What issues do you foresee with our application for a bush block?

Any general questions you might have in regards to loans and finance.
Allen
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Joined: Thu May 02, 2019 4:13 pm

What issues do you foresee with our application for a bush block?

Postby Allen » Thu May 02, 2019 4:15 pm

Hi there, I’m interested in purchasing a 25 hectare bush block in the Pillar Valley (2462) NSW. Both I and my wife’s job can be done remotely and I think it would be great for our kids to grow up here. I grew up on a farm so I understand the day to day of small scale farming. The property is listed at $375,000. We’ve been saving up and are ready to put down a $35k deposit plus any closing costs involved. Our combined income is 88k per year. It seems the lenders are quite strict about what kind of property they are willing to approve loans for, so, what issues do you foresee with our application?

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Otto Dargan
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Re: What issues do you foresee with our application for a bush block?

Postby Otto Dargan » Thu May 02, 2019 6:04 pm

Hello Allen. Welcome to the forums.

Different lenders have different requirements for hobby farm (bush block) loans.
They look at:
  • Land size: You can borrow up to 90% for land sizes between 10-50 ha (hectares). Generally, the higher the acreage is the lesser Loan to Value Ratio (LVR) you can borrow.
  • Location: There are postcode restrictions as lenders want the property they can easily sell-off in the event of foreclosure. You can use our postcode calculator to find out how banks view your location.
    Income from the block: The turnover from the block cannot exceed $20,000 in a given year as it then would be considered a commercial farm.
  • Zoning: Some lenders also take into account property zoning while others don’t. Land can be zoned rural, rural residential or the equivalent for your state.
  • Access: The land must have easy all-weather access. Dirt roads are fine as long as they are maintained well.
    Services: The land must be within range to be connected to the electricity grid without excessive costs or have solar power.

We specialise in lifestyle block loans.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a hobby farm loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Allen
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Joined: Thu May 02, 2019 4:13 pm

Re: What issues do you foresee with our application for a bush block?

Postby Allen » Thu May 02, 2019 6:38 pm

The property features a small orchard, a livestock shed and pastures. I’m hoping to reconstruct the dilapidated dam. Are there any restrictions to the improvements I can make on the block so as not to be considered a commercial farm?

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Otto Dargan
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Re: What issues do you foresee with our application for a bush block?

Postby Otto Dargan » Thu May 02, 2019 7:11 pm

Hi Allen,

There is no hard and fast rule as to what improvements are considered residential and which are considered commercial. So, yes you should be able to reconstruct the dam as long as the area’s zoning allows it, if it doesn’t you may need to obtain approval from your local council.

Hobby farms or bush block are generally allowed to have:
  • Standard house, liveable shed or vacant land.
  • A small non-income producing orchard.
  • Machinery shed.
  • A few cattle or horses.
  • A dam.
  • Several paddocks and some bushland.
  • The likely buyer of this property would use it as a home or holiday house.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Allen
Posts: 3
Joined: Thu May 02, 2019 4:13 pm

Re: What issues do you foresee with our application for a bush block?

Postby Allen » Thu May 02, 2019 7:42 pm

Thanks for the info. so far. Although I won’t be doing extensive farming on the farm however, there will be marginal farm goods and we may sell some of the surpluses in the farmers market.
When is a hobby farm considered incoming producing?

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Otto Dargan
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Re: What issues do you foresee with our application for a bush block?

Postby Otto Dargan » Fri May 03, 2019 11:47 am

Hi Allen,

The test for most bank valuers is whether there is an ability to offset business losses from a farm against other income.

Typically, this is where:
  • Turnover from the business activity is at least $20,000.
  • The business has produced a taxable profit in 3 of the last 5 years including the current year.
  • The value of the property carrying on a business is at least $500,000.

Speak with one of our hobby farm specialist mortgage brokers by giving us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an acreage loan with competitive interest rates.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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