Farm Land?

Discussion in 'What to buy' started by GoneFishing, 7th Jul, 2021.

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  1. GoneFishing

    GoneFishing Well-Known Member

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    I have just sold an IP and initially was going to stick the $1M that I got from the sale into an ETF, but I believe the stock market is very over-valued atm, and we are in for a crash. Therefore, I have been thinking about other investments.

    Anybody have experience with investing in farmland? I would either lease it to a farmer in the area or share farm it. As it will be prime-producing, there is no land tax and generally farm land doubles in value every 10 years. Specifically, I have been looking at crop farmland in rural Victoria.

    Opinions?
     
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  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I don't really have much of an opinion except that I'd be very surprised if farm land doubles every 10 years.
     
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  3. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    Yes I have invested in farmland. Prices have ran away from earnings could easily be considered more overvalued than the stockmarket and cant be valued by earnings anymore. Supply/scarcity is what it is valued on now, not many small parcrels are sold now, once properties were broken up into small parcels, now aggregations attract the big money. It is more a place to store spare cash, if you have say 4 other properties that have doubled in value, it can be very feasible to bid up the price and lower your LVR's ,and be able to extract cash from additional land. But starting from scratch now will be difficult. Not saying it cant be done. So it could be worth while talking to some stock and station agents to increase you knowledge and get a feel for comparitive returns for different locations and entrerprizes.
     
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  4. Stoffo

    Stoffo Well-Known Member

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    Also if that land is in a future development corridor and the council rezone it for development the rates will go through the roof !
     
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  5. Ronen

    Ronen Well-Known Member

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    I've invested in farmland last year. 40km from Melbourne CBD.

    However, my 15HA land doubles (actually triples) as: rental house (3 bedder) + 2 machinery sheds + about 30 acres of prime farmland.

    I can tell you that the land part of it is a very small portion of the rental. Tiny actually. Barely paying for rates.
    I kinda "gave it away" so the farmer (in my case cattle) will have the cows maintaining the land so I don't have to.
    The main yield is the house and sheds.

    Do you research if you really want to go farmland alone. I'm not sure it'll be much of rent return.

    Double the value will happen in most places, so if you can find something that give you both capital and rental income - you'd be better IMHO.
     
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  6. VickieM

    VickieM New Member

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    Silly question but can you please explain in simple terms how this works?
     
  7. Wilko

    Wilko Well-Known Member

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    Correct. By any measure farmland is more over valued than either shares or residential property.(and no 30ha isn't considered farmland). Long term capital growth is higher than shares or property but income is variable and higher risk. At the moment you can lease (rent out) your farmland for around 4% of the capital value which is pretty attractive but it will be a long time before the next growth cycle comes around. Rural land usually stagnates in value for very long periods and then increases rapidly over a short period of time like we've just seen.
     
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  8. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    If you want to invest in farmland RFF may be a good and easy way to do it, currently has about a 4.3% yeild growing@4% p/a. People say you cant leverage Shares but that is BS. RFF tries to Leverage @30 to 35% , a good amount for any property. Has a capital raise at the moment that will bring its leverage down to 23% , so it will have $180m to spend by adding value to land by planting to Macadamia nuts to get back to 35% leveage. I expect the price may drop from $2.60 to about $ 2.45 in the next month, so maybe worth watching if interested.
     
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  9. TangibleGoodwill

    TangibleGoodwill Well-Known Member

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    Is there a likely chance of leasing out 100+ acres of farmland without a dwelling and sheds?
     
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  10. HaigJames

    HaigJames Member

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    Farmland is generally seen as very low yielding and my uncle who is a farmer has mentioned those have risen a lot over the recent years. So I’m not too sure if you would get great bang for your buck in this hot market.
     
  11. Redwing

    Redwing Well-Known Member

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    https://www.commercialrealestate.co...y-state-during-covid-19-report-finds-1050267/

    Australian real estate may be hitting new price highs in cities around the country, but during the peak of COVID last year it was farmland that set the ball rolling.

    A new report has revealed the median price for a hectare of Australian farmland increased by 12.9 per cent nationally last year, in its seventh consecutive year of growth, with one region seeing prices leap by 65.2 per cent.

    The Rural Bank’s Australian Farmland Values 2021 report uncovered extraordinary price hikes across the board over 2020. The Northern Territory had that biggest leap (65.2 per cent), but prices rose 25.3 per cent in Tasmania, 19.3 per cent in Western Australia, 15.6 per cent in NSW 11.8 per cent in Queensland, 10.9 per cent in South Australia and 6.9 per cent in Victoria.

    It was the first time in 15 years that all states experienced growth in the median price per hectare, demonstrating the resilience of farmland values through big upheavals such as the pandemic.


    The breaking of the drought, historically low interest rates and even the advent of COVID-19 have all helped to create the perfect storm for the agricultural industry, according to Rural Bank chief operating officer Will Rayner.
     
  12. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    No its not, until the recent jump in prices 5% net plus regular increases, was standard, with regular increases compounding can give high returns, for more developed properties 8% net. .
     
  13. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    Must watch Video if you want to invest in, or understand what has been the best performing property class or investment class for that matter. Might want to skip first 20 min and go straight to the knitty gritty. There has been a lot of noise here about passive investments but farmland has been the only true passive investment other than signing new lease , banking the cheque and spending it. At the end there is a suggestion that carbon farming may contribute to further price growth. Australian Farmland Values | Rural Bank
     
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  14. Wilko

    Wilko Well-Known Member

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    Try making 8% return on capital from farming over the long term. Even 5% is optimistic long term. My corporate clients are the first to admit that they put up with the low returns for the above average capital growth. Yes lease rates are high at the moment due to high commodity prices but it's never been sustained at the current rates long term.
     
  15. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    Yeh well I have been hearing that for 30 years. I have tried to earn more than 8% and have earnt more like 14% p/a. Commodity prices are a major factor, but production costs need to be considered too. People dont take into account productivity yield, productivity and management improvements with technology, genetics, WUE, economy of scale , etc. But I am getting 40% yeild on some" overpriced" property . Annual increase is 0.5%, but it is 2% of purchase price p/a increase in yield at the moment. For horticulture if you have established tree's 8% is not impossible. You might want to look at returns from almond plantations. Low interest rates are making buying a good option to leasing. But when interest rates increase , and as in the past when commodity prices fall and larger scale is needed to reduce cost p/acre to maintain returns, lease prices should have upward pressure.
     
    Last edited: 18th Jul, 2021
  16. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    Also bought bought into REIT RFF just over 12 months ago that has given me 8% yield and 55% GC for a very low risk return of 63%.
     
  17. Barry from the bush

    Barry from the bush New Member

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    Maybe try AACO share price does not reflect current rise in land and cattle values although they have made some bad calls in the past eg NT abbitior currently mothballed
     
  18. Wilko

    Wilko Well-Known Member

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    No doubt those returns are achievable in intensive agriculture but thats not the majority of farmland in oz or anything like the average return. Agree much better to buy at the moment than to lease, but once you've bought much better to lease out than to run yourself at the current lease rates in the areas I look at.
     
  19. Cousinit

    Cousinit Well-Known Member

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    Quality farmland has made me more money than all my residential and Industrial investments the last couple of years. As mentioned in another thread, farmers can get access to concessional loans, FMD's, the use of averaging, drought support measures etc that other business cannot really get. Sometimes I wonder why I have bothered with residential at all.
     
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  20. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    The reasons I bought Resi was to reduce capital concentration risk, taxation benefits, easier to get finance and more leverage into growth stocks which give much higher returns , more liquidity, and accessability to capital gains than real estate The weird thing is the worse a property performs the higher LVR's and easier the financing is. Dont know why I keep buying more either ? Must be to take advantage of the ability to lock in cheap money for the opportunities in the Share market. Plan to get rid of Resi as it is a pain in the arse, too much regulation and expenses. But cant help myself perhaps higher interests rates will come and cure the addiction.