SPECIAL REPORT: BUILDING A PORTFOLIO
Invest to get ahead Dairy farmers wanting to invest in opportunities off-farm have benefited from Mark and Measure courses run by DairyNZ. Anne Lee spoke with Paul Bird to find out how dairy industry workers can get ahead financially without getting burnt.
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nvestment on and off-farm can help fast track progression, diversify risk or even create pathways for succession. Whatever it’s for, investing your hard-earned cash into an asset should always be done with sound advice. But there are a few fundamental checks and balances you can do when assessing a venture, no matter what it is, DairyNZ’s Paul Bird says. He’s been running Mark and Measure courses for many years and has seen farmers invest in a wide range of things including young stock, mixed-age cows, support land, houses in town, storage units, commercial property, additional sharemilking businesses, managed funds, KiwiSaver – you name it. “What I usually say to them – and it may sound obvious – but do your homework, build your knowledge so you can do it well. “If it’s rearing calves – learn how to do that well, if it’s owning a house in town to rent out – learn all you can about the market, about your responsibilities as a landlord. “Understand the upsides and the downsides, so the risks. “They might be purely financial – what happens if interest rates change, if returns don’t meet expectation, what might be the reasons returns would be lower, are they short term downsides you could ride out or could they be fatal? “There could be other factors like finding out you actually don’t like being a landlord and renting out a house and it takes too much time and travel. “Whatever it is, make sure you fully understand it and if you can get good at it before you invest. “Some couples are great at doing up houses and love it whereas others aren’t. “If it’s an equity partnership make sure you really know who you’re going into partnership with, that your values are aligned. Know the farm, it’s strengths and weaknesses and know the numbers. “Do your due diligence well and get professional advice
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to interrogate the numbers properly and make sure business structures are set up well.” Paul says building up livestock numbers has given many young farmers a good leg up, but there are multiple permutations to how this is done that will affect just how good the margin and equity growth is including whether they’re dairy or dairy/beef stock, whether they’re free or at a cost, the cost of rearing, where and how much grazing is. It can boost annual equity growth but it doesn’t come without risk either – one death can impact a margin as can timing of sales in weather affected markets. “Talk to others who have done it so you can learn from them.”
Partnering with others Paul says many young farmers have made big progress and achieved farm ownership goals by investing in the intangibles such as their own reputations. “There are a lot of creative ways people get into farm ownership and that can often include partnering with others but to make those connections you need to invest in yourself. “Your reputation is a key asset and having a reputation as a hard worker, being honest and known for your integrity – people notice that. “So, before you even think about what you might invest in there are a couple of key principles you need to think about first. “First, be good at what you do, so be good at farming and learn all you can and be good at saving because you’re going to need that saved cash to get into any venture and kick start your progression. “Second, when you’re looking at investing, think about what interests you, what you’re good at or work out how
