All Topics / Finance / Finance for Rural Property

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    I have a few questions for the mortage brokers on this forum.

    I am interested in buying a piggery in northern Victoria, which is being offered for sale by tender.

    The property is a 600 sow breeder unit with 44.88Ha of land, 171.5 megalitre water right, and a 3 bedroom weatherboard house.

    I have spoken with the vendor and he would consider vendor financing 40% under a 2nd mortgage, leaving me to find 60-65% including stamp duty.

    The piggery has a long term contract with Australia’s largest pig producing company, and the income a set price per pig produced so is reletively sheltered from normal market conditions. The farm is currently making about $80k taxable income per year plus sharefarmer wages of about $40k. However the owner say that the farm should be making around $30k a year more due to the current sharefarmer not performing his duties properly, hence their reason to sell.

    The real estate agent has told me that the vendor is looking to get about $750,000 to $800,000 ballpark for the property. The vendor has told me that their last bank valuation had the property valued at $1m.

    My questions are:

    1. Is it possible to obtain finance for 60-65% with the vendor financing 40% with a 2nd mortgage
    2. If so is it possible to get an interest only loan for 5-10yrs to enable me to pay out the Vendor ASAP
    3. If the valuation on the property is correct at $1m, is it possible to get finance at the val and not the contact price.

    Thanking you in advance.

    Gavin

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Gavin

    This is a specialised area of lending. I will ask around for some rough idea on LVR etc, but it is generally rather low at around 50-60% LVR for these. IO should not be too much of a problem, but getting it based on valuation of $1mil (not contract price) will probably be hard.

    Usually the applicaiton fees for these are also high at around 2% of pp and the valuations are very high too – about $5000 probably.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Thanks for your reply Terry,

    Getting finance at the valuation in not essential, I just thought that if I could get I might as well try.

    Thanks Gavin

    Profile photo of Mobile MortgageMobile Mortgage
    Member
    @mobile-mortgage
    Join Date: 2003
    Post Count: 913

    Hi Gavin,
    Give ARAF a Call on 1300302723
    They specialize in Commercial & Rural Finance,
    Good luck.

    Regards
    Steven
    Mortgage Broker

    [email protected]
    http://www.mobilemortgagemarket.com.au
    Ph:1800 820 500
    VICTORIA

    PLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.

    Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Thanks Steven,

    I will give them a call.

    Are there any other options available to me?

    Thanks Gavin

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Gavin

    I have found out a few things. It seems it may be more difficult than you (and I) imagined.

    You would have to be in a good financial position, with income coming in from outside the farm, and hopefully experience in the industry – ie how would you run the business.

    Would need to know the exact location, but probably the max LVR would be 60% of land and buildings. I assume the price may include a ‘good will’ component.

    It would be good to know more about the last valuation – which bank and when. Can you get a copy?

    Would need to know full details of the vendor finance arrangement. ie term, interest rate etc

    Would need to see verification of past performance of the property.

    Also the number of pigs included?

    Mainstream lenders would only probably look at lending on purchase price or valuation – the lower.

    I don’t know about rates, it would depend on the strength of your position etc. Interest only would probably be available for 2 years, reverting to PI.

    There maybe also private lenders willing to look at this type of deal. rates would be around 9% and LVR around 50%. Sometimes however, having a specialised property like this is a bit of a turnoff to them.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of wilandelwilandel
    Member
    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi,

    Just do your homework on piggeries (I’m sure you have done lots already)…

    We have friends who ran one of the largest piggeries in Aust, (in QLD) and they have done it tough for the last few years (so have most other farmers like us)… It recently sold under mortgagee conditions.

    If the farm is supposedly valued at $1mil, why would they sell this much under valuation, unless they know something that you don’t…[blink] There are obviously not many people beating their doors down to buy it.. They sound pretty desperate to sell.

    Large scale farming is tough, no matter how motivated you are – income is determined by overseas influences, and the japanese know who cheap you can produce, and still survive, and the drought has caused many to go to the wall due to feed costs.

    Sorry to be a wet blanket, [blush2]
    Good luck,

    Del

    Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Thanks for the comments Del,

    Yes I have been doing my home work, I have been involved in the pig industry for the past 10 years. The pigger has a contract with the largest pig producing company in Aust. and therefore don’t own the livestock, so I just get paid $xx for each pig that is produced regarless of the market conditions. Its just a matter of trying to convince my bank about the deal.

    Thanks Gavin

    Profile photo of wilandelwilandel
    Member
    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi Gavin,

    Farming is a great industry for anyone who is prepared to work. (we are asparagus farmers)..

    It’s a shame more people don’t consider farming theses days. A great lifestyle at times.

    When we wanted finance for our farm, we went to the best rural accountant we could find, and he prepared a cashflow forecast for the next 5 yrs. They didn’t give us Interest only loan straight away, but we refinanced the loan a year or so later and got it. In hindsight, I am very glad now that we have paid off a large portion of principal though… We managed to get 100% finance plus we borrowed stampduty etc.

    Anything is possible if you get a bank manager on a good day…
    All the best with it,

    Del [biggrin]

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