# Farmland option



## galway_blow_in (20 Apr 2019)

Not sure if I mentioned before but I own some farmland which I inherited from an uncle some years ago, currently have it let to a full time farmer but the lease is due to expire in less than a year, he is talking about retiring and none of his children plan to farm, he currently has sheep on the land

For a few different reasons I don't wish to look for another tenant so my options appear to be either sell or plant in forestry, thirty acres in this area is worth max 200 k on a good day but likely to be worth about 170 k, were I to plant in trees, I could look forward to a tax free income of 220 euro per acre for fifteen years, that's 6600 per annum or just under 4% yield, there is no real maintenance as the forestry company does everything, after fifteen years the subsidy ends but you can begin thinning after twenty years and clear fell at thirty to thirty five years ( again tax free), this is for conifer trees.

Were I to spend the proceeds of a sale of the land, I could afford an apartment in a decent part of the likes of limerick-city with a projected rent of circa a grand per month before fees or repairs etc, ignoring the risk associated with tenants, after tax is paid It does not appear that the income differential is that great.

Equities are of course another option but this is more of an income producing asset comparison


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## Brendan Burgess (20 Apr 2019)

Have you any other borrowings e.g. a mortgage on your home? 

If you own your own home outright, maybe buying another property is not a good idea.

Equities or forestry would be a good diversification. 

The problem with forestry though is the lack of liquidity and the artificiality of the market.  At one stage forestry was selling for less than the value of the underlying land because of the obligations to keep it in forestry. 




galway_blow_in said:


> Equities are of course another option but this is more of an income producing asset comparison



A false comparison.  You should look at the total return. If you get 5% income from a rental property and no income but a 10% capital gain from equities, you can sell some of your equities if you need "income".

Brendan


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## galway_blow_in (20 Apr 2019)

Brendan Burgess said:


> Have you any other borrowings e.g. a mortgage on your home?
> 
> If you own your own home outright, maybe buying another property is not a good idea.
> 
> ...



Hi brendan, I currently have no debt of any kind, I suppose the forestry option is more readily put in place as I own the land already where as I would have to sell the land, presumably pay capital gains tax ( as I got it for nothing) and then set about buying either property or equities.

You are right in saying I could sell off a portion of an equity fund as a form of income seeking - generation but it does involve timing to some degree as it would surely be regrettable to offload a portion of a fund - portfolio while the market was below where you started off or barely above ?

I've a year to decide, forestry is a bit like pouring concrete on land, no going back.


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## RichInSpirit (21 Apr 2019)

galway_blow_in said:


> I've a year to decide, forestry is a bit like pouring concrete on land, no going back.



From a CO2 point of view forestry sounds like the way to go. Much better than concrete, no farting cows etc.
And all the life that goes along with a forest, birds and insects.


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## RedOnion (21 Apr 2019)

@galway_blow_in 
The whole forestery thing is distorted by grants and tax treatment. Talk to as many people as possible that have gone down the forestery route before you do it. Particularly those that planted 15+ years ago. I've seen cases where there was a net cost for thinning, as the timber was worthless. A few guys thinned and processed for firewood themselves. Good money, but hard graft.
Its a very long term commitment. There are a few specialist agents that handle the sale of forestry - not unusual to take several years to sell, and depending on location, might be only worth about 5k per acre once the grants have run out. I'm not sure with the current grant scheme, but one of the older ones meant the land can only ever be used for forestery, but no further grants so the land was worthless.
Insurance premiums are very high at the moment to insure against fire.
And finally, it can make a great tax planning vehicle to pass on wealth without heavy taxation. 



galway_blow_in said:


> presumably pay capital gains tax ( as I got it for nothing)


You would have received it at market value for inheritance tax purposes. That's your base cost for capital gains tax.


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## galway_blow_in (21 Apr 2019)

RichInSpirit said:


> From a CO2 point of view forestry sounds like the way to go. Much better than concrete, no farting cows etc.
> And all the life that goes along with a forest, birds and insects.



I jokingly used the " concrete" comparison as if you put down concrete or trees in a field, you or anyone else won't be using it to graze sheep or cattle again or grow barley.


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## Brendan Burgess (21 Apr 2019)

Hi galway

I referred the thread to a friend of mine who is a farmer who has planted forestry and he replied as follows: 

 He owns the 30 acres and doesnt need the cash that a sale would produce but rather seems to prefer the prospect of a steady income over the coming decades. From that point of view, forestry is hard to beat. Short term, he has a 15 year tax free income from the premiums and doesnt have to spend a penny on the planting, fencing, maintenance etc etc as the grants cover all of that. He will have to include 15% broadleaves in the mix which will not produce saleable timber for say 100 years but are of course lovely to look at and good for the environment as are the conifers that he should plant in the remainder but which will bring an income from year 20 onwards depending on the quality of the soil which will govern the growth rates of the trees. The outlook for timber is really positive and this explains why so many pension and other investment funds are constantly seeking to expand their woodland portfolios. Laminated timber is set to steadily replace concrete in certain applications and technology is making it ever more useful. Concrete is really bad for the environment in terms of CO2 emissions during its manufacture whereas trees do the opposite and absorb and lock up carbon.
Not only is forestry a nice income provider but it is an excellent means of passing on wealth to your children in that the land valuation will be low and the value of the trees is exempt from taxation.
If he decides to plant, he needs a good forester with excellent credentials.


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## galway_blow_in (21 Apr 2019)

Thanks for that comprehensive reply Brendan and cheers to your friend who planted his land. 

I think perhaps if I do decide to plant, I should view the clearfell stage as for the next generation in terms of benefit

Will think on it over the next twelve months.


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## NoRegretsCoyote (22 Apr 2019)

People can get very annoyed with the look of forestry. It can be a bit gloomy to look at and there are big objections from a visual perspective in places like Leitrim.

Something to consider if you have family connections and/or want to remain on good terms with the neighbours.


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## galway_blow_in (22 Apr 2019)

NoRegretsCoyote said:


> People can get very annoyed with the look of forestry. It can be a bit gloomy to look at and there are big objections from a visual perspective in places like Leitrim.
> 
> Something to consider if you have family connections and/or want to remain on good terms with the neighbours.



Land is a distance from a house.


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## cremeegg (22 Apr 2019)

https://www.askaboutmoney.com/threads/investment-in-irish-forestry-funds.6699/

One of the best threads on AAM.

Although it is specifically about a forestry fund and you are looking at planting yourself, there is a huge amount of info about direct planting too.


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## galway_blow_in (22 Apr 2019)

cremeegg said:


> https://www.askaboutmoney.com/threads/investment-in-irish-forestry-funds.6699/
> 
> One of the best threads on AAM.
> 
> Although it is specifically about a forestry fund and you are looking at planting yourself, there is a huge amount of info about direct planting too.



Different altogether


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## galway_blow_in (23 Apr 2019)

Just to clarify something on an earlier post of mine, " The Forestry Company" are a firm who put in place and manage plantations, coilte being the best known semi - state operator

There are several others out there doing the same thing, the "forestry company" are just one particular operator who I'm familiar with


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## candor (23 Apr 2019)

RichInSpirit said:


> From a CO2 point of view forestry sounds like the way to go. Much better than concrete, no farting cows etc.
> And all the life that goes along with a forest, birds and insects.



This statement is true or not depending on context. From a CO2 perspective, much of the good carbon sequestration is undone during the clear fell operation. Farting cows are generally cows that are fed grains (even if grazing on grassland). They are herbivore by nature, and can help sequester more carbon than trees if managed correctly. For those that are interested, look up holistic managed grazing.

Conifers are devoid of most birds and insects, as they shade out light and deposit acidic needles on the forest floor, which discourages any other species from growing. I would be looking at mixed species agroforestry (enabling stacking of multiple enterprises in the one space) or the Lubeck forestry model. These are longer term models but give a far better return, both for your pocket and the environment. Whatever you decide, don't be kidded into thinking that monoculture conifer plantations are good for the planet, we have to start looking at the bigger picture.


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## galway_blow_in (23 Apr 2019)

candor said:


> This statement is true or not depending on context. From a CO2 perspective, much of the good carbon sequestration is undone during the clear fell operation. Farting cows are generally cows that are fed grains (even if grazing on grassland). They are herbivore by nature, and can help sequester more carbon than trees if managed correctly. For those that are interested, look up holistic managed grazing.
> 
> Conifers are devoid of most birds and insects, as they shade out light and deposit acidic needles on the forest floor, which discourages any other species from growing. I would be looking at mixed species agroforestry (enabling stacking of multiple enterprises in the one space) or the Lubeck forestry model. These are longer term models but give a far better return, both for your pocket and the environment. Whatever you decide, don't be kidded into thinking that monoculture conifer plantations are good for the planet, we have to start looking at the bigger picture.



I agree with most of what you say here and I think sitka are quite ugly looking compared to broadleaves, however, if the government wants to really push afforestation, the annual premia needs to stretch beyond fifteen years as many farmers will be unwilling to then wait another fifty years for broadleaves to deliver a financial return, hence why so many go with the conifer option


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## candor (23 Apr 2019)

galway_blow_in said:


> I agree with most of what you say here and I think sitka are quite ugly looking compared to broadleaves, however, if the government wants to really push afforestation, the annual premia needs to stretch beyond fifteen years as many farmers will be unwilling to then wait another fifty years for broadleaves to deliver a financial return, hence why so many go with the conifer option



The answer is diversification. It's talked a lot about on this site with respect to financial investments, why not branch that concept out to other areas? What can you stack on that land that gives good financial return but also benefits the environment and local community? I'm aware this is a different way of thinking, but worth thinking about none the less.


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## galway_blow_in (23 Apr 2019)

candor said:


> The answer is diversification. It's talked a lot about on this site with respect to financial investments, why not branch that concept out to other areas? What can you stack on that land that gives good financial return but also benefits the environment and local community? I'm aware this is a different way of thinking, but worth thinking about none the less.



I suppose like going vegan or buying an electric car, it's a balance between idealism and necessity


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## candor (24 Apr 2019)

galway_blow_in said:


> I suppose like going vegan or buying an electric car, it's a balance between idealism and necessity



Going vegan or buying an electric car aren't necessarily good either. Veganism in most forms means commercial monoculture cropping which destroys lots of wildlife and soil. The electric car industry is pretty dirty, given how it's extracts precious metals for battery production. Context is key, as with everything, understanding the facts behind something is so important.


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## galway_blow_in (24 Apr 2019)

candor said:


> Going vegan or buying an electric car aren't necessarily good either. Veganism in most forms means commercial monoculture cropping which destroys lots of wildlife and soil. The electric car industry is pretty dirty, given how it's extracts precious metals for battery production. Context is key, as with everything, understanding the facts behind something is so important.



Not often the vegans get talked down to or electric car drivers, there usually the ones doing the condescending 

Double score


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## candor (24 Apr 2019)

galway_blow_in said:


> Not often the vegans get talked down to or electric car drivers, there usually the ones doing the condescending
> 
> Double score



True, but most folks tend to skim on details


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## Drakon (26 Apr 2019)

This is a great post. 
I lived near a forestry plantation a few years ago.  
The deer were great so see around but I don’t think motorists and farmers would agree. 
Otherwise the forestry was an ecological black hole. Nothing whatsoever grew on the floor. A few yards in amongst the trees and it was a dark as night. 
No birds or insects. 
85% wasteland!


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## Drakon (26 Apr 2019)

Don’t forget that if you are 40 years of age or older you won’t be paying any tax on your land rental income.
If I were you, I’d look for a replacement tenant. Maybe discuss a possible rep lament with your current tenant.

0% Tax. Think about it.


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## RedOnion (26 Apr 2019)

Drakon said:


> Don’t forget that if you are 40 years of age or older you won’t be paying any tax on your land rental income.


Even if he never farmed the land himself?


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## NoRegretsCoyote (26 Apr 2019)

Drakon said:


> Otherwise the forestry was an ecological black hole. Nothing whatsoever grew on the floor. A few yards in amongst the trees and it was a dark as night.
> No birds or insects.
> 85% wasteland!



Grass, defecated upon by livestock, is also pretty much an ecological wasteland!


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## Drakon (26 Apr 2019)

RedOnion said:


> Even if he never farmed the land himself?


Yes.  If the landowner is aged 40 or over, and a five year lease is signed with the tenant, then no tax is due on that income.


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## Drakon (26 Apr 2019)

NoRegretsCoyote said:


> Grass, defecated upon by livestock, is also pretty much an ecological wasteland!


Not true.  At the very least the grass will absorb carbon dioxide and release oxygen through photosynthesis.  The defecation you refer to will also fertilise that grass helping it to grow healthy and further improve photosynthesis.  Its blanket fibrous root system is far more reliable in preventing erosion.

I suggest you walk through a short section of forestry (not "the woods"), and then walk through some grassy farmland.  Using just some common sense, compare and contrast the two.


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## galway_blow_in (26 Apr 2019)

Drakon said:


> This is a great post.
> I lived near a forestry plantation a few years ago.
> The deer were great so see around but I don’t think motorists and farmers would agree.
> Otherwise the forestry was an ecological black hole. Nothing whatsoever grew on the floor. A few yards in amongst the trees and it was a dark as night.
> ...



Farmers tend to be instinctively opposed to the very idea of forestry, they view it as a waste of land, this despite the fact that growing trees is much more profitable than growing beef


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## joe sod (26 Apr 2019)

galway_blow_in said:


> Farmers tend to be instinctively opposed to the very idea of forestry, they view it as a waste of land, this despite the fact that growing trees is much more profitable than growing beef



And beef farming has had a bad few years, even dairy farming is not looking great now, there seems to be over supply now that the milk quotas are gone, also farmers have spent huge sums of money investing in dairy facilities so they are stuck with it. The Irish agriculture sector seems to have been caught offside and asleep in not anticipating the changes in what people are eating (faddish and all as it maybe), they are eating less beef and dairy.


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## galway_blow_in (26 Apr 2019)

joe sod said:


> And beef farming has had a bad few years, even dairy farming is not looking great now, there seems to be over supply now that the milk quotas are gone, also farmers have spent huge sums of money investing in dairy facilities so they are stuck with it. The Irish agriculture sector seems to have been caught offside and asleep in not anticipating the changes in what people are eating (faddish and all as it maybe), they are eating less beef and dairy.



Actually dairy farming has been going through some sort of secular bull ( pun intended) market for nearly a decade, the removal of quotas has made no difference, bar a period from 2015 to early 2017, it's been constantly high milk prices since early 2010, very different story with beef which is a perennial loser, beef farmers rely 100% on subsidies


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## RedOnion (26 Apr 2019)

Drakon said:


> Yes.  If the landowner is aged 40 or over, and a five year lease is signed with the tenant, then no tax is due on that income.


Thanks, I wasn't aware the lessor didn't have to have farmed the land (like reliefs from CGT on retirement).
I've looked into it further, and the 40 year limit was removed in 2015, so anyone can now avail of this. (I'm in my 30's and own land, hence the interest).


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## Drakon (26 Apr 2019)

joe sod said:


> ...they are eating less beef and dairy.



This is true of the western world, but developing countries and China can’t get enough of either.


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## NoRegretsCoyote (27 Apr 2019)

Drakon said:


> At the very least the grass will absorb carbon dioxide and release oxygen through photosynthesis.



So does forestry! Obviously both are more ecologically diverse than concrete.

The most biodiversity you will get is in deciduous woodland. Sadly, there isn't very much of it in Ireland.

Otherwise I agree, from a pure profit perspective coniferous plantations are much better option than livestock on smallholdings.


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