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March 2, 2020
As families and individuals explore investment opportunities in real property, many are turning to farmland for a portion of their portfolio. Farmland is a unique class of real property that performs best as a long-term hold that carries with it a counter cyclical performance to stock investments. Investors are once again more interested in farmland as an investment while uncertainty reigns in the stock market.
Farmland purchase and management is a different type of ownership than many investments. Working with families for over 90 years on farmland investments has provided Farmers National Company insight about best practices to apply when preparing to become active in agriculture through ownership of farmland. Each step of the process may take some time depending on the specific situation and require consultation with the appropriate professionals to ensure quality planning and investing.
To start, an investor should establish the goals for farmland ownership including the targeted Return on Investment (ROI). This will be one factor in determining the quantity and quality of land acquisitions and the resulting time frame for investing. Additionally, the amount of funds available for purchasing land is key to the location and type of land that can be acquired. How the land will be owned or titled is important as it affects financial performance and future succession of ownership.
An investor can do all the work themselves or they can identify best practice advisors that will be needed for due diligence and land acquisition. These may include an attorney with experience in appropriate structures, an agent that can be used to represent the investor for due diligence and land acquisition, a professional management firm to facilitate decisions on how to operate each farm including leasing, revenue collection, bill paying procedures, and management reporting.
Owning farmland affords unique aspects for investors looking for long-term real property assets that perform differently than other investments. An investment in farmland requires thoughtful planning with a clarity in purpose and direction to achieve a successful outcome.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|