Why buy acres??

[serf]

I was recently chatting with an old uni mate, who is now a financial advisor, about a few acres that have been sold near me for £12k per acre.

He was asking me why anyone would do this from a financial view point, because if they invested in the stock market they would get a lot better return.

Stock market has been averaging about 10% growth over the past 70 years, one £12k acre would never return £1200 per year, especially with no input.

It got me thinking is he correct??

The only argument that I could think of was for inheritance reasons, but he assured me that a Stock ISA is inheritance tax free and £20k per year can be put in with no tax on any growth in value.

Are there reasons why somone would buy acres instead of investing?

Rollover relief a lot of the time .

 

[BuskhillFarm]

£12k!! 3.9 acre beside me went for £175k no sites on it. Most is £20-30k here. If and it’s a big IF there’s 100 acres up to buy and 100acres up for rent and I’ve cash in the bank I’ll be renting as it’s the more sensible business option. Especially as I don’t have 2-3mil in the bank

 

[Derrick Hughes]

I have a close friend who lost everything on the stock market , it ended up me buying his land to bail him out

 

[teslacoils]

Buy shares, get income, pay tax but range rover and pay for a day's shooting.

Or buy field, grow crop, RR and gun are business expenses, and invite others for a day's shooting.

 

[jackrussell101]

You want a good spread of assets, every millionaire should have a little bit of land or woodland in their portfolio.

 

[David.]

Are we convinced that IHT relief is secure for the foreseeable future?

 

[Old apprentice]

Are we convinced that IHT relief is secure for the foreseeable future?

If not a lot of land on the market every year ok for supermarkets oil company's to buy and plant trees carbon neutral crapp but it would finish lots of farms and business .
But who knows with new governments

 

[Enry]

sure stocks and shares ISAs are not Inheritance tax free and if you look at the stock market over the last 20 years you would have been exceptionally lucky to get 10%

If you bought Genus shares in 2001 for under £1 and sold in 2021 for £60 Av land price was £5600 so an acres worth of Genus shares would have returned circa £400k.

However say an acres worth in 2021 (£8,000?) would be worth around 0.3 of an acre now...

Stocks and Shares like land can go up and down. I still think that if IHT goes, one of the big drivers of land values will be removed....

 

[neilo]

Are we convinced that IHT relief is secure for the foreseeable future?

It maybe wont matter if the IHT is removed completely in the next budget as a sweetener to wavering Tory voters, as has been suggested.

 

[Adeptandy]

I’ll hazard a guess that’s Labour gov would reinstate it

 

[d-wales]

To be fair, if a non farmer buys farm land there would be as many agents, advisors and other "experts" drawing ££ off it as in stocks and shares!!

Plus the capital gains tax if/when land is sold.

I appreciate there are arguments for both sides, probably a bit of both is the best solution.

I was thinking more of somone buying acres by lending money from the bank in the original question.

Roll over money or using space cash to buy must be a good position to be in

 

[Dougalhtid]

Mum (84) just cashed bond with St James' Place. £80k into her pot, until she gave it to us.
No point in brother living in a rented house while she is cash rich.
She struggles to spend her pension since we pay farmhouse bills.

SJP have done very well out of the bond for last 30 years while bond has made less progress than putting the lot into a house in 1990.
The world is heading for massive revaluation.
A good time to have a lot borrowed rather than a lot deposited?

I agree borrowed will look like a cheap debt soon enough

 

[Jerry]

I was recently chatting with an old uni mate, who is now a financial advisor, about a few acres that have been sold near me for £12k per acre.

He was asking me why anyone would do this from a financial view point, because if they invested in the stock market they would get a lot better return.

Stock market has been averaging about 10% growth over the past 70 years, one £12k acre would never return £1200 per year, especially with no input.

It got me thinking is he correct??

The only argument that I could think of was for inheritance reasons, but he assured me that a Stock ISA is inheritance tax free and £20k per year can be put in with no tax on any growth in value.

Are there reasons why somone would buy acres instead of investing?

Land is a bit of a special case but if he’s a financial advisor he needs to a bit of research.

 

[d-wales]

Land is a bit of a special case but if he’s a financial advisor he needs to a bit of research.

Can you explain please

 

[toquark]

It maybe wont matter if the IHT is removed completely in the next budget as a sweetener to wavering Tory voters, as has been suggested.

IHT is going nowhere. The maths indicate that the tax affects such few people to be statistically insignificant in an election scenario, so they’ve really no need to get rid. It’s just the government desperately trying to shore up their base who are currently planning to stay home or vote for Nige.

 

[T Hectares]

BPR would probably fulfil the IHT role if it went ??
Land values probably safe enough

 

[Enry]

I have a close friend who lost everything on the stock market , it ended up me buying his land to bail him out

I have had shares in companies that have gone bust, and know of farms sold to satisfy Lloyds Insurance...also farms sold because of unwise/badly timed/unlucky investments with high interest rates that could not be serviced. If he lost the farm on the stock market he was a fool, no better than the ones who lost farms on a card game. He was a gambler, but "investor" sounds more respectable. I remember being told to gamble on milk quota one year, no risk of levy, lease it out. Upside would have been a very good year, downside could have meant bankruptcy. Any investment has risk, and it is usually inversely linked to returns.

 

[egbert]

There's a nice depressing post Christmas, pre new year thread.

To widen it out further, we all know buying land solely for financial reasons, doesn't make sense at all, but Its better not to think too much, or we might all actually catch on to the fact that the financial return on the business of farming is pathetic in relation to the investments of time effort and money that are made towards it.

Really?
I've bought 3 times, and twice the land has skyrocketed since.
the third was a 'have to have this land' situation....which ha stood still since

 

[Lakesdigger]

I have a close friend who lost everything on the stock market , it ended up me buying his land to bail him out

And here's the thing you'll only make decent money on the stock market if you take risks, you also need to devote a fair amount of time to moving money around to make any decent coin.
Whereas land in the right area is fairly guaranteed and predictable.

 

[Enry]

Plus the capital gains tax if/when land is sold.

I appreciate there are arguments for both sides, probably a bit of both is the best solution.

I was thinking more of somone buying acres by lending money from the bank in the original question.

Roll over money or using space cash to buy must be a good position to be in

The problem is land as an investment is that we never want to sell it again... so it's all about the warm feeling of knowing that it's worth x times what we paid. A 3 bed semi BTL can be cashed in without regret if the cash can be better used elsewhere.

A large 2nd gen farmer from the shire, father started from 0, now a huge business, told me that because they had no inherited land, they saw it differently, and were happy to buy, but also happy to sell if it looked like a good return or they needed/wanted the money to do something else. Others just want to amass land and leave 1000ac more than they started with (usually to 3 children) and whoever takes it on has a lifetime of debt while the other two are made for life