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Investors hoping to diversify their investment portfolios are increasingly turning to farmland investing. Companies like FarmTogether allow investors to buy fractional shares of farms, orchards and other agricultural land. Is farmland investing right for you? This FarmTogether review should help you determine whether farmland investing is a good choice for your investment goals.
This investing platform is similar to AcreTrader and other farmland investing schemes. You can choose which farms to buy into, and receive dividends for your contribution. It’s a fast and easy way for investors to break into agricultural investing.
Here’s what you need to know before investing with FarmTogether.
What is FarmTogether?
FarmTogether is a relatively new investing platform, which helps investors buy shares of farmland in the United States. Because there will always be a demand for agricultural services and farmland, this tends to be a steady and stable long-term investment. Furthermore, farmland and agricultural services aren’t usually correlated to the stock market. Even if other stocks and investments take a dip, farmland usually holds steady over the years.
Before services like FarmTogether, investors had a harder time buying into farms. Price, market knowledge and location—plus potentially buying and managing an entire farm—were significant barriers. Now, investors can buy smaller shares of a farm and allow FarmTogether to manage the day-to-day operations.
FarmTogether allows investors to choose which farms they want to invest in—typically either permanent or row crops. Unlike an REIT, investors actually own their individual properties, even if only a small share. The property is usually held as an LLC or corporation, so investors can buy fractional shares or entire farms.
FarmTogether is only open to accredited investors, and the minimum buy-in ranges from $15,000 to $50,000. Whole farms usually require a minimum investment of $1 million. Finally, FarmTogether has an increased focus on sustainability, which is great for environmentally-minded investors.
Invest in Farmland
West Coast U.S. Farmland
Access to a secondary market
South American Farmland
Open to non-accredited investors
The pros and cons of FarmTogether
Here are some of the main pros and cons of Farm Together.
- Directly invest in real estate: The biggest benefit of FarmTogether is that it allows investors to directly invest in real estate, whether they want to purchase fractional shares or an entire farm. Investors own their portion of the land.
- Combine investments with others: When you combine your investment with other investors’ contributions, everyone enjoys larger average returns.
- Easy-to-use platform: The FarmTogether website is easy to use, even if you’re less-than technologically savvy.
- Consistently good returns: Farmland has an average 12% annual return, making it a very stable investment—especially because it doesn’t correlate with the stock market.
- Accredited investors only: Unfortunately, if you’re not an accredited investor, you won’t be able to work with FarmTogether. This is a barrier to brand-new investors who may not have the appropriate experience for accreditation.
- High minimum investment and investor requirements: The $15,000 to $50,000 minimum buy-in is another barrier to investors. Plus, investors have to have a net worth of at least $1 million, individually or jointly, and have earned an annual income of at least $200,000 for the past two years. You’re also expected to continue to meet the $200,000 threshold (or $300,000 per household) in the future. That’s a significant barrier, especially for newer investors.
- No mobile app: While some investors won’t mind the lack of mobile app, those who like to closely track their investments on the go may not appreciate the missing functionality.
- Few educational materials: Other farmland investment platforms offer thorough educational guidance, which can help investors learn more about the industry, the land itself and where their money might be best invested. FarmTogether currently offers very little educational material, although that could change in the future.
How does FarmTogether make money?
FarmTogether buys and manages farms, holding them in a corporation or LLC. They lease the land to farmers. The investor isn’t required to know anything about farms or land management: all they need to do is decide which parcels fit their portfolio needs and buy fractional shares as desired.
Like real estate, FarmTogether investments are illiquid and designed to be held for years. Investors make money through cash distributions and land appreciation. Cash distributions are sent either quarterly or annually—it can vary depending on the lease agreement or the harvest sales schedule. Land appreciation is realized at the time of sale. If you receive land appreciation funds, it may not happen for years.
AcreTrader vs. FarmTogether
AcreTrader is a similar platform to FarmTogether, without the focus on sustainability. Both sites allow accredited investors to buy shares in farmland, which is rented out to farmers for profit. They receive dividends on either a quarterly or annual basis. However, FarmTogether allows investors to sell their shares early on a secondary market, whereas AcreTrader does not. Both platforms have similar underwriting processes and simple websites.
The minimum investment on AcreTrader is $10,000, which can make it more accessible to newer investors. AcreTrader charges a flat 0.75% fee for all deals, while FarmTogether charges an upfront 1% fee and a 1% management fee.
Finally, FarmTrader’s returns tend to range from seven to 13%, with average cash yields of 11%. AcreTrader’s returns average 11%, about on par with historic farmland returns.
When making a choice between AcreTrader and FarmTogether, the fee structure, minimum investment and secondary market will factor in the most—as well as FarmTogether’s financial requirements for investors.
Is FarmTogether right for me?
If you can meet FarmTogether’s minimum income requirements, are an accredited investor and want to tie up funds in a stable, low-risk investment scheme, FarmTogether is a great choice. Not only will you directly invest in American farmland—and reap consistent returns—but their focus on sustainability means your money is also helping promote a healthier planet.
Newer, non-accredited investors should probably look for other investment schemes. Having a $1 million net worth along with making $200,000 to $300,000 per year is a significant barrier to many.
FarmTogether and similar farmland investing platforms are not designed to turn immediate profits. Investors must understand their funds will likely be tied up for years. Since farmland doesn’t see the same ebbs and flows as the stock market, though, your money will remain relatively safe throughout the investment process.
Is it time to invest in your own farmland?
Deciding which investments to make is a daunting proposition, especially for newcomers. Fortunately, farmland offers consistent returns. After all, with an exploding global population, the demand for food will continue to increase. Directly owning parcels of farmland is a smart investment for anyone who can afford it.
This FarmTogether review covers the basic information you need to know to get started. Keep in mind that talking to a financial advisor is always wise before making any investment: they’ll be more familiar with your specific financial circumstances and historic farmland performance.
Whether you choose FarmTogether, AcreTrader or another farmland investment structure, it’s important to make sure that your investments complement your individual portfolio. Ultimately, however, most investors will find farmland and agricultural investments a great way to generate passive income.