- FarmFundr provides investment opportunities in fractional shares of productive farmland.
- Investments generate returns from both annual crop production and land appreciation.
- Farmland values benefit from land scarcity and a growing global population.
Bill Gates recently became the largest private holder of American farmland, holding over 240,000 acres. If this billionaire thinks it makes for a good investment, should you consider adding it to your portfolio?
The only trouble is that investing in farmland requires you to own and operate it in most cases. It's challenging to secure mortgages from financial institutions on farm purchases unless you have farming experience.
Today there are alternatives to owning farmland assets that don’t require you to work the land. FarmFundr is a real estate crowdfunding company specializing in investments in working farms. The company recognizes investors don't have the time or knowledge to invest in productive farms, providing an alternative path for accredited investors to add farmland to their investment portfolio.
Inside this review
What is FarmFundr?
Founded by a fourth-generation farmer, Brandon Silveira, FarmFundr is a crowdfunding platform specializing in investments into productive farmland, which the company sees as the backbone of the American economy.
However, the company also realizes that the average investor can't allocate capital to these investments without having cash on hand. The banks simply don't offer mortgages for farms, and if they do, they often comes with a 60% downpayment.
However, the FarmFundr team meets the financing requirements for investing in farmland. Brandon has a degree in Agriculture Management, and he sets up the deals where FarmFundr takes over the farm operations or leases them to farmers to manage production.
With FarmFundr, accredited investors can invest in crowdfunded deals and gain exposure to farmland without the need to put up large amounts of capital. Minimums with FarmFundr can range from $10,000 to $100,000, depending on the terms and conditions of the investment.
Who is it designed for?
FarmFundr is suitable for investors with a long-term horizon. You're locking up capital for a considerable time in a relatively illiquid asset compared to stocks. In addition, withdrawing capital early incurs huge penalties. Therefore, if you're looking for liquid assets for investment purposes, it's better to go with things like stocks and bonds that offer immediate exits.
However, if you're comfortable with parking capital and you're looking for an inflation hedge and a steady return on your money, FarmFundr makes investing in farmland possible and profitable for the average accredited investor.
Who would not be a good fit for FarmFundr
Non-accredited investors can't access the investment opportunities on the FarmFundr platform. Also, as mentioned, those investors not comfortable with locking up their capital for the long term should avoid FarmFundr investment opportunities.
How does it work?
FarmFundr offers accredited investors the chance to invest in US farmland in bite-sized chunks. This crowdfunding platform gives prospective investors a hands-off investment strategy into US farmland, with all due diligence performed by Farmfundr’s professional investment and management teams.
FarmFundr doesn't carry any debt in the deal, though in many cases they take an equity position in the transaction, which means they only make money if the investors do. It also offers a FarmFindr program for accredited investors that want to maintain sole ownership and allocate more than $500,000 to a single property.
Investors receive returns from both the annual sales of the property’s crop harvest as well as land appreciation.
FarmFundr's investing strategy
Brandon Silveira is a fourth-generation farmer, evaluates each deal based on the following criteria:
- The farm's crop yields and history.
- The current health and status of the farm's crop.
- The local water sources, quality, life span.
- The past financial history of the farm's performance.
- Industry-related and global financial performance of the crop.
- The future appreciation of the land and farms performance.
- A review of the worst-case scenario.
- The FarmFundr financial team must review and analyze all deals to ensure they make financial sense before the team moves forward with the investment.
Performance
Historically, investments into US farmland are some of the highest-yielding available, providing a 12% average return over the last 10 years. FarmFundr is capitalizing on the investment climate.
The fund's first investment yielded an impressive 8.8% return for investors, with other deals returning up to 13%. In many cases, FarmFundr will be the operator and owner of the farm long before they make the deal available to the public for investment.
For example, the company's investment into a Californian almond orchard in 2014 was only made available through the FarmFundr platform in 2019 after the farm completed its first harvest. As a result, the investors get to share in the proceeds of working farmland without exposure to the waiting period before the farm becomes productive.
How much does it cost?
It costs nothing to sign up with FarmFundr. The company charges no platform fees and subscription fees to its investors. However, minimum investments start at $10,000 to $15,000, with some as high as $25,000 to $100,000.
The management fees involved with the investment vary from deal to deal. Typically, as with the almond farm purchase, FarmFundr doesn't charge management fees. Instead, it takes an equity stake of 35% in the farm.
If FarmFundr doesn't take an equity stake in the deal, then they'll charge investors management fees. There's an annual management fee of 0.75% to 1% in addition to a 3% sponsor fee.
How to sign up
To sign up with FarmFundr, visit the company's official website for more details. You'll sign up directly through the site and leave personal details to verify your identity and investor status.
Pros and cons
Pros
- Invest directly in productive US farmland.
- Benefit from annual land appreciation and crop output.
- FarmFundr assumes an equity stake alongside investors.
- The company receives an interest in the farm instead of management fees.
- The FarmFundr team completes all due diligence on the deal.
- Transparency with investment decisions and finances.
Cons
- Opportunities limited to accredited investors.
- High minimum investment amounts from $10,000 and up.
- Capital lockup in illiquid assets.
- A limited number of approved deals on the platform at any time.
- Investments currently only in California farms.
- No diversified fund options.
Alternatives
Other crowdfunding firms such as FarmTogether and AcreTrader are also investing in American farmland through a similar strategy that requires accredited investors to invest in productive farmland.
Farmland REITS and agricultural stocks are also alternative ways to obtain exposure to farmland.
Verdict
FarmFundr offers accredited investors a way to benefit from the increased demand for food due to population growth. Farmland provides a solid inflation hedge and returns remain uncorrelated to the broader stock market, providing diversification benefits, especially in a down market. Dual returns from crop production and land appreciation provide two distinct sources of value.
However, Farmfundr provides fractional share ownership in single properties rather than a portfolio of farm assets, making the investment relatively riskier. In addition, a long lock up period and relatively less liquid market means your capital will be tied up for a significant period.
If you already have a well-diversified portfolio of liquid stocks, bonds, and ETFS, Farmfundr provides an alternative, uncorrelated investment that can further diversify your portfolio and help offset inflation.
