If you’re looking to build wealth, or secure your farms financial future, off-farm investments might be the solution you’re looking for.
By creating additional streams of incomes (usually passive), many businesses are able to improve their financial position using off-farm investments provided they are structured the right way.
Talk to an AdvisorWhat is considered an off-farm investment:
- Value adding activities (i.e. supplying branded product to retail).
- Marketing activities (i.e. grain storage).
- Alterative employment off-farm.
- Alternative business using farm assets (i.e. contracting).
- Income generating asset acquisitions (i.e. share portfolio, residential housing etc).
- Farm management deposits.
- Lease or royalty incomes (i.e. windfarm leases, carbon credits, environmental offsets)
At SproutAg, the three main streams of off-farm investment that we see are income generating assets i.e. Shares, Commercial Property or Residential Property.
There are many reasons to consider off-farm investments from risk management, wealth creation, succession planning and retirement and tax benefits. In a survey conducted by the National Farmers Federation, 22.3% of ‘household income’ was coming from off-farm income and earnings from off-farm income was the second most used tactic to manage losses on farm with 34.3% of responses using off-farm income.
At SproutAg, we typically see off-farm investments as a way of creating wealth and setting families and businesses up for a successful transition.
Diversification in the form of off-farm investments, when done well, can build long-term wealth and resilience for any farming business, especially as land prices have risen and productivity margins have tightened across mixed farming businesses. We see many of our clients are choosing hard “bricks and mortar” assets over more volatile options like the stock market, with property investments emerging as a popular choice.
Using off-farm investments to build wealth is crucial for financial security and independence. Additional wealth can serve many purposes for farming families including funding kids’ education, expansion or upgrading on farm plant and machinery or setting the older generation up for a comfortable retirement. It can also mitigate the risk of a bad season and a reduced-on farm income.
At SproutAg, we know that succession becomes far more manageable when farming families have access to additional assets that can make the process fair and equitable for all involved. Off-farm investment assets create flexibility. They allow the current generation to step back from the business and have a comfortable retirement and provide options for fair compensation to non-working family members. The most popular choice we see our clients pursuing is commercial or residential property.
The most accessible source of capital in a farming business is debt. The ability to borrow against existing farm equity and then service debt is ever increasing. At SproutAg, we work with our clients to put a strategic plan in place that will enable them to borrow against existing assets and diversify with off-farm investments.
Let’s walk through an example of how a client might use existing equity in their rural property to purchase a commercial property with strategic debt funding support.
At SproutAg, we believe diversification is about control, not risk. When executed with sound planning, the right professional support, and a clear long-term strategy, investing in commercial property using existing farm equity can strengthen both the family balance sheet and your succession plan.
If you’re interested in exploring how this could work for your business, reach out to the Sprout Agribusiness team today.
Here at SproutAg, we have plenty of experience when it comes to providing bespoke financial solutions for businesses and individuals with agribusinesses in regional and rural Australia.
SproutAg are specialists in agricultural finance – if you’re looking at in investing off-farm, contact our team today.
Provide your details below and the SproutAg team will get in touch with you shortly or call 1300 149 409
