FarmTogether is a digital farmland investment platform that allows accredited investors to invest in fractional or exclusive farmland ownership.
While the accreditation requirement puts FarmTogether out of reach for middle-income investors for now, a minimum investment of just $ 15,000 per location means that FarmTogether is much more than just a portfolio diversification game for the ultra-wealthy .
FarmTogether stands out from other collective investment platforms, including farmland-focused options like AcreTrader , in other important ways. The FarmTogether team has over 70 years of collective experience in finance and agriculture. This team only presents investors with opportunities in which it plans to invest its own funds.
And, while past performance is not indicative of future results, FarmTogether is targeting investment opportunities that can offer capital gains returns between 7% and 13% with annualized cash returns of 3% to 9% after fees. .
FarmTogether platform and key features
The FarmTogether investment platform is built with sophisticated investors in mind. It is not a beginner-friendly online stockbroker or a low minimum capital crowdfunding opportunity .
But these shortcomings, if you can call them that, make FarmTogether no less valuable to investors seeking exposure to an often overlooked asset class, relative to other types of commercial real estate, at least not. it is closely correlated with the stock markets.
The FarmTogether platform offers a predictable investment experience for accredited individual investors, corporate entities, wealth managers and family offices. The FarmTogether team applies a standardized process to evaluate, buy, apply for investments, manage and sell agricultural land.
Types of FarmTogether investments
FarmTogether offers two types of investment options: fractional ownership (crowdfunded farmland deals funded by multiple FarmTogether investors) and custom sole proprietorship deals (assets wholly owned by individuals, households, or entities).
Crowdfunded farmland deals are much more accessible to the average FarmTogether investor. However, they are only eligible for tax-saving 1031 exchanges when investors commit at least $ 500,000 in a single offering, putting them out of reach for lower-asset investors.
FarmTogether performs thorough due diligence at every opportunity and selects only those that meet strict criteria, and in which you are willing to invest your own money.
Rather than holding title to the agricultural land itself as one of dozens or hundreds of tenants in common, each investor purchases shares in a special-purpose entity, an LLC, that directly owns the underlying agricultural land.
FarmTogether focuses on permanent crops such as tree nuts and citrus, in sub-regions of the West Coast with good water availability, high-quality soils, and proximity to FarmTogether’s preferred farm operator networks. The team is also looking for other types of opportunities, including annual row crops like corn, wheat and soybeans east of the Rocky Mountains.
FarmTogether features two fully committed offerings as representative of this diversity: an organic apple orchard in central Washington and a corn and soybean farm in northwestern Illinois.
Regardless, FarmTogether makes targeted investments to modernize and streamline its farm operations, employing sustainable farming practices where practical and deploying leverage where appropriate to drive returns.
Initial investment minimums for pool-funded farmland offerings start at $ 15,000, but vary by offering. Retention periods (the amount of time FarmTogether plans to keep the asset) start at five years and increase from there.
Bespoke offers are fully customizable, with retention periods, returns and risk-return profiles at the investor’s discretion. They generally require a minimum investment of $ 1 million and are eligible for 1031 exchanges.
Individuals and entities that can invest in FarmTogether offerings
FarmTogether accepts investments from individuals and corporate entities that meet the definition of an accredited investor from the U.S. Securities and Exchange Commission (SEC) :
- Minimum income of $ 200,000 for individuals and $ 300,000 for couples in the last two years with expected future income at similar or higher levels, OR
- Minimum assets (net worth) of $ 1 million for individuals or couples, OR
- Minimum assets of $ 1 million for eligible business entities
Investors can finance and maintain their investments through individual institutions, pension funds, accounts IRA , accounts 401 (k) individual and other eligible vehicles.
Price revaluation (returns) and cash returns
FarmTogether targets investment opportunities with the potential to produce an annualized price appreciation (return on equity or IRR) between 7% and 13% and cash returns between 3% and 9%, all net of fees. Investors typically receive quarterly, semi-annual or annual cash distributions by direct deposit.
FarmTogether fees vary by opportunity, but the platform strives to keep them below the industry average. FarmTogether describes the fees for each investment opportunity and the potential risks on the offer page in plain language.
Declaration and tax forms
FarmTogether’s secure investor portal helps investors track the performance of their assets over time and includes annual tax forms, such as K-1s, that investors need to report cash distributions and Capital gains.
FarmTogether Farmland Acquisition Process
FarmTogether’s data science-driven sourcing platform helps the team identify attractive off-market properties.
FarmTogether also leverages a broad network of agricultural professionals and digital sourcing partners to help identify acquisition opportunities on and off the market.
FarmTogether investors are not directly involved in the acquisition process, but it is worth having a general understanding of how it works. By FarmTogether, the process unfolds as follows:
- Identified potential customer . A farm is identified that is within the FarmTogether target geography and the ‘buy box’ of crops.
- Initial call . FarmTogether connects with the owner to discuss ownership.
- Property evaluation . The investment team leverages its industry expertise and Terra, FarmTogether’s AI-powered farmland underwriting engine, to examine farm fundamentals, including water availability, yield potential, and appreciation prospects. If the farm appears to be a good fit for FarmTogether and its investors, the team schedules a site visit.
- Offer and contract . FarmTogether designs a sales offer that adapts to the needs of the owners. The parties agree on the terms of the deal and enter into a sales contract.
- Diligence . FarmTogether conducts due diligence, completing a title search, confirming water rights, ensuring property complies with all applicable state and federal environmental regulations, conducting industry analysis, testing soil and water quality, and more. FarmTogether’s investment team is agile and leverages technology to eliminate the red tape often associated with large institutional land investors.
- Escrow and closing . If no issues arise during due diligence, the sale is closed. The former owners receive the proceeds of the sale and FarmTogether prepares to offer the property to its investors.
FarmTogether Secondary Market (Coming Soon)
Traditionally, real estate, especially farmland, which for much of history has been communal or family-owned and passed down to successive generations, is an illiquid asset class.
Modern innovations like REITs have injected more liquidity into the market and enabled fractional ownership of real estate assets at low prices, but the class is still best approached with a long-term horizon in mind.
That is also true for FarmTogether. FarmTogether’s holding periods span several years at a minimum, and the platform advises investors that they may not be able to sell early if the need arises, although FarmTogether promises to make “best efforts” to find secondary buyers.
But this limitation may be changing. FarmTogether has announced plans to launch a secondary market sometime in 2021. More details will be forthcoming, but this feature could make it easier for FarmTogether investors to buy and sell agricultural assets after the initial offering period ends.
The biggest advantages of FarmTogether over other real estate investment platforms include:
1. FarmTogether invests its own money in properties offered for investment
FarmTogether puts your money where your mouth is. That is, it only presents investors with opportunities that FarmTogether is willing to invest in. That should allay any concerns that FarmTogether is more concerned with transaction flow than transaction quality.
2. Attractive returns
FarmTogether targets investments with annual returns between 7% and 13%, net of fees. This is roughly in line with the long-term average profitability of the stock market , if not slightly better.
3. Generous cash returns
FarmTogether targets investments with strong cash flows that produce annual cash returns between 3% and 9%, net of fees. Even at the lower end of this range, this is significantly higher than the return on long-term cash investments such as bonds and certificates of deposit .
4. Returns and returns may not be closely related to other asset classes
Because agricultural real estate returns and returns may not closely correlate with other asset classes, such as stocks and precious metals , FarmTogether is a useful tool for sophisticated investors looking to diversify their investment portfolios.
5. Plain language and transparent investment risk and fee summaries
The investment offers on this real estate crowdfunding platform clearly and easily describe the annual management fees and potential risks. The FarmTogether FAQs also contain a wealth of plain language details about general investment risks.
This is a refreshing change from the dense or completely inscrutable investment materials you’ll find elsewhere.
6. FarmTogether investments are 100% passive income
FarmTogether uses a network of preferred partners on the ground to manage its farms, freeing investors from any day-to-day management responsibility.
Similarly, while potential investors should always perform their own due diligence, FarmTogether takes responsibility for the painstaking and time-consuming work of sifting through potential opportunities.
The result: a completely passive investment experience for FarmTogether participants.
7. FarmTogether can support 1031 exchanges
Certain FarmTogether investors and investments may be eligible for 1031 exchanges . The rules around these tax saving maneuvers are complicated and situation specific, so check out the FarmTogether FAQ and consult your tax advisor before proceeding.
8. FarmTogether accepts investments from corporate entities and pensions
FarmTogether is not just for people. The corporate entities eligible, as LLCs and partnerships, can invest in their bids, the same as people who use funds in their pension accounts.
See the FarmTogether FAQ for more details on the rules governing these types of investments.
The biggest disadvantages of FarmTogether include:
1. Only available to accredited investors
FarmTogether is only available to accredited investors, which the SEC defines as individuals earning at least $ 200,000 or couples earning at least $ 300,000, individuals or couples with assets greater than $ 1 million, or business entities with assets greater than $ 5 million.
Most Americans do not qualify as accredited investors, so participation in FarmTogether is inherently limited.
2. Farmland is not a liquid asset
FarmTogether plans to introduce a secondary market in 2021 that should make it easier for investors to buy and sell farmland offered on the platform after the initial offering period ends.
For now, FarmTogether does not offer any liquidity guarantees and advises investors that it will only use “best efforts” to facilitate secondary transactions. If successful, these transactions can involve substantial fees or discounts on the purchase price.
And in any case, as with most real estate investments, it’s best to treat farmland as a long-term investment.
3. Investing in agricultural land carries substantial risk
FarmTogether’s FAQs leave no illusions about the risks inherent in their offerings. Your answer to the question: “Are investments in FarmTogether risky?” reads, in part:
“As an investor, you must be prepared for the possible loss of your entire investment. Review the risks in the associated disclosure documents. If the potential loss prevents you from surviving financially, or if you are unwilling to accept the potential loss of capital you have invested, we do not recommend that you invest with us or anyone else. ”
This is not a reason not to invest with FarmTogether, just a reminder to carefully consider your own risk tolerance and financial position before doing so.
The FarmTogether platform has a role to play in virtually any well-capitalized, sophisticated investor’s alternative investment portfolio.
With cash returns far higher than even the best high-yield savings accounts and the promise – but not the guarantee – of long-term returns on capital that outperform the stock market, that role could well be lucrative.
Beyond the potential for above-average returns and returns, FarmTogether offers something that could be even more important for investors with long-term horizons: diversification. You don’t have to understand the difference between a harrow and a planter to understand the value of effective risk management.