land is an inflation hedge that combines low volatility, income, and proven long-term appreciation. It has been called “gold with yield.” • Unique among real estate investments, farmland never has a vacancy. It produces reliable income year after year. • Unlike other real estate, there are several methods of increasing income. • Professionally managed farmland is a passive investment. • Farmland never needs maintenance (except for irrigated farms, also known as money pits). • Farmland cannot be trashed, burned down, vandalized, or stolen. • Property taxes are lower due to agricultural exemptions. • Landlords never get calls from their farmer tenants to fix or replace anything. Be aware that because they have so many advantag- es, a farm may not produce the annual cash return (not counting appreciation) that other investments offer. Own- ing a farm is not a way to get rich quick. My farm manag- er Ed Kiefer, who was voted by his peers as the National Farm Manager Of The Year with Hertz Farm Management, cautions, “The agriculture economy has always been cy- clical. Farmland is a long-term investment; in my opinion, 10 years at the minimum.”
A farm is a large investment. However, it is relatively easy to get favorable financing through the Farm Credit system. An alternative is to do a sale-leaseback with the farmer/seller. Two less capital-intensive options are to buy fractional ownership through a farmland fund or a REIT (Real Estate Investment Trust). The two publicly traded farmland REITs are Farmland Partners (NYSE: FPI) and Gladstone Land Corporation (NASDAQ: LAND). Be aware that when you invest in a fund or a REIT you trade invest- ing less money with giving up control of your investment. If you buy a farm it is critical that you work with a pro- fessional who knows the market and has the agricultural background to evaluate farms for sale. Unless you are experienced in managing farmland, hire a professional. Aside from the farm itself, a good manager may be the best investment you have ever made. Farmland gives you an asset you can walk on and enjoy owning, knowing that you have consistent passive income, the ability to maximize that income to take advantage of market conditions, appreciation that historically beats inflation better than other investments, low volatility, property tax exemptions, no vacancies, no maintenance, and no tenant problems. You have a renewable crop growing each year and the satisfaction of doing your part to feed the world. Plus, you always have a place to live far away from urban areas! •
W. J. Mencarow is a real estate investor (including farmland) with over 35 years of experience. He offers a free e-course on real estate note investing at www.PaperSourceOnline.com
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