How to Invest in Farming Without Owning a Farm (2024)

FAQs

How to Invest in Farming Without Owning a Farm? ›

The closest that an investor can get to owning a farm without actually doing so is by investing in a farming-focused real estate investment trust (REIT). Some examples include Farmland Partners Inc. (FPI) and Gladstone Land Corporation (LAND). These REITs typically purchase farmland and then lease it to farmers.

Role of farmland in your portfolio

Farmland can serve as a cornerstone of a balanced investment portfolio. Commodity prices, including the cost of food, tend to rise with inflation. This strong correlation allows agricultural investing to protect against inflation, especially compared to high-volatility assets.

ETFs & Mutual Funds

Rather than buying individual stocks, you can buy shares of mutual funds and exchange traded funds (ETF) that invest in the farming sector. With a low investment minimum, mutual funds and ETFs help you diversify into different aspects of the farming process without buying individual stocks.

Farmland investing for non-accredited investors can be accomplished via a “real estate investment trust” or REIT. It is a company created to acquire and hold farmland. Although farmland REITs are not a perfect method, they are an option for non-accredited investors to invest in farmland.

If you're looking to get into farming, you can get started for as little as $600 up to $10,000 or even more.

Dairy Farming: Dairy farming is one of the most profitable agricultural business ideas. Aside from milk, it also produces manure. There is a high demand for organic dairy products all year round such as milk, cheese, curd, cream and so much more.

But farmland still provides real diversification benefits, and best of all, investors don't have to sacrifice long-term returns to lower the risk of their portfolio. Historically, farmland has actually outperformed stocks, bonds, gold, and real estate, generating 10.5% average annual returns since 1992.

Using Livestock to Make Money Farming. Livestock is probably the most common way farmers make money from their land. And while animals have a few more expenses and a higher overhead, they usually bring in top dollar in terms of net income. Here are just some of the ways you can make money with livestock.

Seek Grants and Loans

If you need serious cash for your farm, your two main options are agricultural grants and loans. Grants generally are for very specific purposes such as converting some of your farm to wind or solar power, repairing farm buildings or buying a set number of livestock.

How do I start farming for a living? ›

Accredited Investor Definition

The SEC defines an accredited investor as someone who meets one of following three requirements: Income. Has an annual income of at least $200,000, or $300,000 if combined with a spouse's income. This level of income should be sustained from year to year.

Subdivide Land and Resale

Subdividing land for resale is common. It's the fastest way to make money from raw land investment. Investors with large land parcels can increase the overall value of property by dividing it into lots and selling them separately.

It's simple: land values rise, and the land produces crops, which provides you with income. The higher the income, the more valuable the farmland. In addition, the land could appreciate due to its beauty or location for a vacation property.

Rising input costs, shrinking production values, commodity specialization, and challenges to land access all appear to be connected to declining farm operator livelihoods, the new study in Frontiers of Sustainable Food Systems concludes.

Oklahoma. Oklahoma currently sits at the lowest cost per acre among the best states for farmland in the US, so this is another state to consider when looking to buy land for agricultural purposes.

Acreage is another way to assess farm size. According to the USDA , small family farms average 231 acres; large family farms average 1,421 acres and the very large farm average acreage is 2,086. It may be surprising to note that small family farms make up 88 percent of the farms in America.

Farm Household Wealth and Income

In 2021, the average U.S. farm household had $2,100,879 in wealth.

The best states for farmland in the US include Montana, Kansas, Oklahoma, South Dakota, North Dakota, Texas, Iowa, Kentucky, Wyoming, and California. Consider factors like profitability, cost of operation, infrastructure, and availability when selecting a location.

What is the cheapest farm animal to raise? ›

Chickens are generally a low-cost farm animal; the feed is cheap, and they love to eat all of your scraps. It only takes a few minutes per day to take care of chickens. You have to feed and water them, and you will need to make sure they're protected at night.

Most urban farms are small scale or micro-farms due to the availability of land in urban areas, but occasionally urban farms can constitute several acres within city limits.

Poultry, without a doubt, are the easiest animals to raise on the homestead. Starting with this small livestock will give you the confidence to explore other livestock options. Chickens are the quintessential livestock for every farm and homestead.

The billionaires of Silicon Valley and other rich Americans are reported to be buying extensive areas of land in New Zealand in preparation for a feared apocalyptic event such as a nuclear war or an outbreak of a global virus that would end our civilisation as we know it.

Land pays for itself over the long term through the cash flow generated from rent or crops and asset appreciation over time.

There are several advantages that farmland investments have over stock market investments. As an alternative asset, farmland investing gives you access to an opportunity to make a return that's not tied to market performance.

Working as a farmer has many potential benefits, including: Ability to work outside: Farmers spend most of their workday outside. They often wake early to feed animals, inspect crops and perform other agricultural duties. Farming can be a great profession for people who enjoy being outside.

Most Richest Farmers in the World

Qin Yinglin is a Chinese businessman who founded the Muyuan Foodstuff Company, which is one of China's largest pig breeding and pork processing firms. As of 2021, Qin's net worth is estimated at over $20 billion, making him one of the wealthiest farmers in the world.

These tips for making money on your hobby farm can help farmers can make extra income from their farms. From selling produce at farmers markets to renting out farm animals for petting zoos, there are plenty of options available for those who want to generate income from their hobby farms.

Which livestock is most profitable? ›

Beef cattle are considered the most profitable livestock and easiest to raise for profit, but homesteaders with small acreage won't be able to raise cattle. Cattle, whether you want beef or dairy cattle, require plenty of good-quality pasture, supplemental hay, fresh water, room to roam, and veterinarian care.

While farming is indeed profitable, making money from a small farm isn't always a walk in the park for everyone. Nonetheless, it is possible and can be done with proper planning and a decent level of hard work. It also involves getting your priorities right and understanding your market well.

The act of farming can be for people of any age—all that matters is how you approach it. No one will contest that farming can be a difficult job. Farming can start early in the morning and keep you busy until late at night, seven days a week, if you want it to. But farming can also be whatever you make it.

For someone who isn't farming as their full-time source of income, even one to three acres may be plenty of growing space for one person to maintain. This is particularly true if they do most of the work by hand and aren't using large mechanized equipment like tractors and combine harvesters.

Our advice is to stick to the general rule of 20 to 25% of businesses income. If your investor is more interested in cashing in on equity growth, you can offer 15% of the business or more, depending on how much money the investor provides.

Individuals who want to become accredited investors must fall into one of three categories: have a net worth exceeding $1 million on your own or with a spouse or its equivalent; have earned an income surpassing $200,000 ($300,000 if combined with a spouse or its equivalent) during the last two years and prove an ...

There is no formal process for becoming an accredited investor. Rather, it is the responsibility of the sellers of such securities to take a number of different steps in order to verify the status of entities or individuals who wish to be treated as accredited investors.

For small investors to truly enjoy the more traditional sense of land ownership, perhaps the best options are timber farms, mineral development lands, vegetable gardens, orchards, vineyards, and recreational land.

What is investing in land called? ›

Real estate investing involves the purchase, management and sale or rental of real estate for profit. Someone who actively or passively invests in real estate is called a real estate entrepreneur or a real estate investor.

Altogether, investments in American farmland have returned about 11% per year, on average, for the last four decades. That's comparable with the long-term returns of the stock market.

Farmland can serve as a cornerstone of a balanced investment portfolio. Commodity prices, including the cost of food, tend to rise with inflation. This strong correlation allows agricultural investing to protect against inflation, especially compared to high-volatility assets.

Investing in farmland is becoming an increasingly popular option in 2023 for those looking to diversify their portfolio and generate passive income. Not only does farmland provide a steady source of returns, but it also has the potential for long-term appreciation.

Grow and Sell High-Value Crops. To make a good living from farming, it's best to focus on growing the most profitable crops. Growing niche products in demand and un-catered for by larger farmers can be very lucrative. Here are some options to consider.

Aside from sugar cane in first place, the next the top three most produced crops in the world are all classified as grains. Grains include cereals and legumes and are such a widespread crop because they can grow in almost any climate.

For someone who isn't farming as their full-time source of income, even one to three acres may be plenty of growing space for one person to maintain. This is particularly true if they do most of the work by hand and aren't using large mechanized equipment like tractors and combine harvesters.

Why is farming not profitable? ›

Rising input costs, shrinking production values, commodity specialization, and challenges to land access all appear to be connected to declining farm operator livelihoods, the new study in Frontiers of Sustainable Food Systems concludes.

These consumers can even become return customers for your business, thus creating a stable income. While farming is indeed profitable, making money from a small farm isn't always a walk in the park for everyone. Nonetheless, it is possible and can be done with proper planning and a decent level of hard work.