If you want to be able to buy the right place in today’s property market you need to be organised and prepared. When working with our top clients who intend to buy farmland in 2023, we start working with them in early 2022. This is because the current seller’s market with land prices rising significantly across all markets in recent years have meant success relies on a person being prepared and agile to be successful.
Considering settlement is around 40 days, an auction or expression of interest period can be as little as six weeks the ability to have your finance in place can be the difference between you buying the land or missing out.
Another factor, we’ve noticed is the reactionary nature of purchases as people tend to be too busy working in the business to think through what they need to do and start working on. Two main factors for this are:
Lack of time
The day-to-day operation of a farm can often take precedence over the preparation needed to take on the next acquisition. It can be easy to underestimate the work involved in obtaining finance and the time needed to find out the right information. You should also consider getting a second opinion when getting financial advice.
Agri-finance is also inconsistent and complicated meaning it can be time-consuming when you are trying to find out information. We’ve seen inconsistency right through from obtaining credit, to structuring and pricing.
Understanding bank requirements have changed
Gone are the days when you turn up the bank and secure finance based on your loan to value ratio (LVR) and equity position alone. Instead, cash flow and showing you can repay the debt is critical for raising finance.
Banks look at your ability to repay your finance even when interest rates rise against your cash position in order to make a decision. Equity is also important to want to continue to lend and provide help should you require additional working capital.