Assets earn income depending on harvest cycles. When producing, beehives and blueberry bushes earn twice a year while solar panels earn each month. Both beehives and solar panels take time to swarm and install respectively. This means there may be a delay before your asset starts production.
Farming assets typically take time to generate income. Bee colonies require time to mature and increase the volume of honey, wax and propolis they can produce. You can expect a lower income in year one, with increases over the next nine years of the hive’s life. Solar panels are ordered, a site selected and contracted, installed and then tested. When the site is live, you will start to accrue income and this will be paid to you in line with the landlord’s agreed payment schedule.
For beehives, your projected income over the 10-year term is around R9 000. This gives you an average nominal return of 21% p.a. When the original purchase price taken into account, you arrive at the IRR of around 14% p.a. (which also takes into account the time value of money, bearing in mind that returns increase every year, in line with inflation and maturity of the hive). Your returns are projected to be 4.5% in year one, increasing to 28% in year 10, for the average nominal returns of 21% p.a.
Your beehives will only start earning income when they are swarmed. We will let you know when this is. It can take around eight weeks to swarm a hive and it then takes time to establish a bee colony that is capable of producing enough honey, propolis and wax to be harvested.
If this is to be viewed as an investment vehicle as opposed to a source of passive income, then investors should also look at the revenue generated from reinvesting their income, as this would further boost their returns. If you reinvested your harvest income at each harvest period in a typical risk-free interest-bearing account paying 7% p.a., your IRR would increase to 19% - your compounded effective interest rate.
You can also apply for a tax benefit to boost your returns even further.