Some one smarter than me explain the BTO!

[SASKFARMER3]

Talked to a banker friend and most that are flipping every year or two have 0 equity in their equipment and most owe more than the trade in value.

Just saying the dealers are passing on the idiotic price on to the buyer and most aren't aware of this. Blow them out.

Thats another topic for another day.

interested on exit plan FLIP and how you make out.

[MBgrower]

Could you image how much more wealth we would have had we not flipped machinery as often as we do? how much more land we would own, and much larger investment portfolios. Really, when you think of it how much more efficient is a new tracked tractor, or new combine? So old machines break down, but if you had a half decent heated shop, you can spend all winter red lighting/green lighting your own equipment. the cost of repairs is much cheaper than depreciation on new equipment (see Ritchie bros) plus the older equipment is so much simpler. ahh, the lure of new paint, and the need to impress the neighbours.

[farmaholic]

By incorporating you have held the Taxman at bay on a portion of your income.... so be prepared to pay up.

It's not a bad theory to incorporate but it needs to be managed.

MBgrower: there comes a time that new paint does nothing for you! "Egotistically" In fact you think, why the **** am I doing this? I could buy/build a pretty darn good house for the cost of this major piece of equipment that will depreciate to scrap iron value in twenty years! But if you can afford it....to each their own! But its the worst investment going. And people think the land is too expensive....


SF3.... I am ashamed to admit that I really don't know if, when you are about to "hit the wall", you are any better off owning your land personally or through a Corp(and signing personal guarantees). Either way I think the end result is the same!

What I don't understand is, if you are trying to tell me people think they are going to be off the hook if the land is going to be repossessed that is owned by the corp but don't understand that the personal guarantee they signed makes it no different than if they owned the land personally. This is so far from being a reality for me it doesn't concern me! (but is good to know)

[iceman]

You nailed it ice!!!

Sad thing is I don’t think the ones that are leasing or financing the bulk of the purchase understand this.

If little to manageable debt, spend as you like

I'm not sure if it's a AG thing or a society thing. Probably more of a society thing because of a long period of access to such easy capital.

Land regardless of the price in 20 years will still remain a productive asset. You must be able to float it over the long term though. Will that S790, 9340, or 780 be a productive asset in 20 years? You need machinery to farm but this has gotten crazy.


Iceman Out

[AlbertaFarmer5]

This existing on the edge of insolvency, while living far beyond ones means phenomenon isn't limited to farmers or BTO's.

I've attended a number of bankruptcy auctions in the oilfeild manufacturing business during this downturn. They were starting to fail even before the crash, leveraged to the max, all the latest shiniest equipment, biggest shops, yard, cranes, offices, luxury vehicles. Sure did look impressive from the outside though. Lots of bargains to be had on nearly unused equipment. In at least one case it was a successful family business, that the younger generation leveraged into exponential growth and lost it all.

The timing of a big expansion either makes one look brilliant or bankrupt, not much in between.

I really believe that many business models are simply set up to extract as much as possible for the shareholder/owner, live the good life while it lasts. The owners of these companies I refer to above were still driving around in their luxury automobiles while their auctions were happening.

[farmaholic]

And what example has government set regarding debt and paying it back? Besides it was their policies that made it possible for Joe Borrower to get in as deep as he has, albeit the choice was ultimately his!

Why not live high on the hog and beyond your means if there are hardly any repercussions for not paying back what you borrowed. For some there seems to be no shame in bankruptcy.

As I said in the beginning of this thread.....just because they will give it to you doesn't mean you have to take it.

[farmaholic]

What if.....some "operations" are using the current economic policies, opportunities and the "Great Sask Land Rush" to further increase their own wealth by creating Operating Corporations that they may be preferred shareholders and employees of and hold luctrative board seats. Skimming cream! Creating their own opportunities and capitalizing on them. Is it illegal, is it immoral or just capitalizing. If the Op Corp hits an iceberg do these special individuals really go down with the ship or have they their own specially designed and built life raft they're sitting in at the first sign of the main vessel taking on water?!?

I think there are two camps....one where someone is lulled into the BTO style of farming by Industry and their own naive ego. Then those who do it by design....like the above description.

[bucket]

Did Gary Pike suffer any financial hit with his attempt. ....


And what about those New Holland farmers that have office workers....

[biglentil]

As long as the outside investment keeps flowing in the crop really does not matter. Just ask Bernard Madoff. All that matters is the optics from a far. Fancy drone videos, heavy marketing, expensive branding, lots of shiny paint perfectly aligned and the cherry on top inventive accounting. After a while you might even believe that your the worlds greatest farmer even though your crops are the laughing stock of area. Big bin yards are fantastic for marketing. The investors think they are full. Its not about neighbours helping neighbours its squish the the competition.

[MBgrower]

Did Gary Pike suffer any financial hit with his attempt. ....


And what about those New Holland farmers that have office workers....

any farm that has non family office workers, and an office located off the farm will be the first to go.

[farmaholic]

We should note that even some farms that look like they might resemble SF3's description, they are actually very well heeled and financial powerhouses. Not leveraged to the max or using other people's money to drive "their" farm growth! That make calculated well managed risks.

So when that special land comes up for sale they are able to pounce on it without putting their operations at risk, in fact they can probably afford to be on the wrong side of the trend(buying high when things have plateaued or are coming down)... because they look at it as a long term investment for the family operation and have every intention on staying active farmers for the foreseeable future.... because the kids want to be involved and part of it.

Then there are those "small" operations who likely have stronger balance sheets and just as profitable(if not more) than those who, as SF3 described, are just spinning their wheels....

I know where I want to be! The days of wanting to move mountains are well behind me.

[Oliver88]

After reading this thread there are a lot of good points and eye opening points for a small-medium sized farmer with older iron.

Maybe Iceman is right and INP would be a good investment after all??