Grow your wealth, increase your passive income and contribute to a more sustainable planet with FarmTogether. Find out whether investing in high-quality US farmland is the right fit for you in this review.
“Farmland is an excellent addition to any investment portfolio. It is inflation-resistant and contra-cyclical to many conventional equity investments.”Artem Milinchuk, CEO and Founder of FarmTogether
What is FarmTogether
While many investors are familiar with the benefits of adding alternative investments like commercial or residential real estate to their portfolios, few are equally familiar with farmland.
Farmland is a real estate investment that offers high, inflation-linked returns, low volatility, a lack of correlation with most asset classes, and an opportunity to drive sustainable solutions for the planet.
It’s no surprise, then, that farmland has attracted large institutions and the ultra-rich, like Bill Gates, for decades. For the individual investor, it’s a different story. Farmland has been out of reach for most due to a combination of factors including lack of transparent markets, the high degree of specialized knowledge required, and high investment minimums.
FarmTogether is seeking to change that. FarmTogether aims to make investing in institutional-quality US farmland more accessible by enabling accredited investors to purchase shares in U.S. farms for the first time. The company was founded in 2017 and has already completed 38 deals across 6 states and 12 crop types. This translates to over $150 million in assets under management.
Their team of veteran agriculture and real estate investment professionals leverages more than 100 years of experience to bring top-notch farmland opportunities to their investors. They handle it all, from sourcing and risk management to operations and distributions, to remove the barriers to entry that would otherwise turn investors away if they tried to do it all themselves.
Using FarmTogether’s easy online platform, investors can easily view and manage investment opportunities. FarmTogether also offers investors substantial educational resources through its learning center.
Last, and certainly not least, FarmTogether’s portfolio is certified by the Leading Harvest sustainable farmland management standard. Investors can trust that FarmTogether and its operators are using sustainable methods, such as cover cropping, implementing micro-drip irrigation technology, and when applicable, transitioning the property to organic. These methods not only increase farmers’ bottom lines, meaning better returns for investors, they can also help offset the impacts of climate change in the long run.
Thanks to FarmTogether, individual accredited investors now have access to institutional-quality farmland investment opportunities.
How to Open an Account
Anyone can open a free account with FarmTogether to explore the platform. After answering some basic questions, including whether or not you qualify as an accredited investor, you will be able to view the offerings currently available on the platform.
How To Invest
FarmTogether offers accredited investors the opportunity to invest in institutional-quality US farmland. In general, an accredited investor is someone who meets one of the following criteria:
- Earns an annual salary of $200,000 or more (or $300,000 jointly with a spouse)
- Has at least $1,000,000 in net worth, excluding the value of their primary residence
- Holds a current Series 7, Series 65 or Series 82 license
A full list of criteria for accredited investors can be found here.
FarmTogether offers investors several ways of accessing farmland. Investors have the option of participating in a crowdfunded farmland offering for as little as $15,000. FarmTogether also sources farmland for individual investors who would prefer to have sole ownership of a farm. The minimum investment for a sole sourced offering is $3,000,000. FarmTogether is additionally piloting an annual secondary liquidity market (more on this below) and offers 1031 Exchange eligibility.
Each farmland investment is structured as a standalone LLC, which allows tax benefits to be passed directly to investors.
What is the Typical Hold Period for an Investment?
Farmland is a longer-term investment, with a typical hold period of 5-12 years depending on the crop type, after which the property is sold and investors receive the appreciated value of the farm. In general, permanent crops are held for longer than row crops because they take longer to mature.
What Returns Does FarmTogether Target?
FarmTogether typically targets returns of 7-15% with cash yields ranging from 3-9%, both net of fees. Permanent crops, such as apples or almonds, tend to yield higher returns, but they come with more risk. Row crops, like corn and soybeans, yield lower returns but can offer an investor with stability and more cashflow upfront.
FarmTogether recommends that investors diversify across crop types for a well-balanced portfolio.
How experienced is FarmTogether’s Management Team?
FarmTogether’s CEO and Founder Artem Milinchuk has over a decade of experience in food, agriculture, and farmland investing. Together, FarmTogether’s team of investment professionals have more than 100 years of combined experience across agriculture, technology, investing, and real estate. Executive members have experience investing on behalf of some of the largest and most innovative funds in the world, including Prudential and Ontario Teachers’ Pension Plan, as well as experience in asset management at Hancock Agricultural Investment Group, one of the largest institutional managers of agricultural real estate in the U.S.
How Does FarmTogether Source and Conduct Due Diligence Opportunities?
FarmTogether’s investment team has developed a highly disciplined approach to investing.
The team sources deals through a combination of strategic partnerships and their proprietary sourcing technology, which gives them the ability to access both on- and off-market investments. To date, the team has reviewed thousands of opportunities, of which only 2-3% ultimately made it onto the platform.
- The FarmTogether team’s process starts by taking a global macro view. This includes an analysis of future impacts of climate change, water availability, regional trends, the current regulatory landscape, and long-term trends in agriculture yields.
- Next, the team does a deep-dive into the end market for the target farm product. The team arrives at a long-term view on price and valuation for the given market through analyzing factors including supply and demand, consumer preferences, marketing, regulations, and new product development.
- Next, the investment team uses over 150 data sets from public and private sources, combined with proprietary technology and significant investment experience, to hone in on the most attractive investment opportunities in the target regions and crops. The team is especially focused on opportunities with clear opportunities for value creation through sustainable improvements. For example, adding a secondary water source or transitioning a property to a specialty label such as certified organic.
- Finally, once specific investment opportunities are identified, the FarmTogether team conducts exhaustive due diligence to ensure that only the best opportunities make it onto the platform. FarmTogether relies on a 120-point checklist so that every base is covered. In particular, the team is focused on soil quality, water availability, availability of best-in-class operators, market access for goods, and climates which are conducive to growing the expected crops.
Is There a Secondary Market for Fractional Shares of Farmland?
Due to investor demand, FarmTogether started piloting a secondary market for transactions in September 2020. Once implemented, this will allow investors to liquidate their holding prior to the stated hold period for the investment. For most properties, the company plans to offer the liquidity window 366 days after the closing date for the investment, providing investors with a 30-day period in which they can sell some or all of their units of ownership in the farm. The company also plans on offering more frequent liquidity windows (quarterly or even monthly) in the future.
To date, FarmTogether has piloted secondary market liquidity windows on three offerings.
What is the Fee Structure?
Opening an account with FarmTogether is free and open to all potential investors. FarmTogether’s fees vary from deal to deal, but FarmTogether aims to have fees in-line or below the industry average.
For permanent crpp deals, investors pay a one-time fee at deal closing equal to between 1 – 3% of the deal’s project basis. FarmTogether is also paid an annual fixed management fee, calculated as a percentage of the project basis, and a profit share, which is calculated as a percentage of net operating income. FarmTogether does not charge carried interest or other fees.
For row crop deals, FarmTogether charges a one-time fee equal to 1% of the property’s purchase price at closing + 20% of gross lease revenue annually for row crop transactions.
How Do Investors Earn a Return?
Farmland investing offers investors three streams of income: periodic rental payments through lease agreements with the operators, crop payments from sale, and appreciation when the underlying farm is sold. After their initial investment, FarmTogether pays investors dividends directly to an investor’s bank account on a quarterly or annual basis, depending on the structure of the deal. When the farm is sold after the target hold period, investors receive a proportional share of the net proceeds based on their investment.
By incorporating sustainable farming methods, FarmTogether’s farms can become more efficient, which should lead to appreciation of the underlying farm.
Is Investing with FarmTogether Safe?
Compared to the stock market or commodities such as gold, farmland is an extremely low-volatility asset that has performed well in recessionary and high-inflation environments. However, all investments carry some level of risk.
The FarmTogether team mitigates investment risk through its enhanced due diligence process, which includes a 120-point diligence checklist. The team maintains strict criteria for which opportunities are made available through its platform, and only 2-3% of opportunities that are screened are ultimately shown to potential investors.
The two most common risks for a farmland investment are overpaying for the farm and selecting the wrong operator partner. FarmTogether mitigates these risks by being conservative when underwriting deals, only partnering with experienced operators, and relying on an experienced team of farmland managers.
What are the Pros and Cons of Investing with FarmTogether?
- FarmTogether offers investors multiple ways of investing in farmland opportunities, including crowdfunded offerings, bespoke properties, and secondary market offerings.
- FarmTogether’s investments have high target returns of 7-15% with a high cash yield component of 3-9%, both net of fees.
- FarmTogether’s has a team of experienced management professionals with more than 100 years under their belts.
- FarmTogether’s online platform is easy to use and offers investors a one stop shop for managing all their investments.
- FarmTogether gives investors the opportunity to make food systems and the planet more sustainable.
- At this time, FarmTogether’s offerings are only available to accredited investors.
- FarmTogether has a relatively short track record, given that the platform has only been offering investments since 2019.
- The minimum investment of $15,000 may be too high for some investors.
Is FarmTogether Right for You?
The FarmTogether crowdfunding platform is one of the few means for accredited investors to invest in farmland as a commodity. With good returns and low fees, it’s an appealing alternative for diversifying your portfolio to those who want to invest in farmland.
The bottom line: For accredited investors who are interested in diversifying their portfolios, an investment in farmland can be a great way of reducing portfolio volatility, while earning steady, inflation-proof passive income.