Agricultural Land Investment – Can it be a Safer Option than other Property?

2nd June 2017

“Farms with tenants are proving to be popular as part of investment portfolios,”says H&H Land and Property

Agricultural land has been seen by some commentators as a comparatively safe investment to other forms of property transactions, and today it is no different.  If you buy a farm that was let after 1st September 1995, and you then survive for seven years, there will be no tax to pay on death; therefore buying a let farm can be a good tax shelter.

“Reported rates of return on land investments are generally between 1 and 3%  annually which is potentially higher than if you were just to invest your money in a bank,” says Mark Barrow H&H Land and Property Chartered Surveyor.

Mark continues “H&H Land & Property are finding that farms which have a sitting tenant at the time of sale are currently proving popular with investors.”

The actual value of a farm with a sitting tenant is dependent upon on a number of factors, such as:

  • The age of the tenant
  • The type of tenancy
  • The term remaining on the tenancy
  • Its development potential
  • Its location

The above factors are likely to have an impact on the discount an investor would apply to the vacant possession value of a farm.

The benefit however, is that if, and when the tenancy ends and the landlord gains vacant possession, the value of the land and property will increase given that it is not subject to a tenancy. The potential investor will need to investigate how easily the tenancy can be brought to an end, how long the process could take and at what expense before finally having the opportunity to release the additional value of the asset.

Alternatively, an investor may wish to continue with the existing tenancy if the initial return meets their investment criteria and there are other opportunities to gain returns elsewhere.

An example of a tenanted farm with a strong investment opportunity is Town Head Farm, Nethertown near Egremont Cumbria, which has just been brought to the market by the Kendal office of H&H Land and Property. Subject to an Agricultural Holdings Act 1986 tenancy, this is a 134 acres traditional stock and arable farm with traditional farm buildings and a four-bed farm house. On the market for £750,000, not only does Town Head Farm provide excellent investment prospects, but with possible planning and development opportunities, it also provides real potential for those looking for a good return on their investment. Town Head Farm was let as a first succession tenancy in 1990, therefore the property would benefit from 50% Agricultural Property Relief on death under current legislation.

Opportunities exist for investors with certain criteria to find suitable returns on agricultural land and property which are subject to a tenancy.

A tenanted farm which the Durham Office of H&H Land and Property recently brought to the market was Prospect Hill, a 285 acre farm near Corbridge in Northumberland’s Tyne Valley.

“We receive regular requests for people looking for investment opportunities and this was without a doubt reflected in the number of offers we received for Prospect Hill. There was an exceptional amount of interest in the farm, with a number of offers received from potential investors and farmers, supporting a good return” said Mark

Town Head Farm is being offered for sale freehold, subject to an Agricultural Holdings Act 1986 Tenancy Agreement, as a whole by Private Treaty.  Viewing is strictly by appointment only, and those wishing to view should contact the Kendal office of H&H Land and Property.