FarmTogether Review 2023 | Is FarmTogether Right for Me?
Bill Gates has made waves in recent years for his acquisition of huge quantities of US farmland. Whether or not you’re a fan of Gates, it’s likely a smart move. After all, farmland has long been a sound alternative investment. It has historically provided stable returns, and it’s not correlated with the stock market. This makes it a great way to diversify your portfolio while also collecting passive income.
The average investor, however, does not have Bill Gates’ wallet. So buying property outright is likely out of the question. This is where a platform like FarmTogether comes in. (That said, they are currently only open to accredited investors, somewhat defeating the purpose.) FarmTogether owns farmland that investors can add to their portfolio in three different ways, which we’ll cover below.
Keep reading to learn more about how FarmTogether works and whether it might be right for your portfolio.
Learn More About FarmTogether
External FarmTogether Review & Ratings
|Best Wallet Hacks||4.5|
|My Millenial Guide||4.5|
|Money Done Right||4.5|
FarmTogether is a technology-enabled investment platform based in San Francisco, California, that specializes in providing individuals and institutions with access to direct ownership of institutional quality farmland.
The company was founded in 2017 by Artem Milinchuk, David Chan, Josiah Terrell-Perica, and Olga Ayvazyan. The founding team boasts a collective experience of over 70 years in food and agriculture investment in the US and globally, and a unique combination of expertise in farmland investing and technology.
The founders created FarmTogether out of personal and professional frustration with the complexities and challenges associated with investing in farmland. They believed that farmland is a safe, stable, and attractive long-term investment and sought to democratize farmland investing by making it more accessible to everyone.
The company meticulously reviews all investment opportunities and only pursues those properties they find attractive. They then partner with top quality local farmland operators to manage the land.
As of their latest funding round, FarmTogether had raised $25.7 million in funding.
How Does FarmTogether Work?
FarmTogether offers three unique ways for people to invest in farmland.
- Crowdfunded Farmland Offerings: These are farmland investments funded by multiple FarmTogether investors. Investment minimums for these offerings can be as low as $15,000. However, they’re only eligible for tax-saving 1031 exchanges when investors commit at least $1 million to a single offering. The hold period for these offerings is typically 8 to 12 years.
- Sustainable Farmland Fund: This is a diversified agricultural land portfolio. The Sustainable Farmland Fund is the most accessible FarmTogether investment option, with minimum investments as low as $5,000 for Class I shares. It has a lockup period of 2 years from each share purchase, after which you can submit a redemption request. FarmTogether processes redemptions every quarter, within limits: no more than 2.5% of net asset value per quarter, or 10% of net asset value per year.
- Sole Ownership Bespoke Offerings: These are assets wholly owned by single individuals, households, or entities. These offerings are fully customizable, with hold periods, yields, and risk-return profiles at the discretion of the investor. They typically require a minimum investment of $1 million and are eligible for 1031 exchanges.
They target permanent crops such as tree nuts and citrus, in West Coast subregions with good water availability, high-quality soils, and proximity to FarmTogether’s preferred farm operator networks. The team also looks for other types of opportunities, including annual row crops such as corn, wheat, and soy east of the Rockies.
They make targeted investments to modernize and streamline its farms’ operations, employing sustainable farming practices wherever practical and deploying leverage where appropriate to boost returns.
Regardless of the option (or options) you pick, FarmTogether is all about allowing people to invest directly in farmland. The crowdfunding platform entails investing in LLCs managed by FarmTogether. The way this works is much the same as a crowdfunding real estate platform (such as Fundrise, to name one popular one).
Investors using Farmland will make money both through cash distributions (i.e. dividends) and through appreciation of the land. Dividends are paid out either quarterly or annually (it varies based on the property). Land appreciation is only factored in at the time of a sale.
Of course, FarmTogether has to make money itself, which is why it uses a fee structure. We’ll cover that more down below.
- Multiple ways to invest – With three ways to invest, FarmTogether offers a degree of versatility that’s not often seen with crowdfunded real estate investment platforms. There are crowdfunded investments (fractional ownership), outright ownership possibilities, as well as the ability to invest in a diversified fund.
- Investment calculator – When you browse investment opportunities on FarmTogether, you can use an investment calculator to estimate your returns based on different investment amounts. This is a great tool that saves you from opening up your own calculator and doing the math yourself.
- Easy signup process – Some sites make it a pain to sign up, but not FarmTogether. You can open an account and invest in a matter of minutes.
- Intuitive platform – FarmTogether offers a large number of investment opportunities. Fortunately, they make it a breeze to browse them, with a range of filters, such as crop, investment size, and more.
- Learning center – FarmTogether recently launched its own Learning Center, which provides helpful resources for understanding farmland investing, including investment overviews, whitepapers, blog posts, webinars, a podcast, and more.
- Transparency: FarmTogether offers detailed information about each investment opportunity, allowing investors to make informed decisions. This includes information about the property, financial projections, and more.
FarmTogether Fees & Plans
First off, you should know that FarmTogether is currently limited to accredited investors. This is a bit disappointing since the idea of crowdfunding is to make investing more accessible.
FarmTogether’s fees are complicated, to be perfectly honest. They vary widely based on the type of investment (crowdfunded, sole ownership, or the Sustainable Farmland Fund).
Their website notes that fees are “dependent on product offering,” but that there’s a 1-2% one-time admin fee, a 1-2% annual management fee, and a 5% net operating income fee.
You’ll have to read carefully before investing to ensure you understand the fee structure of the investment in question.
FarmTogether’s investment process is comprehensive, taking into account a wide range of factors before making a decision. The firm’s process includes:
- Global Macro-View: They evaluate the broader context of potential investments, including climate change, water availability, regional trends, regulatory landscapes, and long-term trends in agricultural yield improvements.
- End Market Analysis: FarmTogether deeply investigates the end markets for the farm products it targets. This allows the team to forecast how long-term trends in the industry might influence end prices.
- Property Analysis: In order to gain an in-depth understanding of potential properties, FarmTogether integrates 150 data sets from public, private, and proprietary sources. The firm also leverages its proprietary technology to identify the most promising opportunities.
FarmTogether employs a detailed 105-point due diligence checklist in its evaluation of potential investment opportunities. This checklist covers a wide range of factors including:
- Soil, leaf, and water conditions
- Capital improvements
- Local legislation
- The depth of the supporting farming ecosystem
- Cost of inputs
- Farmworker wages
This rigorous due diligence process is a testament to FarmTogether’s commitment to ensuring that only the best opportunities are presented to their investors.
They only approve less than 1% of deals that enter their pipeline for inclusion on their platform
Why Invest in Farmland?
- Steady Demand: The demand for agricultural products is constant and increasing with global population growth. Everyone needs food, fiber for clothes, and now more than ever, crops for biofuels. This steady demand contributes to the relative stability of farmland investments.
- Inflation Hedge: Farmland can act as a natural hedge against inflation. In times of rising prices, the value of physical assets, such as land, often increases. Moreover, agricultural commodities, which are the output of farmlands, also tend to rise in price during inflationary periods.
- Diversification: Investing in farmland can provide portfolio diversification. The returns on farmland have a low correlation with traditional asset classes like stocks and bonds, which can help to spread risk and potentially improve the risk-adjusted return of your overall investment portfolio.
- Resilient Investment: Historically, the value of farmland has been resilient during economic downturns. While it’s not completely immune to market pressures, it generally doesn’t see the same level of volatility as the stock market.
- Sustainable and Impact Investing: With a growing focus on sustainability, investing in farmland can also contribute to environmentally conscious investment strategies. By choosing to invest in farmlands that prioritize sustainable practices, investors can contribute to positive environmental impact.
- Potential for Appreciation and Income: Farmland offers a dual earning potential. There’s the possibility of land value appreciation over time, as well as annual income from the sale of crops produced on the land.
However, like all investments, investing in farmland also involves risks. These can include climatic events, changes in commodity prices, and changes in governmental policies related to agriculture. Hence, potential investors should fully understand these factors and consider their own risk tolerance levels before venturing into farmland investment.
Farmland has consistently been a superior asset class, outperforming most major assets, including commercial real estate, for over three decades. This can be attributed to its strong performance, demonstrating robust absolute returns over the past several decades.
From 1992 to 2022, farmland has approximately 11% total annual average returns, which includes both income and price appreciation.
Moreover, farmland has historically been an effective hedge against inflation. The NCREIF Farmland Index’s Total Return has consistently provided returns more than double the inflation rate since before 1992. This characteristic adds a layer of financial protection, particularly during periods of rising prices and reduced purchasing power.
The performance of farmland is also enhanced by the vital role it plays in global food and water security. As the world’s population continues to grow at an unprecedented rate and farmland acreage shrinks, there is an urgent need for increased productivity and efficiency from our farms. This demand for food and water security translates into potential growth and value appreciation for farmland assets.
It’s also important to note that the increasing scarcity of farmland and its lack of correlation with other asset classes make it an exceptionally strong diversification tool for virtually any portfolio. This uniqueness has caught the attention of institutional investors, who have significantly increased their investments in farmland over the last 30 years.
This trend underscores the recognition of farmland’s potential for stable returns and portfolio diversification benefits.
Who is FarmTogether Best For?
FarmTogether is ideal for several types of investors seeking to diversify their portfolio and explore alternatives to traditional investment avenues:
- Long-term Investors: With hold periods typically ranging from 8 to 12 years for crowdfunded offerings, FarmTogether is best suited for long-term investors who can commit their capital for a significant duration.
- Investors Looking for Diversification: Farmland investments provide diversification because they have little correlation with traditional asset classes. If an investor wants to diversify their portfolio beyond traditional stocks, bonds, or real estate, farmland can be an attractive option.
- Investors Seeking Stable Returns: Farmland has historically provided strong absolute returns and can serve as a hedge against inflation. For investors looking for stable returns over the long-term, FarmTogether’s platform could be an appealing choice.
- Environmentally Conscious Investors: FarmTogether targets sustainable farming practices. For investors who value environmental stewardship and sustainability, investing through FarmTogether can align with their values while also providing potential financial benefits.
- High Net Worth Individual investors or Institutions: FarmTogether’s bespoke offerings are fully customizable, allowing for direct ownership of farmland. These offerings typically require a minimum investment of $1 million, making them suitable for high net worth individuals or institutional investors.
- Investors Interested in Agriculture: For individuals who have a personal interest in agriculture and want to support farming operations while making a return on their investment, FarmTogether offers a unique opportunity to invest directly in farmland.
Is FarmTogether Worth It?
FarmTogether is a solid option for accredited investors looking for an easy way to invest directly in U.S. farmland. For non-accredited investors, it’s not currently accessible.
To check out FarmTogether for yourself, click here to see how it aligns with what you’re looking for in a crowdfunded farmland investment platform.
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