Buying a Farm, Generation to Generation

My great grandfather was the first person in my family to start farming when he settled on a soldier block near Griffith after the First World War. His son, my grandfather bought his farm after the Second World War. He was able to buy his farm after working as a truck driver and farm labourer while his son, while my father bought his first block in the late 1980’s when he was in his late 20’s.

My father was able to buy a 500 acre rice farm near Griffith while working as a journalist and newspaper editor on a $20,000 a year salary for around $500,000, a sum which was 25 times his yearly wage. On top of that he needed to purchase machinery and the other essentials such as the seed and chemicals that are necessary to get that first crop in ground.  In comparison I know from browsing real estate windows (a habit I have inherited from my father) that I would probably need to spend around $1.5 million on a property depending on the land and the type of operation I intend to run. On top of that I would need to spend another $200,000-300,000 on livestock or machinery. As a first year out of university a person can probably expect to have a take home pay of around $50,000 to $60,000 depending on their package and what other factors are at play. Taking the average of $55,000 the cost of a property equates to around 27 times the annual wage. While this is slightly higher it is comparing the salary of a person straight out of university with someone who was established in their career.

The real trouble with buying a farm is building up the capital required to make the deposit, as unlike urban real estate which can require as little as a 5% deposit an agricultural loan normally requires a deposit of at least a 40%. A figure which is large but hasn’t changed much since my father bought his first block. This means that in order to buy the above mentioned farm I would need to pay $600,000 up front just to purchase the land. Whereas my father would of needed to pay around $200,000 as a deposit, which is still proportional to his salary at the time.

He did have some extra advantages that I don’t have today such as zero debt from university as it was still mostly free when he attended and the “cost price squeeze” wasn’t as tight then as it is today. However at the same time interest rates are much lower today than they were when my father purchased his first block. As back then interest rates were over 10% while today they are closer to 5.5-6% giving the producer a significant saving.

To be honest I wasn’t sure where I was going with post when I started writing it and I’m still not sure where its taken me other than these two conclusions that I can draw from it. The first one being that it was very hard to get into farming then and it’s still very hard to get into farming now but it is possible. My second conclusion is that it is possible to buy a farm and get into farming if the person is driven, creative and smart. They need to be able to follow their head over their heart, find opportunities where other people see liabilities work hard and save. As it is only through hard work and solid determination that dreams can come true, so now my only question is am I that sort of person?

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