“You no longer need Bill Gates’ level of net worth to reap the benefits of investing in farmland.” says FarmTogether’s CEO Artem Milinchuk.
Finding the appropriate mix of assets is essential to maximizing long-term returns and protecting your portfolio during unpredictable times. With continued uncertainty imminent, many investors have looked at adding alternative investments, such as gold and real estate, to their portfolio. These two are of the most familiar options to date, they are assets that are uncorrelated with public markets and could produce returns that are less volatile over time in comparison to more traditional investments.
While gold and real estate are both tremendous options, if you’re looking for an investment that combines the best attributes of both, is resilient in times of financial crisis (even during recessions), and serves as a superior hedge against inflation, you might want to consider investing in farmland.
Why Invest in Farmland?
For many investors, farmland might seem like a foreign concept – even to those familiar with real estate. However, farmland has been a popular option for asset managers, pension funds, and the ultra-wealthy for years. In fact, news recently broke that Bill Gates is now the largest farmland owner in the U.S.
This should come as no surprise, farmland offers steady, reliable returns with lower volatility that many investment options. But, until recently, high-barriers-to-entry have made investing in farmland extremely difficult for the average investor.
With a boom in farmland ownership transfers expected over the next decade and the introduction of investment platforms like FarmTogether, investments into farmland are now accessible (without needing Bill Gates’ levels of wealth first).
Is Farmland a Sound Investment?
There are many characteristics of farmland that make it a sound investment, but here are the top six:
Farmland’s uncorrelated returns compared to traditional asset classes, such as stock, bonds, and even real estate, offer welcome diversification. When these assets drop in value, investments in farmland remain virtually unaffected.
Farmland has low volatility when compared to most other asset classes, providing stability for investors during times of economic crisis like we saw with COVID-19. The reason for farmland’s stability is the perpetual need for food: people still need to eat, no matter what economic factors are in play.
Farmland has consistently produced high returns for investors over the last several years, through both price appreciation and periodic distributions like lease payments and crop sales. In fact, returns to farmland averaged ~11% total annual returns from 1992 to 2020.
The U.N. predicts that the global population will increase by 2 billion people by 2050. However, the supply of farmland is steadily declining. In the case of supply and demand, the land that is used to feed the rapidly growing population will inherently increase in value.
While gold is the most popular inflation-hedging investment, returns to farmland investors have actually outperformed gold over the last 30 years. This is because commodities, including food, tend to increase with inflation. When we see inflation rise, like we might see in 2021, the price of food increases, and therefore, the value of the land that produces it.
Research shows that sustainable farmland management could double or triple a farm operation’s yields without clearing additional acreage. However, these transitions are extremely costly to implement. By directly investing in farmland, investors are channeling the funds required for these sustainable transitions, in turn, reaping the benefits of increased yield efficiency and higher land prices.
Who is FarmTogether?
FarmTogether is an investment platform offering direct access to US farmland ownership.
Recognizing that farming is the single most vital industry on our planet, FarmTogether aims to drive sustainable and prosperous food systems that work for everyone in our globally connected world.
To achieve this, they’ve created an all-in-one technology-powered platform providing direct access to farmland ownership. It’s similar to real estate crowdfunding platforms, but for farmland.
Through FarmTogether, investors can browse different investments, review due diligence materials – like deal structures, operating partner details, and private placement memorandums – and make investments quickly and seamlessly. Unlike investing in a fund or REIT, FarmTogether investors have complete visibility into their investment throughout every stage in the investment process and they have complete control over where their investment goes.
FarmTogether offers a wide range of row and permanent crops to choose from, specifically in California and the Pacific Northwest, allowing investors to diversify their portfolios based on market trends or crop success rates.
How Does FarmTogether Work?
FarmTogether’s team sifts through hundreds of properties and completes thorough due diligence, including industry analysis, soil, tissue, water rights, on-farm equipment, and farm’s potential for capital improvements. The team chooses only top-quality, institutional-grade farmland that they themselves would invest in. When a property meets FarmTogether’s rigorous standards, the offering is then available on the platform and open to accredited investors.
When you invest with FarmTogether, you’re purchasing shares of an LLC, therefore becoming a partial owner of a farm of your choice. As a partial owner, you will receive income from land value appreciation, lease payments, and crop yield.
After you’ve completed your investment, FarmTogether and the selected operator manage each offering. You’ll receive regular updates on your investments, like land valuation, productivity, photos and videos, as well as cash distributions.
You just sit back, relax, and enjoy your new passive income stream.
Who Can Invest with FarmTogether?
To invest with FarmTogether, you must meet the SEC’s Accredited Investor definitions. The current definition requires that an investor earns an income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years OR has a net worth over $1 million (excluding the value of the person’s primary residence).
How To Invest with FarmTogether?
Check out FarmTogether’s step-by-step tutorial on how to get started and make your first investment. Within the video, David Chan, FarmTogether COO & Founding Team Member, walks investors through the entire process, from registering and creating your account, to reviewing their live and past offerings, to making your first investment on the platform.
Even better, the FarmTogether team has a customer-first 24-hour response policy. If you have any questions on getting started or future offerings, contact their team at firstname.lastname@example.org.
Additional Features & Requirements of FarmTogether:
- FarmTogether targets investment opportunities that can offer 7-13% returns with 3-9% cash yields
- Minimum investments range between $15,000 and $50,000
- Investment hold periods range from 5-12 years
- FarmTogether charges a one-time fee between 0.5% and 1.0% for your initial investment in addition to an annual management fee, which is around 1% of your investment value.
Farmland has proven itself to be strong, stable, and attractive in the long-term. If you’re interested in getting started with farmland investing, we recommend FarmTogether.