How to secure loan for land - non farmer

asdfg87

https://www.boards.ie/discussion/comment/119417750#Comment_119417750

I hear you, assuming it is the same as the surrounding land its total turnover is about 1% of the land value, i expect the surrounding land be at least 10k per acre.

Grueller

https://www.boards.ie/discussion/comment/119417781#Comment_119417781

That is agroforestry not planting.

asdfg87

https://www.boards.ie/discussion/comment/119417817#Comment_119417817

I am aware of that, i don't like sitka. I am not even sure i am doing the right thing but i think i am.

Does anyone know if agroforestry decreases land value, i am not doing this for the money and am just curious...

Bass Reeves

https://www.boards.ie/discussion/comment/119417751#Comment_119417751

You obviously never invested in your life. We are entering a downturn there is always investment opportunities in any recession no matter how benign.

OP as well disobeyed what most financial advisors will tell you to try to keep the equivalent of 6 months wages in cash. 60k kept in cash would cost him 1200-1500 per year at mortgage rate. Borrowing it at personal rate 40k would cost you 2800/year. If OP had 100k in savings the bank would look more favourable at the purchase.

OP is hardly going to tell the bank I want to buy it for to have sites for my children.

Bass Reeves

https://www.boards.ie/discussion/comment/119417812#Comment_119417812

I would think the land value is 10k+. I also think the OP will find it will go 10-20% above guide price unless OP has allowed for that.

Forestry may not pass muster with a bank unless you tell them it's part of your long-term pension planning. I suspect that the land area maybe too small for forestry.

TBH the OP need access to an old style bank manager who will only look at the repayment capacity and lend the money. OP may be as well off going the line of ''I want it to keep a few ponies for the children and a bit of hobby farming''

However his conundrum is lack of equity

AnF Chuckie egg

Land prices are very high here in Ireland due to many factors from parcel sizes, history, planning laws, Tax and inheritance etc. But as an investment farm land gives a very poor return managing only 1-2% at times even when well farmed and all grants and incomes used.

200k on farmland as a single unit might not give as much as 1% per year to a non farmer. Compare that to if say the OP was to buy an apartment or house he would see a ROI of at least 6-8% and even higher in some cases. Plus it's easier to get a loan for and interest rates are lower for bricks and mortar than farmland

asdfg87

https://www.boards.ie/discussion/comment/119418020#Comment_119418020

That's why i mentioned an accountant earlier as bankers hands are pretty well tied so there need be a go between.

I know a guy who paid €500k+ for land some years ago and the bank would only allow about €200k loan on it.

He sold it recently for €1.4 mil.

Do you know if agroforest will de-value land value?

Donald Trump

https://www.boards.ie/discussion/comment/119418059#Comment_119418059

"Past performance is no guarantee of future returns".

The "problem" with planting trees is that you cannot just change your mind in a few years and legally cut them down. There is nothing wrong with planting trees - just be aware that if you put in rows of trees for your agroforestry, that if you later decide to sell that land, it's not going to be attractive to a fella who wants big fields for big machinery. That will make less difference if you are in an area which is not suitable for tillage.

Del2005

https://www.boards.ie/discussion/comment/119417781#Comment_119417781

The log cabin can't be lived in though. Planning permission is for use so living on the land requires residential planning permission regardless of the building being temporary or permanent.

Bass Reeves

https://www.boards.ie/discussion/comment/119418059#Comment_119418059

Not really sure. Even if it will not at present you never know how long term rules will effect such development.

https://www.boards.ie/discussion/comment/119418049#Comment_119418049

I bought land in 2003. It cost 320k. I have probably put another 50 k into it in real terms. Over the last ten years it would be generating an equivalent income of 30k+

The total property is now worth 700k plus. The first ten years were tricky with 3 of them hard going

The investmentment return is 15+% in my case

asdfg87

https://www.boards.ie/discussion/comment/119418105#Comment_119418105

The reason planting taking place is too much machinery, people want to take silage 2 times and slurry so this is the option being taken.

Its not a large piece of land anf the money not priority.

https://www.boards.ie/discussion/comment/119418116#Comment_119418116

I think the plan is to have a little cabin that can be used occasionally at weekends in summer.

I think the same rule apply as portocabin.

Donald Trump

https://www.boards.ie/discussion/comment/119418130#Comment_119418130

I think you are saying a 150% return over the 19 years?

That's 5% return per year, just to decompound it for comparision

asdfg87

https://www.boards.ie/discussion/comment/119418182#Comment_119418182

I make it 220%

Donald Trump

https://www.boards.ie/discussion/comment/119418234#Comment_119418234

I'm not commenting on the total as I don't know the figures.

I merely referenced the "15+%". I thought it could be a typo. If it's not a typo and he meant 15% return per year, that would means 1 Euro in 2003 growing to over 14 Euro today assuming he means annual return in the normally understood sense. If he is quoting it as a "simple" return (total return divided by number of years) then that is a bit misleading over that time frame.

My post was merely decompounding 150% over 19 years for comparison. It might not be what he meant.

For yours, 6.5% return would give a 230% overall increase

Bass Reeves

https://www.boards.ie/discussion/comment/119418182#Comment_119418182

The capital return is 120% over 20 years that is 6% a year. It's generating an yearly return of 30k. So at present it yielding a 15%+ return. 700k would be a conservative valuation with present land prices

Donald Trump

https://www.boards.ie/discussion/comment/119418318#Comment_119418318

That's a decent return Bass.

My post was only a comment/clarification between using simple rates and annualised rates for comparison. They'll differ over that time period. The difference is bigger when then rates are bigger. That would correspond to about 4% compounded annually to get to 120% over 20 years. For the below, each line is 4% higher than the previous one. I've rounded for display purposes.

1.00 Start

1.04

1.08

1.12

1.17

1.22

1.27

1.32

1.37

1.42

1.48

1.54

1.60

1.67

1.73

1.80

1.87

1.95

2.03

2.11

2.19 End year 20.

You're also counting the rental income as a percentage of what you paid for the land. Which was 20 years ago. That isn't applicable to the other poster. He would need to look at your land as returning 30k on 700k, not returning 30k on 320k. Which is still very good. I was looking at a 50+ acre block near me a few years ago and figured that even if I got top prices for renting it out, it would be bringing in less than 2.2% (say 300 an acre for rent on land which was asking 14k an acre. I wouldn't have been buying it to rent it...)

asdfg87

https://www.boards.ie/discussion/comment/119418285#Comment_119418285

The only figure i used was purchase against today value and that comes pit almost exactly 22%

€320 X 22% = €700400....

AnF Chuckie egg

https://www.boards.ie/discussion/comment/119418130#Comment_119418130

If only the OP had a time machine. At todays valuation of land 200k would only buy him at most 10 - 15 acres. The income from that much land would be next to nothing for a non farmer, maybe he could rent out the grass or do something like that. Either way it's less than 1% ROI. That's a useless return and relying on the greater fool theory to be able to offload the land for profit in the future. Sooner or later these valuations have to reflect the intrinsic value. I know for me I'd rather buy a good apartment in the City. 200k on an apartment will yield a rent of €1350 pm. Take management fees from this of 2k and that's €13,500k/year at a 90% occupancy rate which is a ROI of 6.75% per year.

kevthegaff

Lad was telling me if u get a loan of 300k u need repayment capacity of 30k a year over 15 yrs roughly speaking

Bass Reeves

https://www.boards.ie/discussion/comment/119418666#Comment_119418666

You are talking through your proverbial. You have no understanding of investment and return. Farming is an active investment it's possible to avoid tax through spending. Rental income is away harder to shield. You can write down farming losses against PAYE income. You cannot write down pre investment costs against rental income. Repairs can be considered improvements and some may not be allowed against rental income

As well as farming is an active investment when you reach 60 years of age you can technically take 750k out as a pension without any tax.

AnF Chuckie egg

https://www.boards.ie/discussion/comment/119418803#Comment_119418803

Hard to know what you are on about, you seem to be angrily acting towards me. I understand plenty about investing and making a return. All I'm pointing out is for the OP it is my opinion that farmland would be a poor investment at current prices.

Tonynewholland

https://www.boards.ie/discussion/comment/119418803#Comment_119418803

Have you met many farmers that were able to draw €750k from their pension like that.

Good loser

Could OP increase the mortgage on the house? The cash released could go towards the farm?

Bass Reeves

https://www.boards.ie/discussion/comment/119420567#Comment_119420567

There was a a good few that use this provision. Anybody disposing of land would use it. Farmers with limited status can take this amount out of the company at 60. People selling sites.

Long term leasing has also given another option to some farmers. This is often as advantageous as using the 750 k allowance. As well just because some farmers do not use it is not to mean it's not available to be used.

Most farmer understanding of the tax advantages of farming is limited anyway

https://www.boards.ie/discussion/comment/119419633#Comment_119419633

I not angry at you. However you have a very limited understanding of investment a d the different option available. There are other advantages in transferring to the next generation as well.

AnF Chuckie egg

https://www.boards.ie/discussion/comment/119421284#Comment_119421284

You know nothing about me, don't presume you do, and stop the snide remarks towards others here.

Dinzee Conlee

https://www.boards.ie/discussion/comment/119418803#Comment_119418803

Is there something about getting the 750k tax free, the farm/company needs to be your sole income source? So may not be an option for part time farmers?

Bass Reeves

https://www.boards.ie/discussion/comment/119421601#Comment_119421601

I am not making snide remarks. You are making assumptions on ROI that you have no knowledge about

amacca

https://www.boards.ie/discussion/comment/119419633#Comment_119419633

You've got the wrong end of the stick here....buying an apartment to invest in and land are two very different things (just using ROI isn't very useful in fairness)

Both have advantages and disadvantages, at the moment for example that ROI % on the apartment in presumably ireland you are talking about could take a very steep nosedive given the shite you might have to put up with from delinquent tenants and the difficulties (in terms of timescale) you might have getting them to leave while they continue to pay no rent ...... the rules and regulations are imo very much not in your favour as a private landlord here...I'm not saying you wouldn't have trouble with land either but in the right circumstances not that type of hassle if you know what you are doing and prepared to work at it...

Then there's the fact not all apartments or plots of land are created equal and not all investors are created equal either as they wont all be in a position to maximise the value of either type of asset......eg:if a non- farmer with no experience decides to purchase a small plot of land the ROI could be minus numbers vs a farmer adding a small plot to an existing holding knocking his 3/4/5/6/7% PA out of it etc etc

JustJoe7240

I wonder would lads/lasses be half as quick to be so confrontational in person as they are behind a keyboard, School yard stuff.

Not to mention, with some of the asset purchase prices and returns mentioned, I'd take those figures with a pinch of salt.

amacca

https://www.boards.ie/discussion/comment/119421941#Comment_119421941

It's unlikely..........but that's a good point of difference in my book, lads let fly and no sitting on the fence!😀