NSW A rural property/a house on acreage as IP

I live in Sydney and I work in the CBD.

My wife and I have thought about living on a rural property with a hobby farm one day when we retire but there's still a long way there. Ideally, to buy a rural property to rent out until we use it for retirement or holiday.

I've read about comments that buying a IP property for future retirement is not a great idea due to changing population, circumstances etc.

Has anyone done this or thinking of doing this?

Thank you.

 

Hi Larry,

Beware of land tax when having rural property as Investment Property. It could be substantial. Other ways you can avoid/exempt such as rent to a raw producer such as market gardener etc..

You can also build a granny flat on rural to increase income.

 

I've thought about it, but it comes down to opportunity cost.

Is using the funds you have available now best used in buying a rural property that may increase in value a lot more slowly than the same amount of money invested in a house/unit closer to a more populated area?

 

Hi Larry

It really depends on how and where you're classifying as rural? Eg: buying a 5 acre block in metro capital city Sydney such as Dural/Kenthurst is a lot different to 100 acres in a regional centre. What's the plan?

 

Thanks for that. That's significant. I suppose it's tricky to find interested parties to rent the rural property. Jafeica, opportunity cost is definitely a factor.
I'm happy to buy, hold and rent it out but CG/CF is probably not great for properties like these. If you are looking for a rural property where would it be? Armidale? Bathurst?

 

Jacque, I suppose I would like a 5-10 acre block with a house on it but Dural/Kenthurst prices are too high so I'm looking further. I would like to move in or use it as a family holiday retreat when it's all paid off. I have the means but not sure if it's the right way to do it.

 

If I were to buy regional, it probably wouldn't be for investment, more for somewhere to live, and at 35 I'm not really ready (mentally or financially) to buy 100 acres and retire to the country, but IF I were to buy, it would more than likely be somewhere close to the Hume Highway between Sydney and Goulburn.

 

I think 100 acres is beyond me at this stage. I love the community feel in Dubbo/Albury.

 

100 acres in that area costs about the same as a one bed unit in some areas of Sydney!

I know where I'd prefer to live for sure, but which one would make me the most on my investment?

 

Just arranged finance for a 500+ acre place around that area - the client took me out there after settlement. Quite cool to own so much land - but also plenty of maintenance work!

For large acreages - there's generally LVR restrictions too. For the deal above - client required 30% deposit + costs.

I carried out one in Tarago too - that was 100 acres+ but got an 80% lend for that one.

Cheers

Jamie

 

One of the issues with buying rural acres say in Dubbo or Albury is what tenants do - like keeping their own animals (which may destroy fences) or adjusting other people's animals without your knowledge, to help supplement (or replace) the rent they pay you (despite being disallowed in the lease agreement).

 

If the rural property is in NSW country, then the land tax comes relative to the overall price of property. I was concerned of acreages close to zoning precinct such as the north-west growth centre, or even in the mid north such as dural/kenthurst where land contents could be in $1m+

Parents used to have a farm in Rouse Hill/Schofield's area. Neighbour would rent their farm to us for $1, otherwise he will be paying $5-10K land tax.

 

I have a 5 acre rural property (still in metro). The biggest issue I see with it is the rent return on land component is limited. Basically the rent i get for the property is only about $20 more than i would get if the house was on a suburban block. This means you are tying up cash in a property that you get no return on.
My block is going to be developed so this is not a problem but I wouldnt have bought it as a straight IP.

 

From all of the above, it has made me think a bit harder. What's the best us of money? Problems associated with rural property and land tax issues.

 

Land tax probably wouldn't be an extra issue because rural land can be cheap - 5 acres an hour from Sydney could cost less than a house at Annandale 2kim from the city. Land content may be the same so no difference in land tax. However with the acreage you may be able to get primary producer status which could mean the land is exempt from tax.
s10AA LTMA NSW
http://www.austlii.edu.au/au/legis/nsw/consol_act/ltma1956173/s10aa.html

 

Thanks Terry. That's very handy.

 

My family used to own acreage - they leased the front section of the farm (house, some minor sheds and a couple acres of land mainly used to horse training) to one couple, whilst leased out the remaining hectares of land off to neighbouring farmers who did cropshare/land leases to farm the land. Keep the provisions in there so your land isn't destroyed and you might get a reasonable cash flow to hold the property.

Other options include hobby farms etc, but they would need to be nearer to metro areas for all the weekend farmers.

 

The other issue with acreage, particularly with properties that aren't within a reasonable distance to a major city, is it can take quite a long time to sell so if you need to exit quickly for whatever reason you could end up stuck. My dad finally sold his 100 acre farm located 20km from a regional hub last year, it only took a measly 3 years to find a buyer!

 

Hi Larry,
Down here in God's Country (South Coast) lots of Sydney siders are buying up houses on a few acres and setting them up as short term rentals. We're near Berry and Kangaroo Valley and every second new purchaser is doing it, yet vacanies dont seem to be increasing. The owners simply block out times when they want to come down and lease out during other times.

We have 100 acres near Berry and a lot of sydney siders are buying them up because it's a great lifestyle, the short term holiday sector is good and the whole farm (if big enough) if a wonderful tax decuction because you can run it as primary production .... And then there's no land tax to pay - it will cost you a mill and a half or more for the priviledge tho

 

I love Berry. I should have investigated the prospect seriously 8 years ago. The prices now are just too high. Good information, Allgood.