Farmland Investments: A Unique Asset Class Becomes Available to Retail Investors

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Whilst farmland investment has historically been dominated by larger and wealthier individuals and institutional investors who are capable of making multi-million US$ in the asset class, in just the last couple of years a number of options have been developed for individuals. The most common is to pool a number of individual investors’ capital together to purchase a large parcel of land, and then divide it into individual parcels as small as one acre available for retail investors to purchase.

These farmland investments for individuals pay regular yearly incomefrom the sale of crops such as rice or wheat, and also provide the opportunity for long-term capital gains if the farmland increases in value. Retail investors are generally able to sell their individual parcels, or else the project originator may actually sell its entire farmland investment, thereby allowing the individual small investors the opportunity to share in the upside capital gains.

There are now farmland investment options for retail investors with investment minimums starting as low as £1,950 per acre (approximately $3,100) for quality farmland in Africa, making it easily accessible by individuals and a great way to diversify. There are also direct farmland investments for retail investors in Europe, Australia and elsewhere. All of these target yearly income payments of between 9-15%, whilst also allowing investors to share in the upside of any capital gains as well.

There are, of course, risks with any investment. For example, farmland is a fairly illiquid asset and it cannot be bought and sold with the click of a mouse at an online brokerage firm. And, of course, other factors such as weather and the price of the crops will also influence the yearly performance of a farmland investment. However, if retail investors perform the proper and due-diligence and invest in the right structure with the right people and institution, farmland investment can be both safe and profitable and could make a wonderful addition to individuals’ portfolios.

 


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