Liz Tucker looks at renovation and financial security (From Smallholder)

Liz Tucker looks at renovation and financial security

8:00am Sunday 29th July 2012 in Property

Most people move to a smallholding because it is realising a dream to toil the soil, get away from the rat race and find a more peaceful way of living but in reality it is worth remembering that if or when this dream fades you still need to have the financial resources to move on.

Illness or old age can soon take the glamour out of getting your hands dirty and as smallholding is not renowned for making you a fortune your property is going to be your biggest asset. So adding to its value or making it earn its keep is something you should really consider even before you buy.

Financing the move Smallholding and renovation usually come hand in hand. Most people are financially downsizing to release capital so properties that need a bit of work are more likely to appeal. Before you dismiss less romantic, more practical, ready to move into properties consider your financial situation very carefully. Smallholding is a way of life that saves you money rather than being an earner so reducing your debt is essential. If you do need to borrow, renovation loans can be much more expensive and the chances are you will need a steady job to get any sort of loan. If you do need to borrow look for shorter term repayment loans rather than the typical 25 year mortgage term. A ten year repayment loan can work out as surprisingly only slightly more per month than a full term mortgage. However you will need to shop around as many lenders are reluctant to offer this option, being keen to sell you a longer term loan that gives them a better return. A renovation property may give you more for your money but only if you have the funds to make it habitable so never underestimate the cost. Discovering at this stage that something is not financially viable may be a bubble burster but that is much better than the long term anxiety from financial overload.

 

Financial help

Moving to a new area and taking on both a renovation and smallholding project can also herald a change in career. This usually results in a drop in wages or even the loss of wages with the view that existing capital can help you through until you are all set up. There are start up loans or grants available for new businesses and also never feel too proud to consider benefits. If you have paid tax and national insurance then you are entitled to a range of benefits if you are unemployed so be realistic about your circumstances. You may well be planning to earn but if initially you are not then consider what benefits are available. Also make sure you are registered as a farm or smallholding so you can claim your subsidy from DEFRA. This may not supply a large amount of money, five hectares is roughly about £1,000 a year but as this is seen as income you can then set up as a business and offset any farming related costs against the business.

 

Insurance

You may be living a new cost effective life but it does not pay to skimp on insurance. Smallholding insurance for buildings and land needs a specialist provider such as NFU. Make sure you cover all your machinery and public liability especially against the action of animals . Joining associations can often be the cheapest way to get cover for specific issues. For example membership of the British Horse Society has built in insurance cover.

 

Income sources

The good thing about smallholding is you do have space and many farm houses come with outbuildings that can be utilised. If you are able to come to your new life with a lump sum, make sure you use it wisely as it is unlikely you will have this working capital again. Converting barns to holiday lets is an obvious one but you need to research you local market or find a unique selling point for your area such as bird watching or walking. Bed and breakfast is one of the easiest ways to generate an income. There is a scheme run by the government where you can earn up to £4,250 a year letting rooms before paying tax. If you don’t like the idea of people in your home then consider converting outbuildings to extra bedrooms. More unusual accommodation ideas like railway carriages or a pigsty have more sales appeal. Caravan and camping has become more popular and is now a much more viable option if you have the location. Outbuilding can also be converted into workshops or offices and you may find there are region specific rural schemes that encourage this with grants.

 

Making the land pay

You may find that you have more land than you will personally use and there is always a local market for land rental. Horse owners are always on the look out for more land and the cost of animal feed can mean you can get a worthwhile amount from selling your hay cut to a local farmer. We have also found that you can get your land cleared and earn an income from letting your land for a short let. Sheep and pigs are excellent at clearing rough ground and you can either take the cash or fill your freezer with meat at the end of the term. Countryside events like festivals and rallies are also becoming more popular. For example there are many new sports such as mucky racing and obstacle running that need private land to host the events. There is a new fad especially in the South East for vintage and the latest craze is village vintage events. Organisers rent barns and fields over a weekend to host a second hand bonanza, basically its Oxfam in a barn but much more expensive. Many of these events are niche so you need to do a bit or research to find out how viable it is for your property. Parking and noise are obvious issues and its not worth upsetting your neighbours over it.

The other long term option to consider is the re-sale value of your property. You may think you will be there for ever but knowing you can come out with a bigger pot is very reassuring. Improving the property is an obvious investment but the key thing I look for is valuable pockets of land. If you have immediate neighbours backing onto your land who have less land they are usually very keen to buy more and at a premium. Small plots of a quarter of an acre can sell for £10,000-20,000 if it greatly improves the value on their property while having little impact on the value of yours. If you can see the potential when you move in it is worth planting hedging around these areas so they have a chance to mature over the years. They make useful paddocks and if the boundary has an age to it when you come to sell, it can easily be transferred without blighting the value of your property.

 

Labour saving

On final sum to make is your time and effort. We know smallholders earn a very low hourly rate, if at all but as the main worker you do need to make sure you are using your time efficiently. When time is your own it is easy to drift from one job to another and end up not getting anything finished. A more important consideration is the machinery you purchase to assist you. We initially made the mistake of thinking this was an unnecessary expense as we could do most things by hand. The problem with that is it takes forever when a bit of kit can get a 100 jobs done in the time. It is important to be selective and consider what you actually need to buy and what you can rent. For us the quad bike has been our biggest labour saver as it is quicker, easier to use and more versatile than a tractor as it can tow multiple machines such as trailers and mowers and for us that was a cost effective investment. However we rent a good quality rotivator rather than buy a lesser quality one as we only need it once a year to turn over the veg plots. Renovating a smallholding is not about how much you earn but how much you can reduce our income so you can live richer on less. We have calculated our income only needs to be a third of what it once was which also means we don’t have the same work pressures. Growing your own is the obvious money saving option but your property can actually generate an income. In the long run this is a big plus so make it a priority when you are considering buying.