There will be no profit from the land area you are suggesting with buying cattle in. We finish a lot of our own calves here every year and if you had to buy these calves that would be the majority of our profit left per head eaten up.

That’s the reality of your aspiration here if you don’t have off farm income to set aside to meet repayments you are at a hiding to nothing.

Siamsa Sessions

https://www.boards.ie/discussion/comment/121036973#Comment_121036973

Discussions on here are real life for the people who post.

You've got some very hard-won insights from several posters. Don't start trolling people now.

Danzy

https://www.boards.ie/discussion/comment/121036845#Comment_121036845

It was a quote from pee Flynn, bit off topic.

Back on topic, don't forget that subsides are to ensure that consumers have cheap food that is produced below or just barely above cost of production.

Society here and in Western Europe is much more dismissive of food quality, sustainability or even how green it is, despite ad nauseam talk otherwise than even 20 years ago. You want to buy land with borrowed money to get in to that!

You can give it a go but have the off farm income to support it. You'd be much better off getting a weekend job at McDonald's. That's not a joke.

grange mac

Had a dealer out looking af few of my bullocks.... 2 year old chx...he was offering less than paid for them last year... Not to mind guys who have cattle bought this spring...

All talk about how we all have to take a loss on the cattle we bought. I'm lucky I don't depend on it as its just not sustainable. I just draw down payments and enjoy clearing mind after day job.

So in summary of planning on farming for money then I suggest not to.

straight

https://www.boards.ie/discussion/comment/121037090#Comment_121037090

Am confused now. Depends which direction you go I guess. It's something I was pulled up on at work once myself. Like doing a full 360. Going back the same way you came.... Maybe.

Am using my finger here in my head 180 Deg is a straight line. It's the change of direction is key I guess. Not trying to catch you out or anything. It's just something I was pulled up on before but I'd say now you and I were probably right originally.