1)Farmland is definitely an investment!
We eat food everyday and it is an important part of our culture. Since food is so in-grained in our lives maybe it should also be a part of our investment strategy.Inflation hedging is the main reason why some investors are looking at agriculture. It’s just another way to fight the higher cost of living. And unlike gold, which is also a hedge against inflation, farms have the added benefit to actually generate income.
2)Crop share makes more money for the landlord, but it’s also more risky
farmers will generally pay higher rent if they think the land will yield more crops. The alternative to cash rent as mentioned earlier is a crop share, where after the crops are harvested and sold the land owner gets a share of the total sales, usually about 20% to 30%. In most cases crop share makes more money for the landlord, but it’s also more risky. If the farmer has a bad year for whatever reason (locusts, flooding, etc) then the landlord will share the burden. Cash rent on the other hand pushes all these risks onto the farmer because the landlord still gets paid no matter what happens to the crop’s performance.
3)How to Directly Invest in Farmland?
Farmland investing works the same way as investing in a rental property. You’ll require a realtor, a lender (optional), and a lawyer. Make sure the lawyer you find is from the same province that you’re buying the farmland in because only they have access to the bar in their jurisdiction.
4)Indirect Ways to Invest in Farmland
Another way to invest in the greater agricultural space is to buy shares of publicly traded companies that supply the farm industry. Some examples are Deere (farm equipment manufacturer,) Monsanto (largest seed provider in Canada,) Potash Corp (fertilizer producer.) The average return these companies have returned to their shareholders over the last 10 years is over 700%.