Here’s what you should know before you invest in farmland
We know now that farmland investment is a hedge against inflation and farmland has shown superior returns over the years, but let’s look at what goes into the investment. Farmland investment is a subject where most non-specialized investors have incomplete knowledge around its nuances. Unlike stocks and bonds, there’s not a real-time stream of farmland investment materials helping investors become educated with the market. With all the buzz around farmland investment, investors still might struggle to understand the complexities of farmland. Let’s take a simplified approach to farmland investment.
Farmland is different from other asset classes since it requires a higher upfront investment. After purchasing the land, investors must make a series of decisions on how to manage that land. The possibility that a single retail investor carries this type of all-encompassing knowledge is low. Given the involvedness for farmland investing and eventual management, engaging professional farmland investment advisors demonstrating a history of success can be extremely beneficial. They can help shed light on the process, highlight overlooked concerns, underscore best practices, conduct due diligence, and - most importantly - facilitate deals not available on the public market.
Why relationships are important in farmland investments?
Longstanding relationships give investors access to off-market deals and top-tier tenants. By easing complexities and managing the negotiations between sellers, tenants and investors, the deals can be beneficial for everyone. A new investor will seldom have access to these necessary and personalized resources, experience, and insights.
Professional advisors begin by getting to know the client, understanding their priorities, and building a strategy around it. After the initial onboarding, the next most critical aspect of a successful investment is an exclusive network to find the right row-crop farmland deals matching investors’ goals. Knowledge regarding crop markets, market intelligence, sustainability goals, and investment grade farmland with real-estate services can be integrated as well.
An advisor that promptly gathers information and defines outcomes for stakeholders is important in the farmland arena. Accessing fair information can ensure all parties receive value. A robust network can eliminate the need for land to go to the market where prices can be hiked. In addition, investing in these types of advisors who bring in an array of network can offer research backed solutions that are battle tested.
Are off-market property deals the key to investment?
When it comes to farmland investing, experience and a localized network are essential. Farmland is a predominantly private market that can be complex and expensive without industry experience. When deals are made directly, a diverse range of offers can be made without price gouging since the number of players is limited. On the contrary, if deals go public, competition may outprice an investor seeking quality land.
It is not easy to find such networks, especially those that have a successful history of facilitating these types of transactions. There are many hidden private deals in farmland investing unlike other real asset classes that investors are used to. A solid network of farmers and ag professionals allows investors to have access to these off-network deals that otherwise they would never know about. They’re often the key to success.
Professional advisors can provide full-service sourcing and ongoing management services to facilitate direct farmland investments for institutions, family offices, and sophisticated investors. The exclusive specialization in farmland investments offers clients proprietary investment strategies, meticulous acquisition negotiations, and productive management plans based on their specific needs and portfolio objectives.
Chris Brawner is the President and Founder of AgVest Advisors