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No Rest Farm

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I've had a few cows for 5-6 years and currently have about 30 pairs and a few steers I raise to sell beef by the quarter or half. Im glad I started slow because it's really been a learning process. I've wanted to expand and farm full time but just haven't found the pasture to rent. It's looking like I'm going to get several opportunities this year which could result in running my numbers up to around 100 pairs.
So my question revolves around how to pay for the additional cows. I really don't want to keep heifers because it would take me a number of years to go from 30 to 100 cows. Almost everything I own is paid for except my house (about 5 years left on it). I'm 37 and would like to be full time farming in less than 3 years. This would be a huge step in that direction.
I think my two options are to borrow the money or to pull it out of my retirement plan. I'm a young guy and plan to farm until I'm dead so the cattle would sorta be my retirement anyway. I'm leaning toward my 401k because I think if I didn't owe anything I would have a lot better quality of life. I think it would also allow me to retain my best heifers for future expansion if I'm able to find more land instead of having to sell to make a payment.
It seems like a good time to buy into the market. I'm interested in any advice you may have for someone who is looking to really expand over the next few years.
 

Son of Butch

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Don't touch your 401k, just a plain dumb idea.
You're on pace to have everything paid off by age 42 you're a smart guy, you'll figure it out, but not the 401k.
If the cows can't pay off a business loan, then you don't need more cows. They've gotta pay for themselves.
 

angus9259

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Are you talking about borrowing to buy land or borrowing to buy cattle?

First, taking from a 401k is a VERY expensive proposition if you used pre-tax dollars to do it. Can't imagine a world in which that's a good idea. You can frequently BORROW against your 401k. If I were going to borrow, that's where I would do it AS LONG AS YOU KNEW YOU WOULD PAY IT BACK. If "borrowing" from your 401k becomes "withdrawing" from your 401k, then walk away.

Second, borrowing to buy cattle I can't recommend to anyone. If you get some additional land, retain your heifers and background your steers to eat down the fields till you get your numbers up. 30 animals can become 100 in a hurry especially when you're 37. Sounds like you've done a great job staying out of debt - keep it that way.

Borrowing to buy land is a different matter. If that's the case, I would borrow first from my 401k since you pay yourself back, second, I would attempt to finance through a bank if the owners won't do a land contract.

I also can't imagine a world in which cattle raising is a good retirement plan. Hope you find a retirement plan a little more secure than that so you can raise cattle as your retirement "work".
 

Son of Butch

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No Rest Farm":1ptafv4p said:
I currently have about 30 pairs and a few steers I raise to sell beef by the quarter or half.
So my question revolves around how to pay for additional cows.
my two options are to borrow the money or to pull it out of my retirement plan.
boiled it down for you
 

Son of Butch

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angus9259":3pqpvhna said:
Are you talking about borrowing to buy land or borrowing to buy cattle?
....borrowing to buy cattle I can't recommend to anyone.
I also can't imagine a world in which cattle raising is a good retirement plan.
Hope you find a retirement plan a little more secure than that so you can raise cattle as your retirement "work".
You don't want to put your retirement money all in one basket. The 401k keeps you diversified.
Never have more than 5% of your total 401k in stocks of the company for which you work, same reason diversification.
 

No Rest Farm

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I'm not saying do away with my retirement plan, just use it instead of borrowing. I'm not a real big fan of debt especially to buy cattle. I guess my biggest fear is short term if cattle go down even more and I have payments to make
 

Hunter

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I would not borrow from the 401K. If the company lets you go you must repay that or get hit with a 10% withdrawal fee. Not sure how much you are putting in a year but hopefully you are doing up to what the company matches, if any. That is 100% return on that money. If you are putting more than the match maybe lower it to the match and use the other funds to buy cattle as you go. Like dollar cost averaging.
 

Bigfoot

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My advice, would be to expand a little at a time. Keep some heifers. Buy a few young cows. Grow over time. If you don't wont debt, that's your best option. No way id borrow against, or tap in to my 401k.

Debt free is nice, money for retirement is nice, having cows is nice. You may not be able to achieve all of those goals at once. Pick the best option for you.'
 

backhoeboogie

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No Rest Farm":2teymla3 said:
I've had a few cows for 5-6 years and currently have about 30 pairs and a few steers I raise to sell beef by the quarter or half. Im glad I started slow because it's really been a learning process. I've wanted to expand and farm full time but just haven't found the pasture to rent. It's looking like I'm going to get several opportunities this year which could result in running my numbers up to around 100 pairs.

What is your market? I could sell two dozen steers by the halves each year. (after doing it for a long time) If I had to jump to 100 head, that would be difficult. I'd be out hustling trying to market. You attract a lot of attention and you have regulations all over yourself. Business can be cut throat. Competition. 10 good people and 1 jerk. It only takes one.

If all business is America used the rule of not borrowing, we wouldn't thrive for lack of capital. Businesses borrow money. But you have to be a shrewd businessman.

Borrowing has worked out for me on buying land. I've sold at good profits. I haven't had to borrow to buy cattle, but if I had a good business case analysis to do so, I'd jump.
 

Son of Butch

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No Rest Farm":1vbj0soz said:
I'm not saying do away with my retirement plan, just use it instead of borrowing. I'm not a real big fan of debt especially to buy cattle. I guess my biggest fear is short term if cattle go down even more and I have payments to make
NOPE, dumb idea, just get that plan out of your head.
It would be different if you were going to use it as a down payment on your 1st home... but Cows... no way.
Don't even think about using it for non-retirement investing. Maybe if you had a hot tip on a horse... but cows? no way
Any investment that can't even pay off it's own business loan is a bad investment.

And if you borrow enough money and cattle drop... they can't touch a 401K in bankruptcy proceedings. :)
 

No Rest Farm

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Again I really appreciate the responses. It helps me gain a better perspective.
The biggest reason I really want to jump at this opportunity is because most of the land available to rent was my wife's family farm and it joins my land. I need to talk with my farm credit guy and my accountant as well.
Would y'all say the next two years are the best time to expand it would you say the market will be down longer than that?
 

TennesseeTuxedo

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No Rest Farm":10xckosr said:
Again I really appreciate the responses. It helps me gain a better perspective.
The biggest reason I really want to jump at this opportunity is because most of the land available to rent was my wife's family farm and it joins my land. I need to talk with my farm credit guy and my accountant as well.
Would y'all say the next two years are the best time to expand it would you say the market will be down longer than that?

I hope we see a rebound in prices in 2018 but there is just as good a chance we won't.
 

Bigfoot

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No Rest Farm":2c3csenn said:
Again I really appreciate the responses. It helps me gain a better perspective.
The biggest reason I really want to jump at this opportunity is because most of the land available to rent was my wife's family farm and it joins my land. I need to talk with my farm credit guy and my accountant as well.
Would y'all say the next two years are the best time to expand it would you say the market will be down longer than that?

Nobody can truthfully answer that.
 

Son of Butch

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Now there's a 3rd option, the wife's family farm, figure out how to inherit the land and borrow against it.
Large family or only child? (Can you make it look like an accident?)
See, if you keep workin' at it you'll come up with a better plan than the 401k.

The next 2 years the best time?
Nope 8 years ago was better... sorry my darn crystal ball is cloudy and only goes in reverse. :)
 

No Rest Farm

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Son of Butch":3ee3tjn9 said:
Now there's a 3rd option, the wife's family farm, figure out how to inherit the land and borrow against it.
Large family or only child? (Can you make it look like an accident?)
See, if you keep workin' at it you'll come up with a better plan than the 401k.

The next 2 years the best time?
Nope 8 years ago was better... sorry my darn crystal ball is cloudy and only goes in reverse. :)

It was my wife's grandfathers farm and its split between several aunts and my mother in law. I own the old house and a small amount of land right in the middle. I get along with all of the family very well. It's been my wife's dream to farm and live there. I just have to make the numbers work
 

Rafter S

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No Rest Farm":1g210cqf said:
I'm not saying do away with my retirement plan, just use it instead of borrowing. I'm not a real big fan of debt especially to buy cattle. I guess my biggest fear is short term if cattle go down even more and I have payments to make

Then stick with that. Expand slow and avoid risk.
 

skyhightree1

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Bigfoot":uiofl4ol said:
My advice, would be to expand a little at a time. Keep some heifers. Buy a few young cows. Grow over time. If you don't wont debt, that's your best option. No way id borrow against, or tap in to my 401k.
'

That's what I did/do... Good Advice
 

Brute 23

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Bigfoot":1w6wc4tv said:
My advice, would be to expand a little at a time. Keep some heifers. Buy a few young cows. Grow over time. If you don't wont debt, that's your best option. No way id borrow against, or tap in to my 401k.

Debt free is nice, money for retirement is nice, having cows is nice. You may not be able to achieve all of those goals at once. Pick the best option for you.'

I agree. There are always deals to be had no matter if the market is up or down. Start a savings account and throw a little cash in it here and there as you can and cherry pick cattle here and there as you can afford them.

DO NOT BORROW FROM YOUR 401K FOR ANY REASON. If you were to be laid off that amount would become due, in full, with in 60 days. If you can not pay it back you will pay your tax bracket plus 10% in penalties on that money. That is higher than a pay day loan or credit card interest rate. If you must borrow go down to a credit union or small bank.
 

backhoeboogie

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No Rest Farm":3joifemv said:
It was my wife's grandfathers farm and its split between several aunts and my mother in law. I own the old house and a small amount of land right in the middle. I get along with all of the family very well. It's been my wife's dream to farm and live there. I just have to make the numbers work

Run Far away!!! Your brand new fence is not going to be what half of them had in mind. You cut that old dead tree out of the fence row and you killed it. People show up hunting and leave their shotgun shells all over the ground and drink bottles too. They pop a dove and push fences down to retrieve the bird. Stretch your wire etc. I can go on. You aint got a say in anything. If you do you're the azzhole. Lock on your gate and you don't have a key. "Go see Mary if you need in"

Run Dude. Run from this! I aint against borrowing the money if you have a business case analysis. I am against getting screwed and you becoming a bigger outsider than what you already are. It might look good now, just wait. Blood is thicker and if your wife sides with you, it only makes it worse between you and the family.
 

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