It’s not always a straight line to buying your first rural property. But with the right advice and a plan in place, there are a number of ways to achieve farm ownership.
Brent Irving, a rural and lifestyle sales consultant for PGG Wrightson Real Estate based in Otago, says the first step is building up partnerships with those ‘in the know’.
“A lot of the time it’s about relationships.”
“Most people will know this is something they are going to work towards, so they’ll be getting in touch with their bank, a lawyer, an accountant. You want to be having conversations with experts who can guide you on the journey, and also include talking to those well-connected in the industry - like a Federated Farmer rep, a good rural real estate agent or other farmers.”
Pictured: Brent Irving, a rural and lifestyle sales consultant for PGG Wrightson Real Estate based in Otago
The other thing to note is that rural sales don’t quite work the same ways as lifestyle or residential real estate - there’s not a lot of city folk deciding to up sticks to the country without any experience or background in farming. So, as Brent explains, most working in the rural sector naturally move their way up the ladder, building up the skill and equity required for farm ownership along the way.
“Often someone will be a farm manager for a few years, and somewhere, people in the industry will be watching and seeing who is doing a good job. It can be a case of just taking the time to earn yourself a good reputation, and then you might get the opportunity to lease or go into sharemilking or sharefarming.
“This is usually what happens before buying your first block outright.”
As someone who spent a number of years in rural banking, Brent knows the money is there, but it’s important to put your hand up to get yourself noticed and have the best chance to secure financing.
“Rural banks want to lend. However it really helps if you can be brave enough to confidently say ‘tell me what I need to do to buy a block in 12 to 18 months’. I always loved it when I’d have people come in with real determination, a plan, and be open to listen to advice.
“And there’s lots of young bankers in the industry now, who really have a fantastic ability to relate to other young farmers looking at buying for the first time.”
As with most things in life, Brent says there are upsides and downsides to the various pathways to farm ownership and it’s about knowing what they involve and working out which is best for your own circumstances.
“Leasing land is quite a common way of earning income before being able to buy a block - usually as a supplement to having a job somewhere else.
“It can be a little tricky as you do have to outlay for the livestock and it’s important to talk with professionals in particular around tax implications, so you definitely need to speak to an accountant before looking at leasing,” advises Brent.
Sharemilking is a well-established route to buying for the first time, with two main types of sharemilking agreements - variable order sharemilking (where the sharemilker doesn’t own the herd but contributes some equipment to help run the operation, and are paid a percentage of the milk income), and herd-owning sharemilking (where the sharemilker owns the herd and other assets, and there is a negotiated agreement for income in place).
“These arrangements are a really great way for young people to get ahead and enable them to go buy land. They’ll usually start out working on a dairy farm, then move up to managing a farm and get into the position of negotiating with a farm owner looking for a sharemilker,” explains Brent.
“I’m really passionate about this being the future of farming in New Zealand and see it as a win-win for the industry when two parties can come together and negotiate on terms that work for them. I also don’t think I’ve seen two agreements the same.”
Sharefarming is another good opportunity for those outside of dairy. And Brent says he sees plenty of great deals going through on a regular basis, including one quite recently where two young neighbouring farmers were able to split a larger unit and lease half the property each.
“The landowner had seen them doing it quite tough the last couple of years with the industry the way it had been, so was keen to keep them on board and give them a hand by holding the lease at the same cost. He had done alright out of it, so it was a win-win for both parties to keep things as they were - especially with things now on the upturn for farming.
“Sharefarming is a very broad term and there are many ways of putting an agreement together. And there’s no issue with it, as long as everyone understands what they are getting from the agreement.”
Brent also mentions equity partnerships, which is something he is quite keen on.
“This means an individual, couple or group of people can manage the day to day operations and be a smaller piece of a big puzzle - also adding to their skill set to manage a larger farm - rather than struggling on their own on something a lot smaller.”
Vendor financing is another option for rural buyers, but is quite a challenging one, according to Brent. He says it’s important to understand how the process works, and if you’re already taking a mortgage with a bank, then it can be tricky to secure the lending.
“It is considered a ‘secondary loan’ if you already have a loan with a bank, who will have the first mortgage on your property. But the vendor will also want to have security for their lending purposes.
“Then it’s about negotiating how long the vendor will want to leave their money in for as well as interest rates, a repayment schedule and any provisions for early payments or default of payments. I highly recommend a robust chat to your bank to get very clear advice.”
Brent is just one of the many PGG Wrighston Real Estate agents who get to help negotiate deals and arrangements for those moving into, in between and out of rural properties everyday.
“I’ve been around awhile and with my background in banking, prior to that in wool, I have a large number of relationships. I would like to think people come to me because of my knowledge, passion for people and our rural industry.
“Then of course we have other agents who are extremely knowledgeable about specific areas of the agriculture or horticulture sectors - like kiwifruit, or the Southland dairy market - they are specialists in their fields and can think outside the square.”
Wherever you are and wherever you want to go, there is always a PGG Wrightson Real Estate Agent to help - we are just a phone call away.
Keen to find out more about what rural and lifestyle properties we have available, or wanting to sell up for someplace new? Get in touch with our friendly, knowledge team today - we all live here too.
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