Investing in precious metals 101

Homestead purchase?

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  • Sun, Oct 15, 2017 - 01:59pm

    #11
    Hotrod

    Hotrod

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    Joined: Apr 20 2009

    Posts: 159

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    Buying a farm

As one of the few actual farmers here I'd like to add my "2 cents" worth of advice.

Farming is a rewarding lifestyle in many respects, but financial is not one of them.  In these years of commodity oversupply it is nearly impossible to turn a profit, no matter how thrifty an operator you are, the numbers just don't work.

The most profitable use of farmland in my location is to rent it to a very large operator, who is losing money like crazy, but is willing to increase his debtload to continue on the production and technological treadmill.  These operators will never stop expanding production unless they lose access to additional capital.  So, you are competing against many farm operators who are technically insolvent, and that is a nearly impossible challenge.

If you can purchase the farmstead and rent it out for cash flow it may make sense.  Even if you were a good farmer, trying to work the land yourself and make money is extremely difficult right now.

Also, keep in mind that an old farmstead will require serious investment in repairs and upkeep on the buildings and grounds (roofs, well, septic, etc.)

Good Luck with whatever direction you decide to go.

  • Mon, Oct 16, 2017 - 04:01pm

    #12

    kaimu

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    Joined: Sep 20 2013

    Posts: 161

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    FARM TAXES

Aloha! Tax burden on farming is relatively low from my experience so long as your property is zoned "ag"! You usually get tax breaks.

In Hawaii, not known for low taxes, I pay $465 a year property tax. The excise taxes are 0.05% for wholesale. Then of course you have to pay direct sales taxes on inputs, but in Hawaii the sales tax is 4.66%, State tax on income would be around 6%. Variables apply like net income minus write offs etc.

Certain countries we ship to are insanely expensive to export to like Canada because of duty and sales tax. It is so expensive we don't even market there any more. Canadian government's way of rigging the NAFTA con job.

Be prepared though because there is almost no support for small family farmers. Not from SBA or insurance companies or state and federal income tax breaks. If you are not subsidized or have some sort of government intervention on your behalf like corn/wheat farmers then you fall through the cracks.

To give you an idea I have been farming in Hawaii on the Big Island since 1998 and during those 19 years we only had one hurricane hit the island near our farm that did damage and that was in 2014, Hurricane Iselle. About three years prior some of the general liability farm insurance companies pulled out of Hawaii all together citing an impending major hurricane is overdue. The truth is they could not jack up rates fast enough to make up for their other losses from other industries/states. After Hurricane Iselle hit many farms were damaged and filed claims and some went out of business. Our farm sustained damage but we never filed a claim. Fast forward to this year and we are the only farm in our district that has any general liability insurance. Why? The other farms that filed claims cost the insurance too many losses so they now only insure farms with no claims filed. In 19 years we never filed a claim. Mainly because out of 18 years there was only one year where there was a hurricane and damage. One of the reasons we chose Hawaii over Florida!

Now compare that to the $1mil+ per home in Napa that were destroyed and the heavy losses insurance companies will suffer from Texas, Louisiana, Florida, California, Washington, Oregon, Puerto Rico, etc and insuring property in Hawaii looks like easy money right now!

Generally speaking structure damage at farms is uncommon, but more common is bodily injuries. In 19 years I had only one injury loss claim filed.

Where farmers do get help is from other farmers and universities and their ag departments. On the Big Island we have the University of Hawaii Hilo which has been awesome. I highly recommend developing a relationship with a university facility.

In terms of one of the worst states to farm in or even export to I have to put California at the top of that list! There are enough red tape and regulations to choke all the horses on the Parker Ranch and all the cows too! I had a non-ag business in California for 20 years and it was non-stop lawyers and inspectors piling regulations on top of regulations. Pretty much no small business anywhere in the USA has an advantage. One of the biggest failures of the Obama administration and the Bush era. Hoping Trump will break the trend.

All the best!

 

  • Mon, Oct 16, 2017 - 04:59pm

    #13
    jennifersam07

    jennifersam07

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    Joined: Oct 14 2012

    Posts: 115

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    Follow up?

So this was posted a few years ago…. curious to know what happened. Did you pull the trigger? Where are you exactly? I have some property in McHenry County Illinois from when I lived there a few years ago with husband and teens. Husband wanted to move to Texas because Illinois politics. So that's what we did. But now, he's passed away, teens are grown, and I want to move back. In Texas, property taxes are high so for a retired person with lower income, the fact that that are no income taxes in Texas really isn't a factor. 

 

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