How Farmland Investing Could be Your Gateway to the Real Estate Market

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Given its tangible nature and global demand, real estate is said to be a more stable form of investment compared to the stock market, growing wealth through land value appreciation and rental income.

However, there are still segments to this asset class with different susceptibilities to market volatility. Commercial real estate, for one, took a severe hit since the onset of the pandemic and is currently navigating an uneven recovery. At the same time, single-family rentals became a $4 trillion market as rents and land value soared due to record-breaking demand. More than a decade ago, the housing market witnessed total collapse fueled by subprime mortgages that triggered a worldwide recession.

Although real estate could offer a hedge against inflation and growth in the long term, buying any property class without research might not fetch returns, and may even result in losses. It is therefore important to remember that different real estate asset classes have unique demand drivers.

Keeping that in mind, farmlands' growth is directly tied to the intrinsic nature of the growing food supply chain. It is estimated that Earth will be home to nearly 9.7 billion people by 2050, and with time, the need for good-quality food and water and in abundant quantities will likely lead to high demand for fertile farmland worldwide.

Farmlands weathered the 90s recession, the 2008 recession, as well as the dot com crash, and shares a negative correlation with the stock market offering a hedge against market volatility. Furthermore, farmlands rise in value during stages of high inflation as rising food prices lead to the growth of farms producing it.

How Technology is Reinventing Farmland Investing

Farmland areas in the United States have declined due to climate change and rapid urban developments at a time when the population grew at a fast rate. In order to meet the growing food demands, farmers will have to adopt sustainable practices and employ modern equipment for higher efficiency, which is possible through innovation and capital investments. The shrinking farmland acreage and long-term food and water scarcity concerns are likely to drive the price of fertile lands higher in the future.

Although farmlands appear to be a comparatively stable investment option, the highly fragmented state of the agricultural sector without widespread awareness of investment benefits hasn't appealed to many investors. Moreover, high initial investment requirements and inaccessible marketplaces kept farmland beyond the reach of many investors until now.

With the advent of cutting-edge technologies and artificial intelligence, fintech companies that focus on real estate have found ways to create and sustain online marketplaces that allow individual investors to directly own single-family rentals, commercial spaces, and even farmlands completely online. These fintech companies are bridging the gap between real estate owners and buyers by using technology to reduce fees and minimum investment capital, as well as assign vetted property managers to take care of day-to-day property maintenance.

FarmTogether: An Online Marketplace for Farmland Investing

FarmTogether is an online marketplace where investors all over the world can get direct access to premium farmland investment opportunities in the US. Their all-in-one intuitive platform combines state-of-the-art technology, data science, and a highly experienced team with over 70 years of cross-industry experience.

FarmTogether follows their extensive 120-point checklist to zero in on farmlands and appoints vetted property managers for farm management, making it easier for potential investors to review deal documents, inspection reports, and execute legal agreements from the comfort of their home. In the process, FarmTogether is also able to reduce the initial capital investment to only $15,000.

Unlike Real Estate Investment Trusts (REITs) that don't always necessarily give physical ownership of the units of real estate, investors on FarmTogether actually have physical ownership of the land. FarmTogethers' direct investments are in farmlands that grow permanent crops in the Pacific Northwest and California. Keeping in mind the long-term investment scope and preferences of investors, FarmTogether scouts locations with fertile soil, abundant water levels, and reliable operators within their network.

Their proprietary technology that goes by the name of Terra allows their team to locate, underwrite, and complete real estate deals across various landscapes and crop types. Investors are able to grow their wealth from regular income and land appreciation.

While monthly income could come from farming operations and rents, gains from land appreciation are realized when a property is sold based on the tentative hold period for each investment offering. Bear in mind that hold periods could range from five to beyond ten years depending on the deal. Their institutional-quality offerings could offer absolute returns in the range of 7 to 15 percent with average cash yields between 3 to 9 percent, excluding fees.

How Does FarmTogether Vet and Invest in Farmland?

FarmTogether claims that only three percent of all the deals in their pipeline make it to the online platform. Their extensive checklist accounts for area coverage, location, crop type, soil quality, long-term water availability, title inspection, farming infrastructure, climate effects, and worker wages among other parameters to find farmland that is favored to perform during recessions.

Following preliminary shortlisting, their team deep dives into macro trends, price and industry trends, regional and trade dynamics, and farm yield data to create future projections of investments returns and associated market risks. If the data and results seem to align with the investor's goals and preferences, an in-house inspection is arranged to check the water rights and quality, title and ownership, and operational capabilities of irrigation and pump systems.

FarmTogether is careful to work with established operators like TriNut Farms and Farmland Opportunity, keeping in mind the fees and even their distance from the farmland. Once the operator and FarmTogether form a mutual agreement, the closing process for the investment opportunity begins. The operator will then take responsibility for tenant management and rent collection on behalf of investors.

How to Sign Up With FarmTogether

FarmTogether currently has crowdfunded farmland offerings for a minimum investment of $15,000 and sole ownership bespoke offerings for investment above $1,000,000 to accredited investors. According to the U.S. Securities and Exchange Commission, an accredited investor must have an annual income of over $200,000 ($300,000 for joint income with a spouse) or a net worth of over $1 million excluding the worth of the primary residence.

The first step towards building a relationship with FarmTogether is to create an account and complete the investor profile. To verify accreditation status, you may share certificates of the same from InvestReady or Verifyinvestor or provide documents supporting your income or net worth.

After successful account registration, investors can then visit the offering page, review expected returns, investment amount, hold period, legal documents, title, and inspection reports before proceeding to close the deal. You may also get in touch with their dedicated support team for a thorough walkthrough. Investing will require electronically signing legal documents from both parties through an encrypted medium before payment options are displayed.