FOR ASPIRING FARMERS

How to get onto a farm before you can buy it outright

Buying a farm doesn't have to happen all at once.

There are several proven ways to move onto a farm. Each comes with upsides and downsides. Which one suits you depends on where you're at, and on what the retiring farmer is open to. A common farm transition model works like this.

Buying in over time

The retiring farmer sells some of the equity in the land to you and keeps some, or brings in a backer alongside. You buy as much equity as you can afford, and you aim to buy more over time.

The business is a separate entity, owned by some mix of the retiring farmer, you and any backer.

You manage the business and draw a wage. Your energy lets the business grow and make more profit. You use your profits to pay off debt and buy more equity.

In the end, the retiring farmer retires and you own the business. Or there may be some longer term involvement. The model is flexible.

Two farmers, a backer and a free range pig farm

Here's a made up example of how this can work.

Picture a free range pig operation that brings together two aspiring farmers and a backer. Once they've secured land, they work through feed prices and the logistics of growing their markets, and build up sow numbers and proper systems along the way.

There are two entities. One bought the land and put up the establishment capital. The other is the business, owned by the backer and the farming couple, who run it and are paid a wage.

The business leases the land from the land entity, and the rent rises as the business becomes more profitable. All profits go into a savings account, with the aim of buying the land in ten years through a mix of debt and savings.

Everything is documented and signed off, including a land option agreement, a lease and a shareholders agreement.

Share farming and flexible leasing

Share farming splits profits between the landowner and you, based on who carries which costs and risks. It lines up risk and reward better than a straight lease, because you both share the seasonal risk.

A flexible lease combines a lower base rate with a share of operating profit. In good years, you both benefit. In bad years, the hit is shared.

As a hypothetical, picture two brothers in the Mallee who take over their parents' operation. To farm more efficiently, they negotiate a flexible lease on a nearby block. The rent is set by what the block can produce, rather than as a flat percentage of what the land is worth.

Collaborative farming and equity partnerships

Collaborative farming brings two or more businesses together to pool their resources, for better scale and efficiency.

With an equity partnership, an entity is set up with several equity holders.

Both can work for aspiring farmers who want to get onto land without buying it outright.

The full guide, You Can Own a Farm, is free at cultivatefarms.com/resources.

You can build your own plan at cultivatefarms.com/plan.