Farm Mortgages, And Why Farmers Love Them

There are around 11,000 dairy farms in New Zealand in the same number of sheep farms, and probably a similar number of horticultural operations. Wild farms do not change owners nearly so much as residential property, when they do change owners it is almost always a highly complex and difficult challenge to finance. It is important to understand the dictionary definition of a mortgage broker for this article.

Dairy farms in particular are extremely expensive to purchase because of the land prices, and nowadays it is nearly impossible for individuals to work their way up through contract milking and share  milking to the point where they can purchase a farm. Most dairy farm purchases are achieved by groups of farmers or companies, and indeed dairy farming is steadily turning into a corporate commercial operation.

The complexities for the financing of the farm mean that only specialist farm sales managers and financiers can really be involved. It takes a very skilled and qualified financial advisor to fully understand the financial books for our farm, and to be able to advise potential lenders of the likely profitability in the short and long term of a farm. The financing will also be complex and that there could possibly be multiple sources of cash for a deposit including family money and other partners, and there may need to be more than one Bank involved and supplying the finance simply for risk management reasons.

The banks that lead to farms will always have specialist staff involved throughout the whole process, and in some cases this means that a mortgage broker is not required, but in the majority of cases a mortgage broker  is a very valuable addition to the team. The farm buyer is going to want to know that they are getting the best deal, and any bank is not going to be screwing them down in a way that is to their disadvantage. Mortgage brokers in Gisborne really need to be able to compare the deals across a number of banks, and to take into account all the other sources of Finance including the family and business partners, plus they need to take into account the financial needs of the business in the short term and during periods where production maybe load for example winter or during droughts. This means that the mortgage broker really does need an intimate understanding of farming practices and farming financing needs.

However for mortgage brokers in Nelson that can service this market, the rewards are significant as it is very common for farms to sell for many millions of dollars, and in 2017 a typical sale maybe around $10,000,000. One such sale alone will generate around $65,000 for the mortgage broker, and if they are good then they should see probably half a dozen of these types of sales every year. It can be a very very lucrative business.

Subdivision Financing

Mortgage broking  as a business or career can be pretty lucrative, given that brokers generally get paid around 0.65% of the value of each loan or mortgage they write out.

 One very lucrative line of work is new subdivisions, and brokers with the right experience and contacts can get themselves involved at all aspects of The Project, including the early start up phase with a developer, the ongoing development including the preparation and clearing of the land and the building of the subdivision, and then in the ongoing marketing of the individual properties to residential home owners.

 Generally financially will be required for around 80% of the total value of the subdivision and traps even 90% or 100% of the initial costs of the subdivision, depending on the financial reputation of the developer, click this link for more information.

  A good mortgage broker may be able to provide the finance for the purchase of the property to be subdivided, for the planning and consenting work, for the development of the roading and services, for the subdivision and site preparation of each separate lot, for the sale of each lot of land, and, if they are very smart, then for some or all of the financing for the new homes on the property. It is unlikely that a single mortgage broker will be able to pick up all this work, but good brokers can often pick up a very high percentage of the total work.

 A piece of wasteland that has been resigned from industrial to residential may sell for $500,000 for example, but then this land could be subdivided into 20 sections that sell for $300,000 each. Who develop I may need to raise 1.5 million dollars for example to fully develop the 20 sections, but once the sections are finished they will make $4,000,000 in profit.

 Who smart mortgage broker  will make $13,000 on the financing for the purchase and development of the subdivision, and then could make another $40,000 on the sale of the individual sections, even if they can only get 50% of the new houses being built  they could still  earn another $40,000. In other words a single development project for the best mortgage brokers could make them over $90,000, but the total hours involved could I mount two one or two weeks work, admittedly in short intense stretches at different points on The Project. Mortgage broking can indeed be a very lucrative business.