Large rural +200acres

Hey,
I have a friend looking at a large property. No house on site just acreage at the moment. What are the best banks for this type of thing or anyone have broker that specialises in large rural? in NSW. Any advice welcome she has spoken to 1 broker who said it might be difficult.

Thanks!

 

Rabobank, Suncorp

 

Is it a working farm or just vacant land?

 

It’s also being sold by family friends

It’s just vacant land at the moment. The plan would be to build a house and have a few cattle. Family friends are selling it to her at reduced price, half of what the realestate priced it at. Her family own a few properties in the same area as well.

 

Most lenders look at property size and scale their offer based on that and whether its resi (not without a home !) or working may influence it. A "few cattle" wont service and may be mere agistment. Many lenders cap rural income to low levels. Not agribusiness which is a specific loan product. Just fence, water and paddock maintenance alone may be costly. The land tax alone is an issue. (NSW Land Tax Clause 5 of Schedule 1A may allow a % for the actual residence which would initially be 0%) GST also may apply. Hard to see it passing "investment use" but its possible if income can service it and there is strategy. Lenders often dislike rural land as it is not easily saleable as security and features like irrigation, paddocks, fencing etc can make it unsaleable. 200a is more hobby sized than working size but this will vary with property issue like creeks, trees and hills etc

May be worth a broker in that geographic area

 

Yeah it would be a hobby farm, as she has a full time job. They plan would be to build modest house, most people around here have some cattle, we are north Newcastle NSW.

 

My partner and I just bought 165 acres of vacant farmland in WA, obtaining finance was incredibly frustrating.

We ended up going with Bendigo & Adelaide Bank, but they would only approve it as business lending which meant a 50% deposit, a higher interest rate, and a shorter loan term.

 

That's exactly what I did buying vacant farmland four years ago, albeit 30% deposit back then. Bendigo do lend for this type of thing and they were banking my commercial properties at the time which made things easy. But the 20 year time-frame sucks the life out of you on P&I repayments when not generating much income from it. Capital growth has been around 10% pa. Good old balance-sheet lending in a rising market.
Fast forward a few years and I'm borrowing more to build a house there and refinancing to a construction loan with NAB which will turn into a 25 year loan on completion. I actually expect the repayments on the higher loan will be about the same as before oddly enough thanks to the longer time frame this time.
Moral of the story - if the property is a good long-term prospect sometimes you just gotta do what you gotta do to secure it, knowing there will be opportunities to improve your financing position as you re-arrangement your affairs / portfolio going forward. Quality, tightly-held properties do not last long on market no matter which location you are talking about.