Buy or lease land

More country can mean more stock, more scale and a better spread of overheads. But you don't always have to own it to run it. Leasing is a real option, and for some families it's the better one.

What buying gives you

When you buy, you control the land for as long as you own it. You can improve it, fence it and plan for the long term. If land values rise, your equity (what you own less what you owe) grows. Land is also security the bank can lend against later.

The cost is cash and debt. You need a deposit, purchase costs such as transfer duty (stamp duty), legal fees and a valuation, and then the interest and repayments on the loan. Rates, insurance and upkeep come on top.

Land values can fall as well as rise, so don't count on growth to make the numbers work.

What leasing gives you

A lease lets you run more stock without tying up a large deposit or taking on big debt. Your yearly cost is the rent, plus whatever the lease makes you responsible for, such as fences or water points.

The downside is security of tenure. When the lease ends, the owner may sell, raise the rent or take it back. Any improvements you make may stay with the land. Read the lease carefully, and get your solicitor to check it.

Compare the yearly cash cost

A fair first comparison is the yearly cash cost of each option:

• Buying: interest on the borrowed money, plus rates, insurance and upkeep. Remember the principal repayments and the cash you put in as a deposit.
• Leasing: the rent, plus any costs the lease puts on you.

Then ask what the deposit could do elsewhere. Cash tied up in land can't pay down the overdraft or buy stock.

Our buy or lease land calculator sets the two side by side. Use real quotes: the asking price, the lease rate on offer and an interest rate from your lender.

Questions to ask

• How long is the lease, and is there an option to renew?
• Who pays for fences, water and weed control?
• Would buying stretch the business too far in a dry year?

Our before you buy land checklist covers the rest. Tax and how the purchase is structured are questions for your accountant and solicitor.