Low Investment High Profit Farming

By | May 19, 2023

Low Investment High Profit Farming – By Bob Haegele By Bob HaegeleArrow Right Contributor Bob Haegele is a contributor to . Bob writes on topics related to investing and retirement. Bob Hagel

Edited by: James Royal Edited by James RoyalArrow Right Senior Editor, Investments and Wealth Management Senior Editor James F. Royal, Ph.D., covers investments and wealth management. His work has been cited by CNBC, The Washington Post, The New York Times and more. Twitter Connect with James Royal on Twitter LinkedIn Connect with James Royal on Linkedin Connect with James Royal by email Email James Royal

Low Investment High Profit Farming

Low Investment High Profit Farming

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A Fair Deal For Farmers

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Low Investment High Profit Farming

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Historically, investing in farmland has made no sense for most Americans. Initial costs were high and the investment required intimate knowledge of the agricultural industry. However, this is changing rapidly, with new investment opportunities significantly lowering these barriers to entry.

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All you need to invest in farmland today is a little extra money and an investment account. You can still invest the old fashioned way, but new opportunities are starting to open up to the public.

Nature Based Solutions For Agriculture

In the past, the only way to invest in farmland was to buy a farm or pasture and earn income by cultivating the field or watching the land rise in value. Limited investment opportunities meant that investments in farmland only made sense for those who could produce on the land. For example, someone whose family has been farming for generations may have chosen to invest.

Farmland can now simply be seen as an alternative investment. Farmland generates income from rental income and increases in the value of farmland. As such, these investments can act like dividend-paying stocks, with income gains and capital gains.

The combination of this increase in value and rental yield continued to generate good performance. For example, according to land investing platform AcreTrader, farmland in the United States has averaged a 12.2% return from 20 years to 2020. Compare that to the 10% average annual return of the Standard index. & Poor’s 500.

Low Investment High Profit Farming

Stocks can be volatile, but the fact that people still have to eat during booms and busts can lead to more resilient investments. This leads some investors to believe that farmland investments are recession proof and will not crash if the stock market fluctuates. Nevertheless, farmland can be an attractive alternative investment to help round out a portfolio.

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The days when there was only one way to invest in farmland are over. Investors now have several ways to start farmland, and the best option will depend on the circumstances.

Opportunity: If you want to invest in farmland, you can still own the land yourself. In this case, the land can be purchased in full and leased to a farmer who will use it for crops or livestock. So owning the land directly means it functions as an investment property.

Details: The capital required to buy a farm can be quite large. For example, according to the USDA, the average farm size in 2021 was 445 acres. The USDA also reported an average cost per acre of $3,800 in 2022. Using this average, you would expect the farm to have an average purchase price of $1.69 million. Naturally, if you can find the right opportunity, you can start with less.

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Opportunity: Real estate investment trusts (REITs) aren’t just for office buildings and apartment complexes. In fact, REITs can also invest in farmland and are a popular way for investors to enjoy the benefits of real estate investing, especially income, without the hassle of management.

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Details: Investing in an agricultural REIT has many of the same advantages as any other type of REIT. For example, they facilitate diversification, are much more liquid and the minimum investment is often much lower. And REITs pay no corporate tax in return for distributing 90% of their taxable income to investors as dividends.

Opportunity: An alternative to direct investment in farmland is to invest in agricultural stocks. The idea is simple. Instead of buying farmland, you buy shares of a company in the agricultural sector.

Details: These agricultural businesses may be involved in activities such as agricultural production, the manufacture of agricultural equipment, and the production and distribution of fertilizers. For example, a crop producer may get a return on his investment by producing land and may also own the land, thereby benefiting from potential increases in land prices. Widely held agricultural stocks include Archer-Daniels-Midland (ADM), Corteva (CTVA) and Scotts Miracle-Gro (SMG).

Low Investment High Profit Farming

Opportunity: You can buy stocks in individual farming businesses, but it’s often easier to invest in something like a mutual fund or an exchange-traded fund (ETF). Some mutual funds focus on agriculture and raise funds from investors for activities that support the agricultural industry.

Generating More Profit From Your Farm Business

Details: An important point is that agricultural mutual funds do not always invest exclusively in agriculture, they often invest in adjacent sectors. This isn’t necessarily a downside, but it’s worth keeping in mind if you’re specifically looking to invest in farmland.

The Fidelity Agricultural Productivity Fund (FARMX) aims to invest 80% of its assets in agricultural productivity companies, with the largest holding being Deere (DE), well known behind many agricultural machinery. Mutual funds can have high fees, so always check this before investing in a fund.

Opportunity: Farmland crowdfunding platforms are another way to invest directly in farmland, even if you don’t have the necessary capital. They allow you to buy a small piece of a real farm, significantly reducing your minimum investment. these