8 Reasons to Invest in Farmland | United Country Real EstateBy Natalia Kome
August 16, 2022
If you're looking for a solid investment, farmland may be the answer. Here are eight reasons why you should invest in farmland today!
Why You Should Invest in Agriculture Right Now
Many of those who look and plan to invest often end up putting their money in the stock market. While the stock market has the potential to exponentially grow your investment, it also comes with a certain level of risk that can result in the loss of money.
Agriculture, on the other hand, is an industry that has withstood the test of time and has always been a reliable source of income. It is a scarce commodity that has seen steady growth, making it a more secure investment than stocks.
For someone who wants to start investing or diversify their portfolio, agriculture is a great option.
Here are eight reasons why farmland investment is a smart move:
1. Farmland is a Natural Hedge Against Inflation
The world needs food. As the population continues to grow, the demand for food will only increase. This means that the price of food will continue to rise, outpacing the general rate of inflation.
Farmland is a physical asset that will increase in value as the price of food goes up. This makes it a great hedge against inflation.
Also, while there are no investments with a perfect correlation with inflation, farmland has a 70% correlation with CPI and 79.84% correlation with the PPI, which are the two main measures of inflation in the United States.
2. Farmland Provides Attractive Returns Paired With Low Volatility
Unlike the stock market which is more susceptible to sudden changes, the returns from farmland are more stable and predictable. The long-term average return for farmland is near 11% which includes price and income appreciation whereas the stock market only has 7.8%.
While this is not a bad number, it is important to note that the stock market is much more volatile than farmland.
3. Farmland Is a Good Source of Passive Income
The best type of investment is the one that gives investors passive income without them having to put in any extra effort. Farmland provides just that — farmers are the ones who do all the work while investors simply reap the benefits.
So if you are still wondering whether you can grow your money for real by investing in farmland, the answer is a resounding yes! Farmland REITs and other types of funds that invest in farmland are a great way to do this.
4. Farmland Is Uncorrelated With Other Asset Classes
In most cases, when the stock market crashes, all other investments follow suit. These drops in the stock market often result in a decrease in the value of real estate and other commodities.
However, farmland has shown to be relatively unconnected with other markets, meaning that it does not generally rise and fall with the stock market.
This makes it a good option for those looking to diversify their portfolio and protect their assets.
By investing in farmland, you are not only diversifying your portfolio but also diversifying your risk.
5. Technology-Enabled Platforms Make Farmland Investing Easy
For many years, only a few accredited investors had access to quality farmland. However, with the rise of technology, this is no longer the case.
Nowadays, some platforms allow anyone to invest in farmland. These platforms do all the due diligence for you and provide you with a list of quality farmland options to choose from.
Just like any real estate, farmland tends to be listed online, gaining a high chance for investors to hook on good quality farmland without tedious research.
One of the best platforms that allow investors to invest in farmland is FarmTogether. Investors see an end-to-end view of each farmland deal, from due diligence to closing.
You can filter out the list of farms and choose the one that suits your investment goals according to acres, crops, location, and more.
Moreover, investing in farmland doesn’t require a large amount of cash to get started. According to FarmTogether, investors can start with as little as $15,000.
6. Food Demand Is High
Where there are people, there is a demand for food. The world population is projected to reach over 9 billion by 2050 and with it comes an increased demand for food.
According to BTC Bank, only 7% of the planet’s land is suited for food production. That means the demand for food will only continue to rise, making agricultural land a valuable commodity.
Funds investing in farmland have seen significant returns in recent years as a result and will likely continue to do so in the future.
7. Farm Values Are Rising
A recent study from the University of Missouri found that farmland values continue to rise and even exceed market expectations, even when other asset classes are struggling.
Just make sure to invest time into looking at your various options and available locations, since the value of farmland varies across the globe.
8. Farmland Can Diversify Your Portfolio
Due to its low-risk nature and an asset class of its own, farmland is an excellent way to diversify your portfolio. It provides both short-term and long-term opportunities for growth and income.
In the short term, investors can generate income through leasing the land to farmers or lending money to farmers for a land purchase.
Depending on how you manage your farmland, it can provide a consistent and steady income. In the long term, the appreciation of the land value can result in a large return on investment.
Starting Your Own Farmland Investment
While this generation often focuses on the stock market, it is sometimes good to be the contrarian and invest in something that has been around for centuries.
Agriculture is a necessity and will always be in demand, making it a more secure investment than stocks.
Farmland can also serve as a vehicle of wealth that is transferable through generations. With the right management, investing in agriculture can provide consistent cash flow and generate large returns in the long term.
Make sure to check the market from different regions, utilize technology, and consult with experts before making any decisions.