Is Farmland a Good Investment? What You Need to Know
Is Farmland a Good Investment? What You Need to Know
[Editor’s Note: Today’s article in a guest post from Michael Dinich who blogs over at Your Money Geek. He’s worked in the personal finance industry since 1999, where he helped families plan for retirement, reduce taxes, eliminate unnecessary expenses, and plan their estates.]
Take it away Michael………………………
Have you ever wondered about investing in property or land? Maybe you’ve thought about looking for farmland for sale. Were you stymied because you couldn’t find a reasonable option? Or perhaps you thought you didn’t have enough cash to invest. If so, I have good news for you.
The fact is, many of us fit this bill. Not only do we not know where to look, but we also find ourselves without time. Therefore we are unable to exert the effort required to find an investment opportunity in real estate or raw land (and turning a profit doing it!). However, it doesn’t remove our desire to take an active involvement in this facet of life.
FarmTogether may be the investment opportunity you’ve been seeking. This platform allows investors to expand their knowledge of agriculture without making a significant lifestyle change. In addition to providing an educational and experiential opportunity, FarmTogether also offers investors the opportunity to diversify their investment portfolio.
Best of all, this platform currently boasts as a lower-risk option that may provide a notable return on your investment.
If we’ve intrigued you thus far, keep reading. We’re going to break down the FarmTogether investment opportunity and give you the insight you need to decide if this is the right portfolio addition for you.
What is FarmTogether?
FarmTogether, founded by Artem Milinchuk, a food, agricultural, and farmland finance expert, was first conceptualized a little less than five years ago. His background and expertise led him to create FarmTogether as a method in which he could provide investors access to a safe, stable, and attractive long-term investment opportunities in the farming industry.
FarmTogether offers individuals the opportunity to invest in farmland, through partial ownership in prime properties.
For example, currently, a mandarin farm in California is available for those interested in joining FarmTogether investments.
They expect this property to generate an average 9.6% cash return to investors and an 11%+ total annualized return over a 5-7 year investment period.
Before a property, such as the mandarin farm, becomes available for investment, it undergoes a thorough industry analysis by several different farming and investment experts.
That due diligence gives each investor some peace of mind knowing that potentially reduces their risk; that any underlying issues or economic factors do not bar the projected success.
Who can invest in FarmTogether?
Currently, FarmTogether allows only accredited investors to invest. While the platform is working toward offering more accessibility, this is an area that is still “under construction” and not something that’s developmentally complete.
There are a few parameters that investors must meet. Some of the minimum investment requirements include a minimum individual yearly salary of $200,000 for individuals or $300,000 if married. Alternatively, investors must also have a net worth of $1 million, exclusive of their residence.
Why would FarmTogether Benefit Your Portfolio?
For risk-averse investors, FarmTogether proves a viable option. One of the most desirable characteristics is the industry’s resistance to inflation.
However, what many investors appreciate most is that FarmTogether provides an actual, tangible, or otherwise “real” investment that will always hold some worth.
This is especially true when considering worldwide population growth. With an ever-expanding amount of inhabitants, the space for farmland is gradually decreasing, while the need for cropland is only expanding.
Therefore the projection is that this tangible asset will only increase in value, as opposed to reducing.
If you need a reference for savvy investors who have leaped farmland investments, the name Bill Gates will quickly rise as one of the most notable.
Diversifying his portfolio in this manner allowed him to invest in an area that does not follow other market trends. That means, for the most part, farmland only increases in value when other stocks and investments decrease in value. Having an investment like this in your back pocket may help to balance and equalize your portfolio in the circumstance of an unexpected market dip.
Finally, FarmTogether assists in navigating the somewhat uncharted land of farmland investment for individuals who wish to pursue the opportunity.
While there are other platforms similar to FarmTogether, they are few and far between. When breaking into a somewhat newer arena of portfolio diversification, it’s most desirable to have the guidance of those who know what they’re doing and can provide expert advice.
FarmTogether finds farmland for sale, does the due diligence, and negotiates the terms.
Upon first glance, it’s easy to assume that FarmTogether would be a volatile investment. Many books’ plotlines thrive on the consequences of last-ditch farming that meets destruction from a swarm of locust, or a drought that left the land dry and without production?
Despite these obvious (and somewhat dramatic) concerns, the one key factor to consider with FarmTogether is that the investment is in the land itself, and not the final production of the crops grown there.
Another misconception is that FarmTogether hurts, rather than benefits farmers. The opposite is true. Often, farmers struggle to have the financial backing to support the quantity of land they require. Therefore, they’re not able to meet their production requirements, and the cycle of economic strife continues.
With the introduction of FarmTogether, farmers can access land and capital through the support of investors, allowing them to generate an income and a volume of product that is profitable.
How You Make Money
FarmTogether has an internal investment committee that engages in comprehensive due diligence to select the best investment options. Additionally, they hire experienced and dedicated external teams to assist in the due diligence.
Investors make money in two ways.
- Land Income – Land generates income, typically either from rent or from profit. In all cases, experienced farmers and farming companies pay rent or contract to work the land. The owners (FarmTogether on behalf of investors) take care of property taxes, expenses, etc. Investors receive cash flow from distributions of net profits after expenses and taxes.
- Land Price Appreciation – The team uses land assessment and market measures to value the property annually. Upon the properties sale, investors receive their proportional share of the profits.
Below is an example of one of the current offerings.
The Bottom Line
As is the case with any investment, it’s essential to understand what is best for you and your financial health. It’s never a good idea to jump into a new opportunity with dollar signs in your eyes and a lack of knowledge in your head.
From the best we can tell at this early stage, FarmTogether is worth consideration from anyone looking for a unique, relatively stable alternative investment.
However, keep in mind that it’s an expensive endeavor, and the goal is to reap your returns over several years. Don’t expect to see huge profits instantaneously or within a short period. Therefore, understand that in the current rendition, you would be investing a significant sum of money.
Currently, liquidity is limited to the projected period before the sale. However, the team at FarmTogether has noted investor concerns about that.
They are currently working on a partial liquidity plan to address the issue in future offerings.
It’s yet another reason to consider an investment with FarmTogether. They listen and respond to investor concerns.
The platform shows a lot of promise. It’s something to keep your eye on in the coming years as the world of farmland investment continues to grow.
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