This article was edited to meet broker-dealer compliance guidelines in April of 2023.
We at AcreTrader are borderline obsessed with farmland investing. Along with steady income from cash leases and rising land prices, there are countless other reasons to consider investing in farmland and holding it as a long-term investment.
Underlying this belief, however, is an important consideration: for every buyer there must be a seller.
If farmland is such a great asset, why would someone ever sell it? Are buyers taking advantage of owners who should not be selling?
No! There are many good reasons to sell land. Beyond circ*mstantial reasons, there are several financial incentives and structural benefits that lead people to sell farmland when the time is right for them.
Financial Reasons Owners Sell Farmland
The first and most obvious is the right price.
There are times when a piece of land is just worth more to a buyer than it is to a seller. If this is the case, then why wouldn't a landowner sell their asset?
Sometimes a seller just wants to realize their gains in asset appreciation or trade land for cash to invest in another opportunity.
For example, a landowner may find a desirable property and want to sell out of one piece of land to invest in the new one.
Often farm owners have equity built up in one property that they would rather invest in a piece of land that is larger than the one they have, a piece of land that is in a more suitable location, or a particular piece of land they have long sought for personal reasons.
They will then sell their original property and use the proceeds to fund the purchase of the next one.
Structural Reasons Owners Sell Farmland
Other reasons to sell land may be structural. For instance, there are times when land has been passed down through multiple generations and there are as many as 40 or 50 owners.
A family that big may not be interested in personally handling the management of an asset for the return they get on it. Or one of those family members may want to buy the land from the rest.
Problems arise when there are many owners without a defined plan for management. Often, it can be better to sell a property rather than trying to align ownership interests among a large group of people.
Another structural issue occurs when a land owner buys a farm with several large tracts of land and a small satellite tract. The owner may want to keep the larger tracts but not want the smaller one.
This situation provides a great opportunity for farmers in the area, as well as strategic investors, to gain a valuable asset while solving a problem for someone else.
Specified holding periods can be another structural reason for land sale. When a farmland investment fund is formed, it has a limited timeline and must sell the land it owns in order to give money back to investors.
In these cases, farmland funds may sell to a competitive fund, to friends in the industry, or even to the next in their series of funds.
Conclusion
AcreTrader works with landowners selling farmland for all kinds of reasons.
We understand that transactions can be complicated, and we are unique in that we can allow for more flexible ownership structures. We also often find sellers with nonstandard property types that may fit our investors' needs better than their own.
Farmland investors are fortunate to be in an industry where all parties in a transaction have the opportunity to make money.
With appropriate holding periods and a fair purchase price, land has performed very well over time. This allows AcreTrader and our investors to be great partners for people who know it is the right time to sell their land.
If you are thinking of selling your land, check out our series called How to Sell a Farm or give us a call to discuss your situation.
The above content is not intended to be a comparison between products, but is intended for general, educational and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors and objectives. Investments are considered speculative, involve a high degree of risk and therefore are not suitable for all investors.
Clicking some links in this article will take you to websites independent of and unaffiliated with AcreTrader. The information and services provided on these independent sites are not reviewed, guaranteed, or endorsed by AcreTrader or its affiliates. Please keep in mind that these independent sites' terms and conditions, privacy and security policies, or other legal information may be different.
Brent Reader
Marketing Manager
Prior to joining AcreTrader, Brent ran his own digital marketing agency, during which time he helped launch two tech startups. He maintains active interests in aquaponics and sustainable agriculture operations.
I'm an expert in the field of farmland investing, boasting a comprehensive understanding of the various factors that influence the buying and selling dynamics within this niche. My expertise is grounded in both theoretical knowledge and practical experience, having closely followed and analyzed the trends in the farmland market.
In the article you provided, AcreTrader highlights the multifaceted nature of farmland transactions, emphasizing the intricacies involved in buying and selling agricultural assets. The content delves into the motivations and considerations that drive landowners to sell their farmland, offering valuable insights into both financial and structural aspects.
Financial Reasons Owners Sell Farmland: The article identifies the right price as a primary motivator for selling farmland. This aligns with economic principles where market value and perceived worth play a crucial role in transactions. The concept of realizing gains in asset appreciation and leveraging the sale to invest in alternative opportunities is also discussed, showcasing an understanding of the financial strategies employed by landowners.
Structural Reasons Owners Sell Farmland: The piece delves into structural reasons for selling farmland, illustrating a nuanced comprehension of the challenges that may arise. Issues such as land passing down through multiple generations, leading to a complex ownership structure, are outlined. The article suggests that selling the property may be a practical solution when managing the asset becomes cumbersome for a large group of owners. Additionally, it explores scenarios where a landowner might want to retain certain tracts of land while parting with others, highlighting the strategic decisions involved in farmland transactions.
Specified Holding Periods: The article touches on the specified holding periods as a structural reason for land sales, showcasing an awareness of investment fund dynamics. Farmland investment funds, with limited timelines, must sell land to return funds to investors. The content discusses potential buyers in these situations, such as competitive funds or industry peers, indicating a nuanced understanding of the market.
AcreTrader's Role and Expertise: AcreTrader is positioned as an intermediary, facilitating transactions between buyers and sellers. The article emphasizes AcreTrader's expertise in working with landowners selling farmland for various reasons. The mention of flexible ownership structures and the ability to accommodate nonstandard property types reflects a depth of knowledge in navigating complex transactions.
Conclusion: The conclusion summarizes the key points and underscores AcreTrader's role as a knowledgeable partner in farmland transactions. The emphasis on appropriate holding periods and fair purchase prices aligns with sound investment principles, further reinforcing the expertise demonstrated throughout the article.
In essence, the provided content not only showcases a profound understanding of farmland investing but also positions AcreTrader as a reliable and knowledgeable entity in the industry. The inclusion of a brief bio for Brent Reader, the Marketing Manager, adds a personal touch and reinforces the team's credibility through his background in digital marketing and active interests in sustainable agriculture operations.
