Is Buying Farmland a Good Investment?

Real estate is among the most sought-after alternatives to investing. When people think of the real estate market, they envision offices, rental houses, storage units, and other buildings.

What happens to farmland?

Many of the world’s richest people utilize farmland as a way to the diversification of their investments and for reasons that are legitimate. Fertile crops are known to yield returns that are higher than the majority of assets, while also offering a lower risk of volatility.

As with every other investment, it is not without risks to be aware. Weather conditions can lead to major reductions in profits and the costs of running farms can escalate fast. When you own your own farm it can be a difficult task at best. You can try an online area calculator for different kinds of measurements.

• Buy Farmland Directly

The best method to make an investment in farmland is to purchase the land for yourself. If you want to do this it’s best to search websites such as Zillow and Realtor.com for farms to buy. You’ll also discover that the options aren’t as wide.

As per the U.S. Sustainability Alliance, 98 percent of farms in the United States are owned by families, which is around 86 percent of U.S. farmland production. A large portion of the land is held by wealthy individuals. For instance, Bill Gates owns 242,000 acres of land in 19 states.

In the end, the amount of agricultural land to purchase is decreasing, with the vast majority being held by a person who is not keen on selling. But, with an amount of investigation you might be able to locate a property that is worth your time. For note, give a try a land area calculator for area calculation.

• Invest In Farming ETFs

One of the most simple and most popular ways to gain access to farmland investment can be to put money into exchange-traded funds (ETFs) specifically devoted to farming. ETFs are a well-known type of investment vehicle that pools money from a vast group of investors to purchase assets in accordance with the prospectus for the fund.

ETFs for farming invest in stocks that represent companies that are farming or commodity futures. One of the most well-known is the Invesco DB Agriculture Fund (DBA) which invests in a variety of agricultural futures, from soybeans to cotton.

• Invest In Farming REITs

Another method of investing in farms would be to purchase farms-focused Real estate Investment Trusts (REITs). These are investments that combine investment funds from a vast group of investors, similar to ETFs. However, REITs that focus on agriculture make use of the investment funds to acquire and manage farmlands for the benefit of shareholders.

If you invest in these businesses, you will benefit large corporations which have agriculture down to an art. One example of the largest REITs for farming is called Gladstone Land (LAND). It owns land across 14 states and is actively producing investors with its farming operations.

• Be Part of the Crowd

Crowdfunding has become a well-known method of raising the funds they require and a lot of those businesses are farmers. There are numerous apps and websites that connect retail investors with farmers in need of money. The growth of crowdfunding for real estate has made it easier for ordinary investors to invest in the investment of farmland.

If you take advantage of investment possibilities investors typically receive the right to own a portion of the farms they help. Thus, when the farmer makes money from the crops he produces by the investors, they will all get a share of the profits.

Where to Invest in Farmland?

One of the biggest hurdles for investors in farming is finding out where to start making investments.

• Real Estate Listings

If you’re thinking of purchasing real estate and managing the farm for yourself then you should look up real estate listings websites such as Zillow, Realestate.com, and LandWatch.com. These sites are primarily concentrated on selling real estate and most offer the ability to sort listings that permit you to look through listings for land-only instead of residential properties.

Before buying a piece of land to farm ensure that your land is zoned specifically to be used as a farm.

• Crowdfunding Platforms

There are some important issues to consider when buying the land directly. The initial investment is going to be substantial, however, farming isn’t a simple task. This is why many investors favor buying land using crowdfunding platforms.

If you buy the land in this manner the farming operations aren’t your obligation. They’re instead the obligation of the farmer to trade shares on the property. Furthermore, crowdfunding platforms allow investors to purchase farmland without having to pay out of pocket. Though most platforms require investment requirements ranging from $10,000 to $15,000, it’s much cheaper than the cost of a farm as well as the equipment needed to run it.

Platforms that crowdfund specifically for agriculture are mostly engaged in connecting farmers with landowners who are keen on forming long-term, profitable alliances. The most well-known platforms are AcreTrader, FarmTogether, and FarmFundr.

However, the vast majority of platforms for crowdfunding that offer to the farm are reserved for investors who have high earnings or net worths that are high. It can be difficult to find platforms that allow investors with less money to purchase the shares of land.

• Buy Farming Stocks, ETFs & REITs

For the majority of investors, the most effective method of investing in agricultural land is to invest in ETFs that are based on farming stocks or REITs. These investments are available to all and the minimum amount is equivalent to the price of one share of the fund, company, or trust. It is typically less than $100.

They can be purchased through any broker that is popular, such as Charles Schwab, E*Trade, and TD Ameritrade, among many other brokers.