Buying a farm in Australia

Written by Douglas Ross in Buying

Buying a farm paddock

Whether subsistence farming or hobby farming, Australians are not shy of getting their hands dirty.

In fact, the Victorian Department of Primary Industries reports that there are over 60,000 small lifestyle farms across Australia, which accounts for approximately 20 per cent of agricultural land. With population growth showing little sign of abating in the major capital cities, and an ageing population added to this mix, there is little reason to doubt the future popularity of regional investment, especially in farms.

If you are entertaining the idea of buying a farm in Australia, you first need to make the obvious (and easy) decision of whether you run an income-driven farm (a farm on which you rely for an income) or a lifestyle/hobby farm. Your financial situation, experience, stage in life etc. should make this decision obvious.

Running an income-driven farm

There are many things that a hobby farm and an income-driven farm have in common, the most of which is how you start one.

The same things dictate how you buy a farm, regardless of its type: what do you want to farm (crops, livestock etc), and where do you want your farm to be?

Deciding on the type of farm you want to start/buy will dictate where you look, what size property you restrict yourself to, the conditions of the soil you require, access to water, aspect, and location (access to major roads etc.).

Knowing what crops or livestock you will farm also gives your agent or broker a greater chance of honing in on the best rural properties for your needs.

Entering the sort of farming from which you derive an income involves a significant outlay of money at the start. Deposits are often the largest hurdle for those entering the market, entering the hundreds of thousands, while outlay for machinery, crops, pumps for irrigation etc. can go into the millions.

Choosing to farm dairy, or livestock, as well as cropping (e.g. bananas, carrots) means you are entering a saturated and well-established industry. Farming in this area does provide support, in terms of access to a consolidated market, but this also means you are susceptible to the major dictators of price, while also competing with other farmers.

If you do want to run a farm on which you can derive an income, consider entering a niche industry. Ironically, niche farming can see a steadier income but usually a smaller income than farming for more common crops.

Subsistence/hobby farms:

Hobby farming is an increasingly popular option as an ageing population looks to downsize their homes and split their time between city and country living, or as younger generations are pushed out of city markets and look to live in regional areas and enjoy a more active lifestyle while still deriving an income from elsewhere.

An apple from a hobby farm still ripening on the tree

This last point is key to a subsistence/hobby farm. You almost always need to derive an income from elsewhere as most hobby farms do not sit on enough land to provide the yield necessary to break even. While it is not impossible to live off your own farm, especially if you do not enter heavy debt (buy land outright as a technique to reduce your mortgage, before then building property on the land), it gives new meaning to the phrase ‘living off the smell of an oily rag’.

As is the case for a larger farm, investing in a hobby farm should still follow the same process of deciding what you want to farm.

If you wish to have livestock on your farm, this instantly locks you into being present to feed animals etc. whereas having a lifestyle farm from which you earn a small income on the proceeds of a particular crop (i.e. apples, chestnuts, lavender) can also provide you the freedom to leave your farm during the week.

There are also regulations associated with farming livestock, such as disease prevention, vet visits, tagging and identification processes, as well as registration that are all going to affect your bottom line.

Look to buy hobby farms in areas that show potential for capital growth, especially in locations near satellite suburbs/towns of a major city. This means that further down the line, you may be able to enjoy capital gains when you sell the property as urban sprawl pushes up interest in your local area.

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