When investing in farmland, which platform should you choose?

Farmland is one of the oldest and most stable investments. People have been buying, selling, and developing farmland for centuries to secure their financial (and nutritional) futures.

In recent years, crowdfunding platforms have emerged as a new farmland investment option. These platforms allow investors to pool their money and invest in large tracts of productive farmland.

But not all crowdfunding platforms are created equal. How do you know which platform is right for you? And what’s so great about farmland anyway?

Download Your FREE Farmland Investment Platform Comparison Guide

This is your in-depth guide to the top farmland investment platforms that includes a comprehensive look across 16 major categories including crop types, estimated returns, minimum investment, and annual fees for each one. It’s an essential look at how to generate the best return from the world’s most valuable asset class.

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What Makes Farmland a Great Investment?

One of Warren Buffett’s most famous investing guidelines is: “Rule No. 1: Never lose money. Rule No. 2: Never forget No. 1”.

It’s a bit tongue-in-cheek, but he wisely points out that although it’s impossible never to lose money, chasing short-term returns is typically not an ingredient for long-term success. Managing risk is an essential aspect of building a successful portfolio.

Perhaps it’s no coincidence that Buffett, along with many of the world’s most prominent billionaires, is also a big farmland investor.

Part of a diversified portfolio

Farmland investing is often lauded as a solid method for balancing an investment portfolio. What makes it such an attractive asset compared to other conventional investments?

For starters, farmland is an excellent inflation hedge. While the price of other assets, like stocks, bonds, and even gold, can fluctuate wildly in response to external factors like inflation and consumer sentiment, the value of farmland tends to increase steadily.

Although the overall amount of land remains stable, the percentage of U.S. land used for farming is decreasing. Further, investors benefit from farmland’s multi-income approach.

On top of rent payments that you might receive as the owner along with appreciation of the land, acreage is typically used for agricultural production. Investors benefit from the stable income source created by selling food and other crops.

Finally, because farmland is a physical asset, it can give peace of mind as a lever to diversify an investment portfolio and protect against economic volatility, especially if your portfolio contains other speculative assets like stocks.

Historical performance

Since the early 1990s, farmland has performed quite well against other conventional assets. Regardless of the general economic conditions, farmland’s average annual return of around 11 percent over the past 30 years is a testament to its strength as an asset class.

Although historical data doesn’t guarantee double-digit annual returns, it reinforces the wisdom of farmland as an investment.

How to Begin Investing in Farmland

Imagine now that you’ve decided to add a tangible asset class to your portfolio by investing in agriculture.

After a bit of research, you’ll likely realize that active farmland ownership isn’t for everyone. It requires hard work and specialized knowledge of soil profiles, the environment, and water sources. Farming the land yourself may not be attractive or even fit your investment situation.

Passive farmland ownership

Fortunately, active ownership of a farm isn’t the only way to invest in farmland.

Traditionally, an interested investor would enter the passive farmland investing space through one of the following four ways:

  • An equity stake through stock shares in a public company embedded in the ag supply chain

  • Agricultural ETFs

  • Agriculture mutual funds

  • Publicly traded REITs

Individual public company stocks often include grocers, farm machinery, and everything in between. ETFs and mutual funds represent baskets of those individual company stocks or commodities in the industry.

Finally, an investor can invest in land in a specific sector or geographic area through real estate investment trusts (REITs). A farmland REIT typically owns farmland leased to farmers in various locations. Investors can quickly move in and out of REITs as they are traded on stock exchanges like other equities, mutual funds, and ETFs.

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However, the four traditional options have drawbacks that can make them unattractive vehicles for passive farmland ownership. Because they are publicly traded, they are subject to normal market volatility, and investors lack control over the assets.

Online farmland investment platforms

Fortunately, there’s another, relatively new option: online farmland investing platforms. Savvy investors can use these platforms to access domestic and international farmland opportunities directly. Because they aren’t publicly traded, these options provide greater control and the ability to focus on specific crops or geographic areas.

How Do Crowdfunding Platforms Work?

New investors to the industry might find the wide variety of investment opportunities farmland offers intriguing. But before investing, it’s essential to do your homework and understand what you are investing in.

What are the first steps?

While you might see historical investments facilitated by the platform without signing up, most require some initial information before granting access to current projects.

After giving the platform the required information about you and your investment goals, you can browse the available options. You’ll often see pictures of the farm, descriptions of the land, indications of the type of crops, and the minimum investment level.

Different crowdfunding platforms employ different models to allow smaller investors access to large opportunities. You can fund your investment with after-tax dollars or even a self-directed IRA or 401(k).

Do you need to be an accredited investor?

Although some opportunities to invest in farmland are available to anyone, many platforms are only open to accredited investors. Accreditation implies you possess a high level of financial knowledge and a better understanding of the risks, and it requires one of the following:

  • A minimum annual income of $200,000 as a single person or $300,000 jointly with a spouse

  • Net worth of over $1 million—excluding your primary residence

  • Professional knowledge of securities gained through working for certain investment funds or by holding valid Series 7, 65, or 82 licenses

Best Farmland Investment Platforms

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Choosing From the Best Farmland Investing Platforms

Farmland provides an excellent, recession-proof investment that can be resilient in any economic climate. Given the advantages, crowdfunding sites may be the most efficient way to invest in farmland and benefit from the dual returns from appreciation and crop sales.

Each of the top platforms offers unique farmland investment opportunities with a selection of different geographic areas, ownership models, and types of crops. For example, Farmfolio focuses on Tahitian lime farm opportunities in Colombia, while AcreTrader and FarmTogether offer investments in various row crops and tree nuts in the U.S.

AcreTrader

Founded in 2018, AcreTrader is the list’s newest farmland investment platform. It allows investors to buy shares of several different U.S. farmland opportunities through an LLC. The land is then leased to farmers via AcreTrader’s management company.

A minimum investment between $10,000 and $20,000 gets you access to AcreTrader’s platform, which has helped investors acquire over 20,000 acres of farmland. Investors pay a 2 percent closing fee and an annual management fee of 0.75 percent.

The platform’s investment opportunities lie exclusively in the United States, and they are primarily used to grow row crops like soybeans, corn, wheat, and rice.

As with many real estate transactions, AcreTrader investments are relatively illiquid. There’s a holding period of 5-10 years and no secondary market (although the company has announced one is expected to launch in 2022). You’re also responsible for a 5 percent disposition fee when you sell your stake.

Farmfolio

Farmfolio was founded in 2015 and currently offers farmland investments exclusively in Colombian permanent crop farming operations. Through Farmfolio’s unique vertically-integrated supply chain, food crops such as limes and coconuts are sold to consumers in the United States. This is especially beneficial for investors now with the U.S. dollar so strong.

Unlike AcreTrader, the platform lets accredited and non-accredited investors own farmland directly as part of a larger farm. Once Farmfolio identifies and qualifies prime farmland acreage for investor purchase, they subdivide and sell the property to investors through LOTs (Land Ownership Titles). 

LOTs typically require a $30,000 – $60,000 minimum investment. After the purchase of a LOT, the individual parcel is held by the investor but managed by a Farm Owners Association (FOA), similar to an HOA, which typically charges an annual fee of 0.5-1 percent of the purchase price. They also hire expert third-party teams to handle the farm management.

Farmfolio is unique among the farmland investing platforms listed here in that there is no minimum holding period. Investors can sell or transfer their ownership at any time with a 3 percent brokerage fee.

FarmTogether

With $160 million in assets under management, FarmTogether, founded in 2017, offers investors a platform for direct ownership of institutional quality farmland in select U.S. markets. Opportunities focus primarily on farming permanent crops like fruit trees, tree nuts, and vineyards.

With a similar ownership model to AcreTrader, FarmTogether lets only accredited investors own property by buying shares of an LLC. The farmland is then leased to farmers via FarmTogether’s management company. The investment minimum is $15,000.

FarmTogether’s fee structure varies from deal to deal, with a roughly 2 percent closing fee and an annual management fee of 1.5 percent.

Best Farmland Investment Platforms

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Harvest Returns

Based in Texas, Harvest Returns is an online platform that connects farmers needing capital with investors looking to expand their portfolios into U.S.-based farmland and agricultural-related businesses.

With as little as $5,000, investors can participate in various businesses operating in the farming sector. Options range from livestock operations to row and permanent crops, and also include agricultural technology.

The ownership model varies, but a corporate entity typically sponsors each deal to raise funds via the Harvest Returns platform. Most deals are restricted to accredited investors, but they may offer a small number of opportunities to non-accredited investors.

Generally, there is a fee due at closing to the deal sponsor, as well as carried interest. The investment can’t be easily sold or traded with no secondary platform available. However, selling the investment back to the deal sponsor may be possible.

Farmland LP

The oldest of the farming crowdfunding platforms was founded in 2009 and calls San Francisco, California home.

Farmland LP is a real estate fund that acquires conventional farmland in the U.S. and converts it into organic, sustainably managed farms that apply regenerative agriculture techniques to both row and permanent crops. The company operates over 15,000 acres of farmland and more than $200 million in assets.

Farmland LP offers two ownership models: a limited partnership open-ended fund and a private real estate investment trust (REIT). It requires a substantial minimum investment of $50,000 and has a remaining fund life of 18 years (the amount of time they have to sell the company or go public). However, the fund may seek an earlier public exit after a six-year lockup.

Like many crowdfunding farmland investing platforms, the investment can’t be easily sold or traded. 

Although investors don’t pay any acquisition, disposition, or leasing fees, there is a 2 percent annual management fee and 20 percent carried interest after a 6 percent preferred return to investors.

Best Farmland Investment Platforms

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How Do the Platforms Compare?

Farmland’s high average annual return, stability in challenging economic environments, and tendency to outperform many other asset classes make it an attractive addition to investors’ portfolios.

Choosing the right platform for your farmland investment has a significant value impact on your overall experience and return. As with most investments, there are some key factors to consider when comparing platforms before you invest your capital.

Download Your FREE Farmland Investment Platform Comparison Guide

This is your in-depth guide to the top farmland investment platforms that includes a comprehensive look across 16 major categories including crop types, estimated returns, minimum investment, and annual fees for each one. It’s an essential look at how to generate the best return from the world’s most valuable asset class.

Liquidity and flexibility

One potential drawback of all direct ownership real estate compared with the stock market and other publicly traded asset classes is a lack of liquidity. While an investment through most of the platforms listed here may be highly illiquid, Farmfolio makes it easy to sell or transfer ownership of your assets at any time.

Fees and estimated returns

The purpose of investing is to let your money generate returns and make more money. Most of the platforms outlined here forecast a minimum IRR (internal rate of return) of 6-8 percent. As with any investment, past performance doesn’t guarantee future results.

High fees on any investment can quickly consume potential gains. Farmfolio’s structure that uses a third-party Farm Owners Association (FOA) only charges an annual fee of between 0.5 and 1 percent.

AcreTrader and FarmTogether both charge around 2 percent as a closing fee, as well as an annual management fee of 0.75 percent and 1.5 percent, respectively. Harvest Returns’ fees vary deal by deal, and Farmland LP charges 20 percent carried interest on top of a 2 percent annual management fee.

Proven ownership models

Allocating a portion of your investment portfolio in farmland allows you the flexibility of investing as part of a self-directed retirement account or in a typical non-tax-advantaged account. When you invest, you’re trusting the platform to vet the farmers well and ensure efficiently managed farms so that your capital is safe. Additionally, the structure of the investment must make sense for your portfolio and overall goals for the investment.

Farmland LP offers investment options through a limited partnership or private REIT, while AcreTrader and FarmTogether allow farmland ownership through LLC shares managed through their management companies. With Harvest Returns, you’re essentially investing in the corporate entity sponsoring the deal, and Farmfolio offers direct farmland ownership through its LOT structure.

Best Farmland Investment Platforms

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What’s the Best Platform for Farmland Investments?

Farmfolio investors enjoy quite a few benefits that aren’t available as a single package anywhere else. Not only can accredited and non-accredited investors own the property directly as part of a larger farm, but the independent Farm Owners Association’s low management fees also won’t erode the projected strong returns. 

Although liquidity is often a concern when considering investments in real estate or traditional farming, Farmfolio investments maintain a comparatively high level of liquidity. Investors using Farmfolio’s platform also enjoy no minimum holding period and the ability to sell or transfer their LOT with just a 3 percent brokerage fee

Further, all Farmfolio opportunities are located in Colombia, a compelling destination for foreign investment. The country’s varied terrain and proximity to the equator give the world’s fastest-growing lime exporter long growing seasons. As the Colombian government consistently invests in transportation infrastructure, its strategic location also offers Farmfolio’s short, vertically integrated supply chains quick access to the U.S. market via the Atlantic and Pacific oceans. 

Curious to see why Farmfolio is arguably the most attractive farmland investment platform? Complete the form below to gain access to Farmfolio’s platform and learn more about lucrative farmland investment opportunities with established Latin American farms.

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