Recent figures from the Real Estate Institute of New Zealand show the median farm price in May was $930,000.
The median price for a dairy farm was a cool $2 million.
These are hefty figures for anyone, let alone an aspiring young farmer. When faced with the prospect of being chained to a huge debt during several years many just can’t see how “the hell” they can do it.
This puts the parents at odds ,because how can they go on to retire with adequate funds behind them and keep the farm in the family?
Traditional ways of financing the farm could be to lease part of it, and therefore compromise farm production.
The answer: Well, one company is taking popular theories about farm succession and turning them upside down. In fact, it has come up with a plan so shrewd it should receive a PhD from Cambridge.
NZSE-listed Blue Chip New Zealand devised a succession planning solution that uses equity from a rural property for investment in the fast-growing residential property market.
This not only keeps the farm in the family without burdening the children with massive debt, but also allows the parents to retire on a nice income.
The spin-off is that there is no need to subdivide the land for maximum return, which as I mentioned last week, has got to be a good thing.
Blue Chip general manager Jonathan Woodhams says farm succession is a common dilemma for many rural families.
“A farm is more than an investment to farmers. There is much emotional decision making in these matters that is too hard.
“Each family has different requirements, depending on the number of children and the structure they want to set up, but all our clients have the same objective – to create long-term wealth and financial security without having to sell the farm.
“Using non-farm assets is something no other company offers.”
He says an individual plan is formulated, depending on goals, asset base and present farm income.
“It’s about showing farmers a smart way to achieve their goals. It can be tailored to how much risk someone wants to take on.
“It’s totally passive from the clients’ point of view – it’s totally managed.”
Blue Chip advisers guide clients through the process and even inform their accountant and solicitor on how the plan works.
Mr Woodhams says it’s all part of keeping plans as simple as possible.
“Our aim is to allow people to make investments that are as low risk as possible, with an easy exit strategy.
“We also put plenty of effort into improving our corporate governance, because clients need the assurance that the company will be there for the long-term.
“Saving and investing is a long-term plan and the sooner people start planning the sooner they achieve their goals.”
For you local Blue Chip consultant visit www.bluechip.co.nz