Farm Land

[ktdtx]

Just read about this. Anyone ever invest or heard of Farm Together..a way to invest in farm land as an alternative asset?


https://moneywise.com/investing/rea...0425&utm_content=oath_mon_20425_New+platforms

 

[oldtimer]

There has been a couple recent threads on the Bogleheads forum.
Investing in Farmland?
What are your thoughts on investing in farmland?

 

[ktdtx]

I don't have any real thoughts other than trying to understand some alternate investments that might offer some protection against the (IMO) looming inflation. Somehow I cam across this and wondered if anyone had experience with them.


https://farmtogether.com/


Thanks for the links--I'll look at them.

 

[luckydude]

Just read about this. Anyone ever invest or heard of Farm Together..a way to invest in farm land as an alternative asset?


https://moneywise.com/investing/rea...0425&utm_content=oath_mon_20425_New+platforms

DW and I invest in farmland.

We checked out FarmTogether but do not invest with them.

Investment in farmland requires large capital outlay, takes a lot of research and requires an absentee investor to build up a local support system of folks who perform different functions required to manage a farm. Basically you have to pick a geographical location and make all your investments in that general area to leverage the support system that you build up. It would be very difficult to buy farms in disparate locations and build up a support system at each location.

Taking all that into consideration, FarmTogether makes sense for investors who want to invest in smaller amount and don't want to deal with the hassle of research and hands-on management. Think of it as a mutual fund of sort for farms. The downside is obviously the high management fee and expenses that can eat into your return. And there's no visibility in how their expenses are incurred (for example, they could tell you that a stock pond is leaking and quote a certain price for repairs and you as an investor wouldn't know the real repair cost). Also, investors would be investing largely for returns on farm rental and not so much on the potential of land appreciation and possible eventual development, which is the real jackpot for land investment.

 

[street]

I can't help you on your question of investing with FarmTogether Group because I haven't. I can say I have done very well owning land and selling land through my life. I wasn't in the real estate business as a career but wanted land and always looked for the very best buy and bought.

All the dirt I have owned has been cattle country or farm ground. I bought bare land no houses or structure etc..

I had an irrigated farm I bought when I was in my early 30's and sold it when I was 50. I rented most of it out and did very well renting and farmed a small portion myself. It also was a good thing for my taxes on owning a working operation.

I made money through all those years and sold it for 14 times more than what I bought it for.

I have ranch land now and got a great buy on it. I bought more last year which would increase the value of the entire ranch if I ever had to sell it.

I know most will say there isn't any money in farm ground but in my experience, it has done me very, very well.

I like the idea of my investments in land and not just being in the markets.

 

[luckydude]

I can't help you on your question of investing with FarmTogether Group because I haven't. I can say I have done very well owning land and selling land through my life. I wasn't in the real estate business as a career but wanted land and always looked for the very best buy and bought.

All the dirt I have owned has been cattle country or farm ground. I bought bare land no houses or structure etc..

I had an irrigated farm I bought when I was in my early 30's and sold it when I was 50. I rented most of it out and did very well renting and farmed a small portion myself. It also was a good thing for my taxes on owning a working operation.

I made money through all those years and sold it for 14 times more than what I bought it for.

I have ranch land now and got a great buy on it. I bought more last year which would increase the value of the entire ranch if I ever had to sell it.

I know most will say there isn't any money in farm ground but in my experience, it has done me very, very well.

I like the idea of my investments in land and not just being in the markets.

Our investment experiences have been the same. Land investment has been very lucrative for us.

One great thing about buying land is that unlike stocks, a piece of land doesn't have an army of analyst following it and tracking it, so once we figured out what to look for in land investment (e.g. highway/major road frontage, no power line easement, no floodplain, water available, good soil/hay production, etc.), it has been very easy to identify good, undervalued properties to buy (and bad properties to avoid). Also, having a solid network of locals really helps in identifying good properties for sale before they get formally listed.

Sale of land by heirs in particularly can be of good value, because heirs usually just want to get rid of a property they inherit instead of trying to maximize returns. We bought one such parcel 20 months ago at below market value from an heir, subdivided it, put it water meters and sold the lots (except for a large street corner lot which we are keeping for future commercial development) for 4x what we paid for.

We started buying about 14 years ago and since then, the average land price/acre in the area has gone up 6x, helped by encroaching suburban development and the creation of a new 10-square mile water reservoir/lake with recreational opportunities. Got a few thousand acres (all paid in cash) yielding a very nice income from renting to farmers and ranchers right now and still buying more every year.

 

[all4j]

1st, let me say that I'm in general a proponent of farmland. "Farmland" is a broad, general term for a distinct type of real estate. As such, little said in general is always true & specifics of the site matter hugely. I'll withhold getting further into that & focus on the specific though...which I admittedly have not invested in. I have in the past looked over similar & most comments will be about that general space.

Farmtogether is a crowdsourcing route for farmland. As such, it will share many of the plus/minus of other crowdsourced real estate. Crowdsourcing hasn't fit my needs, but might for others. Most I've seen are limited to accredited investors & that rules out many. Their web site likely touts many positives, so I'll look mainly at the drawbacks.

Usually, what you really get for your money isn't a name of a property deed; rather you get a fractional interest in an LLC. So, it becomes quite important to understand how the LLCs are structured. It probably isn't a separate llc for each piece of property. Then start thinking about what can go wrong. For example, consider if your investment was for a nut orchard & a wildfire wipes it out 2 years into your investment. What if you didn't buy that but it is in same llc as you...are your liabilities limited to the same space as your possible income?

Illiquidity is part of owning farmland. Being a minority owner of the LLC adds a layer to that. See other crowd sourced real estate deals for more. Can you (or your heirs) get out at a fair price? Or, what if you don't want out but property sold?

Don't forget to understand the tax situation, especially state tax. Depending upon the nature of farming, there are some unique rules for ag. Some of those may well be beneficial to you.

I've yet to see clear advantages for me over either direct ownership or via a reit.

 

[Gumby]

Are there farmland REITs? If I considered farmland a good investment, I would be more comfortable with that.

 

[street]

Our investment experiences have been the same. Land investment has been very lucrative for us.

One great thing about buying land is that unlike stocks, a piece of land doesn't have an army of analyst following it and tracking it, so once we figured out what to look for in land investment (e.g. highway/major road frontage, no power line easement, no floodplain, water available, good soil/hay production, etc.), it has been very easy to identify good, undervalued properties to buy (and bad properties to avoid). Also, having a solid network of locals really helps in identifying good properties for sale before they get formally listed.

Sale of land by heirs in particularly can be of good value, because heirs usually just want to get rid of a property they inherit instead of trying to maximize returns. We bought one such parcel 20 months ago at below market value from an heir, subdivided it, put it water meters and sold the lots (except for a large street corner lot which we are keeping for future commercial development) for 4x what we paid for.

We started buying about 14 years ago and since then, the average land price/acre in the area has gone up 6x, helped by encroaching suburban development and the creation of a new 10-square mile water reservoir/lake with recreational opportunities. Got a few thousand acres (all paid in cash) yielding a very nice income from renting to farmers and ranchers right now and still buying more every year.

You get it and understand how to buy land and make a buck. I think the biggest hurdle is to have the mind set to just do it! Buy it and then let things work for you.

The other thing is I never bought or will buy through a real estate company. I have nothing against them I just deal with the owner themself. If I see something I want, I go ask them if they want to sell. It has worked well and is so nice working directly with the person instead of corresponding through a third party.

 

[all4j]

Are there farmland REITs? If I considered farmland a good investment, I would be more comfortable with that.

There are 2 that dominant -- Gladstone Land & Farmland Partners. Gladstone is part of the larger Gladstone family & has many fans. It tends to focus more on specialty type (fruit, vegetable, nut, etc) but not exclusively. That carries with it a certain geographic concentration. Farmland Partners is an interesting story. Historically, it has been more oriented to row crops (corn, soybeans, etc).

Farmland Partners management has had its detractors over the years. A few years back, it was the target of a short & distort article on Seeking Alpha. About half of the common stock value was wiped out in a day. Management held on & fought a costly battle back & was vindicated last year. Author admitted article was false & I believe admitted to getting $ from a hedge fund to write it.

There were other significant events in 2021, including adding some prominent directors (connections to Sam Zell, etc) & getting into other areas such as farmland in Opportunity Zones, etc.

There are other much smaller, niche type companies & I believe at least some are organized as a reit. These are for orange groves, cattle ranches, etc. Quite small, closely held. If you included forestry, there are other larger reits.

Part of the problem with the reit structure is that it doesn't always capture the appreciation in land readily. That is, they'll trade at a discount to nav & there will be a lag between land appreciation & income from updated lease contracts. Lease contracts do usually have an auto inflation type increase & some times there is crop share (not cash) rent though.