Total Debt to Gross Worth ratio

[Spud]

WTF why would tenants be running 20%+ debt?

0%. Anything over that is stupidity

Excuse me? You've never borrowed anything? Have you a rich daddy or something?

I'm a tenant - at certain times of the year my overdraft is invaluable. Re borrowing money to build infrastructure and assets - if I can see a payback in not too many years, or efficiencies gained that increase profits, then I'd be pretty stupid to ignore such opportunity. That said, I've just worked my D:GW out, and it's under 20% - I don't advocate borrowing up to the hilt for the fun of it.
By default of being a tenant, I have rent to pay, which effectively reduces my spending pot by a fair bit, compared to a paid for owner occupier.

 

[Agrivator]

One method of assessing viability, and which applies both to tenants and owner occupiers, is:

Assuming that any existing land and existing houses have a constant or zero value, what is the change in your net worth from year to year?

If it's not going steadily up each year, there is a problem which needs sorting before it's too late.

 

[Nithsdale]

Excuse me? You've never borrowed anything? Have you a rich daddy or something?

I'm a tenant - at certain times of the year my overdraft is invaluable. Re borrowing money to build infrastructure and assets - if I can see a payback in not too many years, or efficiencies gained that increase profits, then I'd be pretty stupid to ignore such opportunity. That said, I've just worked my D:GW out, and it's under 20% - I don't advocate borrowing up to the hilt for the fun of it.
By default of being a tenant, I have rent to pay, which effectively reduces my spending pot by a fair bit, compared to a paid for owner occupier.

If I had a rich daddy... why would I be a tenant ?!

And no. We do not borrow a penny.
We've rebuilt 3 sheds in the last 10yr all out of our own pocket - no help from our laird and no running to the bank. It's called having a viable business

 

[Spud]

One method of assessing viability, and which applies both to tenants and owner occupiers, is:

Assuming that any existing land and existing houses have a constant or zero value, what is the change in your net worth from year to year?

If it's not going steadily up each year, there is a problem which needs sorting before it's too late.

Fwiw it's unrealistic to expect it to climb every year, sometimes things go wrong, but it certainly needs to be climbing over time.

 

[Steevo]

By default of being a tenant, I have rent to pay, which effectively reduces my spending pot by a fair bit, compared to a paid for owner occupier.

I think there are quite a few costs associated with being an owner occupier too....

 

[BELOWAVERAGE]

If I had a rich daddy... why would I be a tenant ?!

And no. We do not borrow a penny.
We've rebuilt 3 sheds in the last 10yr all out of our own pocket - no help from our laird and no running to the bank. It's called having a viable business

No its not, its called DADDY set us up, and now I can farm without borrowing.
Go out and start on your own and see how you get on.

 

[Spud]

If I had a rich daddy... why would I be a tenant ?!

And no. We do not borrow a penny.
We've rebuilt 3 sheds in the last 10yr all out of our own pocket - no help from our laird and no running to the bank. It's called having a viable business

Lucky you.

Some of us lesser mortals are either more ambitious or worse farmers than you clearly are.

What type of farming are you in?

 

[Spud]

I think there are quite a few costs associated with being an owner occupier too....

There are, for sure, but once the property is paid for, they are tiny, compared to paying rent.

 

[Still Farming]

Some chase their tail for F all too!

 

[Nithsdale]

Lucky you.

Some of us lesser mortals are either more ambitious or worse farmers than you clearly are.

What type of farming are you in?

If you can't read "livestock farmer" then there's no hope

500ac upland full tenancy. 50ac grass parks anually and ewe lamb wintering all going out every year. 0 inputs/help from estate.


I will concede I was a little flippant with my initial post, but the aim should be to borrow as little as possible in a tenancy. The figure of high 20%'s as the tenancy average shocked me. Surely as an average across all tenancies that figure is lower?

 

[BELOWAVERAGE]

If I had a rich daddy... why would I be a tenant ?!

And no. We do not borrow a penny.
We've rebuilt 3 sheds in the last 10yr all out of our own pocket - no help from our laird and no running to the bank. It's called having a viable business

Out of curiosity what percentage of your income would be sub ? I'm on about 3%.
Go out on your own with no sub and see how you get on.

 

[Spud]

If you can't read "livestock farmer" then there's no hope

500ac upland full tenancy. 50ac grass parks anually and ewe lamb wintering all going out every year. 0 inputs/help from estate.


I will concede I was a little flippant with my initial post, but the aim should be to borrow as little as possible in a tenancy. The figure of high 20%'s as the tenancy average shocked me. Surely as an average across all tenancies that figure is lower?

Must you be such a twit?

Livestock farmer could mean 4 sheep on a small holding while you work on an oil rig on a hundred grand a year. It could mean you're milking 2000cows, keeping pigs or racing llamas for all I know.

Why wouldn't one borrow, if one could see payback and provide for the future? With money cheap and bps disappearing, arguably there's never been a better time to borrow a few quid.

 

[Spud]

Out of curiosity what percentage of your income would be sub ? I'm on about 3%.
Go out on your own with no sub and see how you get on.

Good analogy. I'm about 3.5%

 

[livestock 1]

Does anyone live long enough to be able to develop a business in a reasonable type of fashion without borrowing money?
It would seem an awful slow process otherwise to me

 

[livestock 1]

A few ways to look at this. To have a viable business with an appreciating net asset you need to pay tax. Then you can look very lendable to a bank keep your existing borrowing terms and increase them to buy more of whatever it may be land or things that bring efficiency would be priority.
You could be more ruthless than that and keep buying more of the above avoid tax and increase asset values much faster. Only problem is persuading a bank or lender to keep backing you as this doesn’t tick their serviceability boxes. In this case net asset will drop.
It’s still more efficient to pay a few % on borrowings than it is to pay 20% then 40% then 50% tax

 

[mountfarm]

I would strongly advise you all to watch this video of what possibly might happen in the USA if what Bidens proposed goes through. I’ve heard similar murmurs over here such as land tax or ag business rates. Scary stuff!

 

[Roger Perry]

I would strongly advise you all to watch this video of what possibly might happen in the USA if what Bidens proposed goes through. I’ve heard similar murmurs over here such as land tax or ag business rates. Scary stuff!

And that friends, is just one of the reasons rural America did not vote for biden.

 

[BELOWAVERAGE]

Good analogy. I'm about 3.5%

Thanks, but I'm living in the past still, going forward it'll be 0%.

 

[Wisconsonian]

The proposed American capital gains tax are across the board, farms and small businesses get "special" treatment because they won't have to pay it yearly like stockholders, but the interest will accrue on the unpaid yearly capital gains. Very preliminary, will never happen, unless it does.

edit in case anybody still reads this: I am talking about a different, even worse aspect of the Biden proposal than the video. I hadn't watched the video before posting.

 

[livestock 1]

The proposed American capital gains tax are across the board, farms and small businesses get "special" treatment because they won't have to pay it yearly like stockholders, but the interest will accrue on the unpaid yearly capital gains. Very preliminary, will never happen, unless it does.

Land is still subject to capital gains tax the same as everything else. The reason it’s not paid annually is due to cost and complexities of valuations. Land is valued at last valuation. Once it’s sold the profit on that land is taxable at 40% capital gains tax.
HMRC don’t need annual valuations as they will always tax the gain when it’s sold