If you are an insider in agriculture, you do not want all your assets to be tied up in farmland. As an alternative investment, including property, farmland can play the role of a diversifier in your portfolio. This is an asset class that can help offset volatility and performance.
It is possible to own farmland and profit from doing the real work of harvesting and raising livestock. In fact, you can invest in farmland without ever even going to it, just as you would in any other business.
Many investors, large and small, make the mistake of not applying professional knowledge of the industry and the market, and only looking after their money. During my real estate career and investment experience as a farmer, I have seen many times investors who have not used the right expertise about the land. It sounds as if many ordinary investors do not understand the difficulty of choosing a property that makes sense for their investment objectives, for example when they invest in farmland and invest for retirement in farmland.
When it comes to understanding the difference between a farm and a ranch it is important to remember that a ranch is a farm and not a farm and a ranch. Before you think about investing your general well-being in a ranch or a farm, it is very important to know the difference to find the right thing for you and your goals.
Investors regularly on the lookout for ranches for sale have been investing in farmland for over 20 years and understand the benefits of a modern, diversified portfolio. The emergent mission is to provide co-investors with access to high-quality investment opportunities for farmland in the Southwest that uses sustainable farming practices that respect water and soil. Farmland produces superior returns for us and other investors and is an attractive investment for most portfolios, but is often misunderstood and difficult to access.
Lower leverage corresponds to a lower loan-to-value ratio than typical return profiles for real estate investments, and investment in farmland has lower volatility than investment in residential and commercial real estate. A key issue for professional investors in farmland is supply and demand, and the associated stability of assets generated by both.
Despite these potential benefits, the number of investors buying farmland remains relatively small. Investment funds and professional investors account for a tiny fraction of all U.S. farm holdings. Professional ownership and investment in farmland is on the rise, but low ownership of the asset is one of the main reasons why it has not been invested on a larger scale.
Investment funds, pension funds and venture capital have increased their interest in the purchase of farmland, at least in states that allow such a purchase. A few years ago, the poor profitability of farms pushed farmers off the land market and, he says, sidelined investors and buyers who did not have the capital to do business. As in much of the country in recent years, land prices have fallen and there are fewer farms competing for farmland, he said.