I wrote a post on this topic before…
The best way to invest in farmland in 2018 depends on your income and wealth.
High Net Worth Individuals
If you are a high net worth individual and you want to purchase farmland, I would simply set-up a LLC and invest a few properties.
• Buy multiple properties
• Find a bank willing to lend
• Keep gearing low
If you an ambitious entrepreneur, or are an investor who can persuade his family and friends to part with their cash and invest in his venture, I would do the same as above.
If you are a regular retail investor, it will be more difficult to find investment options.
• Simply buying land is out of the question
You then have three options:
• Farmland ETF
• Farmland Mutual Fund
• Farmland REIT
I do not know of any farm ETFs, although I do not doubt they exist. ETFs are often sold to people who think they can get low-risk exposure to certain industries.
However, you should always think about how the ETFs work in your specific case, before you decide on their risk level.
For example, if you are buying a farmland ETF and it does not hold actually farmland. You could find that your safe investment is actually a complex package of derivatives. This will end badly.
Farmland Mutual Fund
The other option may be to invest in a farmland mutual fund. Again, I would be highly wary of this.
The farmland mutual funds I have come across have excessively high fees and seem like rip-offs for their customers.
Always check if a fund has:
• Fees above 2%
• A team with management experience
• A long history of investment in farmland
If they do not have these things - please avoid.
This leaves us to the farmland reit.
In theory, the farmland reit should be a sensible investment. However, I see no sensible farmland reits in the US right now.
As I wrote in my article above, seeking alpha defined the reit business in the US as a competition against the tortoise and the hare (gladstone land and farmland parterns)
I think both companies are quite poor.
• lack positive cash-flow
• have built up excessive debt
• do seem to control their debts
• they operate on the assumption that farmland prices will always go up (which explains high leverage)
The market has reacted to this, hence why their stocks have performend poorly:
I think REITs are the best way to invest in farmland, however there are no solid farmland REITs based in the US.
If you want to look invest in farmland, you will need to find an REIT in a foreign market. Australia would be a good choice.