Assessing Farmland as an Investment: A Guide to Getting Started

FarmTogether sponsored this post. All opinions expressed are mine.

You might be overlooking a very interesting investment option when you start to diversify and build your wealth: farmland.

You don’t have to be a farm to invest in real estate! Why has farmland been a more attractive investment in the last few years?

Statista says that the United States’ total farmland in 2014 covered approximately 913,000,000 acres. By 2020, the total area of farmland in the United States will be approximately 896 million acres.

If the amount of farmland decreases, you might think it’s a sign that your investment is weak.

Due to the fact that farmland availability is declining and has little correlation with any other asset class, it is in high demand. This makes it a great asset for your portfolio.

Are you ready to find out more about why farmland is a great investment? How can you add farmland easily to your portfolio. Here are the answers to these questions and many more. Let’s get started!

Table of Contents
Farmland is a good investment.
Why invest in farmland?
How can I invest in farmland?
FarmTogether is a great place to invest in farmland
Farmland is a good investment.
The main question is: Is farmland an investment worth it?

Farmland can be a good addition to any portfolio. Farmland historically has provided investors with strong returns, helped them hedge against inflation and had a low correlation to the traditional market’s movements. The amount of farmland available continues to decrease, but the need and demand continue to grow.

As with any other asset class, investing in farmland is not without risk. Diversifying your investments is important, as you don’t want to risk all your money in one location.

Let’s look at the reasons why you should consider investing in farmland. Data and analysis can show you some past (and present) results.

Why invest in farmland?
Investors choose a certain asset class because they want to increase their wealth.

Why invest in the first place if you’re not expecting a decent return on your investment?

Forbes reports that farmland is a $9 trillion global market with historically high returns. For the last 47 years, U.S. Farmland has produced returns of more than 10%!

Farmland continues to show strong absolute returns. FarmTogether points out also that farmland averaged a total annual return of 11% (income + price appreciation), from 1992 to 2020.

You can generate a return on your farmland investment in a variety of ways, including the increase of its value, crop returns, payments to farmers for farmland, or any combination thereof.

There are also a few other reasons why farmland is a great investment.

As we have already mentioned, farmland can be a good way to diversify an investment portfolio. The more you can be strategic about “how” you invest and “what”, the better you will do during times of economic instability.

Farmland is not correlated with the stock or gold markets. Farmland’s volatility has also historically been lower than other assets, making it an attractive option.

Strong Demand
You read in the introduction that farmland is decreasing. This will only increase the demand for land and its value.

Farmland is also needed to produce alternative fuels and other resources, as well as food for humans and animals. You as an investor are encouraged to invest in farming because the need will never go away.

Alternative To Real Estate
Farmland is a type of real estate. You may already be investing in commercial properties or rentals, or you might not want to become a landlord.

Farmland investment is an excellent way to get into “real estate”, but in a category that has historically had less volatility.

The traditional real estate market can be very competitive, and you may not want to get involved with it at this time.

How can I invest in farmland?
Farmland sounds like an interesting investment.

You may be wondering how to get started investing in farmland. There are several options that you can consider, and there is one method that is easier than ever.

  1. Purchase farmland directly
    Want to invest in agricultural land? You can buy an entire farm. Investing in agriculture is expensive and takes a lot of time.

You can purchase farmland and rent it to farmers who want to cultivate crops or care for livestock.

  1. Investing in farmland loans
    According to USDA, farm debt will increase by $9.6 Billion (2.2%) (in nominal terms) to $441.7 Billion (in nominal terms), mainly due to an expected 3.1% increase in real estate debt.

You can also buy farm debt to get regular payments (with interest), when the debt is paid off by farmers.

  1. Farmland REITs and Equities
    You can also invest in REITs and equities that are traded publicly on stock exchanges. You can get a lot of exposure to agriculture, farmland and farming by investing in REITs or equities, which are publicly traded on the stock exchanges. However, you don’t diversify from the volatility in the stock market.
  2. FarmTogether Crowdfunding
    FarmTogether is the easiest way to buy farmland with less hassle. The platform allows you to easily invest in farms across the United States, or source farms for exclusive ownership if your finances allow it.

Learn everything you need about the top farm investment crowdfunding platform in the following section.

FarmTogether is a great place to invest in farmland
Investing and diversifying your investment portfolio has never been easier. With FarmTogether you can scan the farmland listings to find investments that are right for you.

FarmTogether has proven to be the easiest and most convenient way to invest in farmland. Find out more about the company and how it operates.

How does FarmTogether work?
FarmTogether makes it easy to invest. It is much simpler than searching for farmland and deals yourself.

FarmTogether only chooses properties they would invest in themselves. Using their expertise in the industry and technology, they select only the top properties to share with investors.

The farmland investment is then added to the “Offerings” section, where investors can learn more about the property. Due diligence materials, market values drivers, operating agreements and more.

FarmTogether focuses its efforts on investment opportunities that return between 7% and 13%, with a cash yield of 3% to 9% – net of any fees.

An example of a FarmTogether offer.
Minimum investment for farmland is $15,000. The minimum investment for farmland properties is $15,000.

To learn more, read about FarmTogether’s investment strategy and philosophy.

What are FarmTogether’s fees?
FarmTogether charges a fee due to the convenience and ease of use that investors enjoy.

FarmTogether has a fee structure that is lower than industry average. By using their self-serve online platform, you can keep costs low. Fees will vary depending on the deal. You can see them listed next to each offering.

Who can invest in FarmTogether?
Farmland investment is usually a bigger investment, but there are still risks involved. FarmTogether requires accredited investors.

Accredited investors must meet the SEC definitions, including having an income over $200,000 for the past two years and a net-worth of more than $1 million, excluding primary residence.

The SEC has published its Accredited Investor Guidelines to help you learn more about them and make sure that you meet the requirements. The SEC has updated the definition for the first time in decades.

FarmTogether has written more about this change and mentioned:

A knowledge test is an alternative to income and wealth testing in the new definition. Accredited investors are also individuals who have a Series 7, Series 65 or Series 82 license. The SEC argued that these series exams require a thorough understanding of capital markets and financial concepts, which makes them an excellent test of financial sophistication.

When can I expect to receive my returns on FarmTogether investment?
You will receive a return on your investment as soon as you invest with FarmTogether. This includes ongoing income payments, and price appreciation after the holding period.

Your income will be paid out quarterly, semi-annually, or annually depending on the agreement. The money will be directly deposited into your account.