How to invest in Australian farms and expert reveals what model works best for you

Property expert David Goodfellow from CBRE reveals the best models buyers can use to purchase a farm - crucial information for investors and producers. 

Property expert David Goodfellow says there are five main models for investing in a farm.

There are five fundamental models for buying Australian farmland, according to a rural property expert.

David Goodfellow, managing director for CBRE agribusiness, who spoke at the recent Global Food Forum, discussed the benefits for each model.

Mr Goodfellow said the preferred model was the own and operate because it gave the owner much more control.

“But to do this, it does take an enormous amount of expertise,” he said.

See each model, and their benefits, below.

OWN AND OPERATE:

“This is one we are all very familiar with and has been popular for many decades,” Mr Goodfellow said.

“If you own land you’ve got the ability to carry a bit of debt. That means in a couple of really good years you can pay that debt down or invest in some infrastructure that lower your cost of production.

“Or in tough years you can borrow against the land and that keeps you going on and on”.

OWN AND RENT:

“This is becoming increasingly popular right now and that really suits those that don’t want the worry of having to build operating teams,” Mr Goodfellow said.

“Or have funds tied up in working capital from one year to the next”.

LEASE LAND:

“This model works well for those who love the operating side of things,” Mr Goodfellow said.

“What we are seeing with the new emerging generation of agriculturalists who don’t have access to capital to buy land is to lease land.

“This is a very good way of getting ahead.

“In the good years your return on capital of just phenomenal. It can be a bit challenge in the tough years, but the good years it is quite brilliant”.

LEND MONEY:

“This is a model that isn’t talked about a lot but is emerging very quickly for those that want to invest in agriculture is to actually lend money to farmers,” Mr Goodfellow said.

“You are still getting pretty good cash returns and aren’t taking any risk on the property itself because typically you are only lending up to 75 per cent of the value of that farm.

“And you don’t have the buy in costs of stamp duty that sometimes get in the way when you’re trying to buy land.

JOIN WITH OTHERS:

“You can invest with other people either through unlicensed managed investment funds or licensed funds or listed companies,” Mr Goodfellow said.

“You can join with other people who have the capacity to collectively build the scale to get operations that are very highly efficient but also mitigate the risks through diversification”.

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Originally published as How to invest in Australian farms and expert reveals what model works best for you