Agricultural land investments - investing in farmland

Land Investing
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A few years ago I read a book by Jim Rogers called "Street Smarts". This retired hedge fund manager and guiness record holder for driving across every continent on a motorcycle said that the 20th century was the banking century, and with the world population growth the 21st would be the all about commodities.

That being said I come from a farming family in IL. My grandfather bought land little by little and took advantage of the 80s economic downturn to buy more. He made a living, but retired a multimillionaire with 100k yearly income from renting the land. He divided his farms between his 3 children when he died and each of them are living off the income produced by their agricultural "golden goose."

I think the only real issue is the high price of usa farmland in many fertile regions.

How many of you have considered Ag investing whether in land or other projects? I personally am interested, although not currently invested.

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@jawollbrink - a couple years ago, I spent many hours investigating farmland as an investment. It seemed like such a solid approach, since it's so 'hand-off' for the land owner, and they can just lease the land out to a farmer, who bears all the risk.

The problem I found was that it's very, VERY hard to find good deals on farmland (i.e. - an investment that has positive cash flow). It's a completely different ballgame than buying small, residential lots for 10% - 30% of market value. Unlike a residential lot that serves very little use and requires annual property taxes with no cash flow, a good piece of farmland is actually making money for the owner and requiring virtually no effort from them, so what reason would they have to sell it for such a huge discount?

I think what your grandfather did in the 80s is really the most sensible way to make it work... by purchasing the land when the market is depressed. Right now, this isn't really a thing. Most of the property owners I talked to had inherited their land from their parents and grandparents, and it had been farmed by their family for generations. Back when it was originally purchased (generations ago) it was a different world, and many of the people who own it now are actually working the ground every year.

Of course, I'm sure there are exceptions. There is probably the occasional one-in-a-million deal on farmland, but they're very hard to find.

I was also surprised to learn that the market values of farmland do not move in tandem with the market values of housing, they're like two completely separate things. If anything, it's more affected by the value of commodities, so it really is like a whole new type of real estate you have to learn and understand (and obviously, people who are actually working in the agricultural industry understand it the best).

I did actually put together a few comprehensive blog posts from what I had learned, you might find these helpful:

After realizing how big the barriers to entry actually are in the farmland niche, I saw the value in what AcreTrader had to offer, simply because they allow people to get in with less money and risk, and they do all the research and due diligence for you. Obviously, any crowdfunding platform is only as good as the people administrating it, but if you've really got the itch to get into that side of real estate, it could be a less-committal way to see more of how it works. You can a bit more of how it works in this interview I did with them...

Al

...or alternatively, you can wait until the next time farmland values take a dip.

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I know I would love to find great farmland to invest in long term! As Seth noted, the problem is in the yields. I just can't seem to find anything that hits the IRR projections I want. I'd love to hear ideas on how to find farmland at a discount.

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Hey @JT! I’ve heard that estate attorneys who work in farming communities can be a source of leads like this, because (in theory) they know when land is being passed down and sold out of a family.

Still sounds pretty hard to track down the right attorneys and be in the right place at the right time, but there might be some validity to the idea.

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@retipsterseth

What ever happened to your coffee farm investment in Panama?

Was that a crowdfunded type thing or joint venture...

I actually almost bought a peruvian coffee farm a few years ago...Big thing internationally is having a trusted manager.

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@jawollbrink - it's still going! According to the projections, it's not supposed to produce any cash flow for the first 3 years, so at this point in time, it's still right on target (i.e. - it hasn't made any money yet). :)

Things won't really start to get interesting until 2021 - 2022, because that will be the first year that it's supposed to start generating anything.

Note: If anyone is reading this and doesn't know what we're talking about, this blog post explains more: https://retipster.com/coffeefarm

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@retipsterseth

Ok I reviewed the article, and it is basically a crowd funded farm.

A few years ago I looked at some Andies mountains coffee farms in Peru, and actually traveled to see them. There had been some disease that had driven prices down and people were selling out. The said farm was 18 hectors for 20k usd. Honestly it could have been a KILLER investment, but I really would need a very trustworthy agent to live there and manage it, which is really hard to find in South america. I have also looked in to forestry farms and palm oil, and will continue to keep my eyes open, but haven't pulled the trigger on anything.

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@retipsterseth said:

Hey @JT! I’ve heard that estate attorneys who work in farming communities can be a source of leads like this, because (in theory) they know when land is being passed down and sold out of a family. Still sounds pretty hard to track down the right attorneys and be in the right place at the right time, but there might be some validity to the idea.

That's a really clever way to get involved there! Thanks for the tip!


@retipsterseth said:

@jawollbrink - it's still going! According to the projections, it's not supposed to produce any cash flow for the first 3 years, so at this point in time, it's still right on target (i.e. - it hasn't made any money yet). :)
Things won't really start to get interesting until 2021 - 2022, because that will be the first year that it's supposed to start generating anything.
Note: If anyone is reading this and doesn't know what we're talking about, this blog post explains more: https://retipster.com/coffeefarm

This and another offering in that region are REALLY tempting for me. Seems like amazing returns, low risk, and very passive. Operating in another country though gives me pause..