How to Invest like Bill Gates in Farmland?
Updated: Feb 5
You must have heard, Bill Gates - the billionaire philanthropist and co-founder of Microsoft through his private investment firm, Cascade Investment, George Soros - through his private investment firm, Soros Fund Management and Walton Family - the descendants of Walmart founder Sam Walton, have all been investing in land, farmland, forests etc… both for financial returns and environmental impact.
And now, you too can join the big leagues and invest in the same asset class as these billionaires, without actually having to be a billionaire yourself! That's right, you too can rub shoulders with the likes of Bill, George, and the Walton family, and make a smart investment in land.
But you better hurry up, before these big-wigs snap up all the good land plots. Rumor has it they're buying everything in sight. But, hey, let's not believe everything we read on a blog, right? You never know what kind of crazy stuff people will come up with.
How important is land?
Land is a critical resource for humanity, as it provides the foundation for food production, shelter, and a host of other essential services. It is arguably the most important tangible possession and natural resource we have ever had. Land investments and solving land-related problems are priorities according to the United Nations Sustainable Development Goals (SDGs). The United Nations recognizes the critical role that land plays in promoting sustainable development and has identified several SDGs that specifically target land-related issues.
Sustainable Development Goals Relating to Land
1. SDG 1: No Poverty - Land ownership and control are important for reducing poverty, as access to land can provide a source of income, food, and shelter for people living in poverty. Investing in land can help to support sustainable agriculture, improve food security, and create jobs, contributing to the goal of reducing poverty. 2. SDG 2: Zero Hunger - Access to land and resources is essential for food production and sustainable agriculture. Investing in land and supporting sustainable farming practices can help to increase food security, improve soil health, and promote more sustainable food production. 3. SDG 15: Life on Land - The United Nations recognizes the importance of preserving and restoring natural habitats, including forests, wetlands, and other ecosystems. Investing in land for conservation and reforestation purposes can help to preserve biodiversity and protect the environment. 4. SDG 13: Climate Action - Land-based renewable energy production, such as solar and wind power, can play a critical role in reducing greenhouse gas emissions and combating climate change. Investing in these types of projects can help to promote decarbonization and contribute to the goal of mitigating the impacts of climate change.
By investing in land for sustainable agriculture, conservation, renewable energy production and decarbonization (known as Impact Investment), individuals and organizations can help to address some of the world's most pressing challenges and contribute to a more sustainable future.
Is it advisable to invest in Land?
Ah, land investment. It's the real deal! No Photoshop needed, no virtual reality, just good old Mother Earth. And as Mark Twain said, or maybe he didn't say it (who knows, he's been dead for a while), "Buy land, they're not making it anymore." Unless you're in Dubai, where they're making more land than Elon Musk makes Tesla Model 3's.
Can you think of many assets or consumables or things whatever they are that are highly likely going to have a perpetual increase in demand? the finite nature of land renders it one of the few assets that have a perpetual increase in demand while supply remains constant, and in some cases even disappearing (climate change etc..). As such, it is a valuable asset class for investment, offering the potential for steady income and capital appreciation.
How do land investment returns compare to other asset classes?
Land investments have historically performed well compared to other asset classes such as gold, bonds, and stocks. Over the past few decades, land prices have generally increased, driven by factors such as population growth, urbanization, and increasing demand for food and natural resources. For example, a recent study by the National Council of Real Estate Investment Fiduciaries (NCREIF) found that farmland has outperformed the S&P 500 by approximately 2.5% per year over the past decade. Additionally, a report by the World Bank found that investment in agricultural land has outperformed other asset classes, including bonds, stocks, and commodities, over the long term.
Is land a stable investment? is it considered safe?
While 'Safe' is relative, one reason for this strong performance is that farmland is considered a relatively stable asset, because demand for food and other resources unlikely to diminish in the long term. People like to eat and we are still making babies. Additionally, land prices tend to be less volatile than other asset classes, providing a more stable and predictable return. In comparison, the performance of other asset classes can be more volatile and influenced by a wider range of factors. For example, the price of gold can be impacted by geopolitical events and economic uncertainty, while the performance of stocks can be influenced by changes in the stock market, interest rates, and economic conditions. Unlike stocks, which can go up and down faster than a roller coaster, land just keeps appreciating, slowly but surely. It's like the tortoise in the race with the hare, steady wins the race.
How can I invest in Land and farmlands?
Investing in land and farmlands is a popular method of diversifying one's portfolio and potentially earning a steady income stream through the farming income and sale of crops. Traditionally, there were several ways an investor could invest in this asset class, including:
Direct ownership: Investors can purchase land or farmlands outright and manage the property themselves. This option requires significant capital and requires the investor to handle all aspects of management, including leasing the land to farmers or developing the land, or you can farm it yourself! But let's be real, unless you're ready to trade in your briefcase for a pair of overalls, this option may not be for you.
Real estate investment trusts (REITs): REITs are private or publicly traded companies that own and operate income-generating real estate properties, including farmland. Investing in REITs allows for exposure to the farmland market without the hassle of direct ownership. But in general, REITs are not so much fun and you still need to do a lot of digging (not farming) to understand the REIT structure and the fees etc... Furthermore, those creating REITs wear expensive suits and Rolex watches (nothing wrong with expensive suits and Rolex) - but you get my point. Investing in REITs is like getting a slice of the farm life without getting your hands dirty.
Farmland-focused funds: These funds invest in a portfolio of farmland properties, giving investors exposure to the market through a professionally managed investment vehicle. But let's be honest, investing in a fund is like having a trusty tour guide to lead you through the farmland investment world. Rolexes? Maybe not, but they'll get the job done. So, if you want to join the ranks of Bill Gates and The Waltons and invest in farmland, now you know your options. Whether you prefer to get your hands dirty or let the experts do the work, there's a way for you to get a taste of the farm life!
Crowdfunding and Tokenizing Land
Crowdfunding has changed the way people can invest in real estate. Although societies had farm coops for generations now, such as in Rwanda were more than 5,000 farmers and families co-own the same farm, crowdfunding is relatively new in terms of enabling co-investment in farmlands, and is about to catch scale and potentially skyrocket in the next few years. It is an investment method that allows investors to pool their capital and invest in real estate projects, including farmland. This method provides access to high-quality farmland investments, with lower minimum investment requirements.
Crowdfunding offers several benefits to investors, including:
Diversification: Crowdfunding allows investors to spread their risk across multiple properties, reducing the impact of any potential losses.
Lower minimum investment requirements: Unlike direct ownership or investing in funds, crowdfunding allows investors to participate in high-quality farmland investments with lower minimum investment requirements.
Access to professional management: Crowdfunding platforms provide investors with access to experienced real estate professionals who manage the farmland investments on their behalf.
Improved Liquidity: Crowdfunding platforms typically offer more liquidity compared to direct ownership, allowing investors to exit their investments more easily if needed.
Simple, you can invest in a specific farm in just few clicks, like ordering a pizza from your favorite pizza guy.
And it is rewarding, because you get to invest directly in one farm that you may know or like or want to support...
There are at least another 15 benefits of real estate crowdfunding, check out our post titled: 21 Benefits of real estate crowdfunding.
How much returns should I expect once I invest in farmland?
Well, let's just say you won't be buying a private island with the returns, but you won't be left out in the cold either. Most of our research has indicated that you can expect a general annual yield in the low to mid digits (5%) and an annualized total return around 9 to 12%. Sometimes it could even reach above 20%! For a relatively safe and stable asset class, that's a pretty sweet deal, especially when you consider that gold doesn't generate any yield and cash and other asset classes are being smacked around by inflation.
But let's not forget the real prize here - the warm and fuzzy feeling you get from knowing that you put your money to good use and helped out a farmer. It's like a two-for-one deal - you get returns and feel good about yourself at the same time. Now that's a win-win-win situation! Perhaps we should start a new real estate investment metric called IRRII (not IRR), which stands for Internal Rate of Return of Impact Investments (ESG folks this is music to your ears!)
In conclusion, land is a critical resource for humanity and an important asset class for investment. Land investments offer the potential for financial returns, as well as the opportunity to make a positive impact on the world. Whether it's supporting farmers, preserving natural habitats, promoting renewable energy production, or enhancing food security, land investments can play a critical role in addressing some of the world's most pressing challenges. So, not only are you investing in your future, you're investing in the future of the planet. Now, that's money well spent!
Where can I find Crowdfunding platforms for farmland?
Here are few examples of some platforms and companies helping investors like you to invest in farmlands. Please come back later for our next post deep diving into the various global platforms where we explore them and provide a summary description about each.
Disclaimer: This article should not be taken as investment advice. We are not certified investment advisors and any financial decisions made based on the information contained in this article are at your own risk. In other words, don't blame us if your investments go up in smoke like a poorly cooked bag of popcorn. Always do your own research and consult with a professional before making any investment decisions. Also be aware of those professionals wearing expensive watches :)