What if your tenants were trees, bushes, and plants?
We usually think of real estate in terms of housing. But what is a farm? It’s a piece of dirt where wealth grows.
As we’ve said before, there is tremendous opportunity in agricultural investments. These investments are less dependent on economic changes, and ideal for creating wealth over time.
The U.S. is still a one of the strongest economic engines in the world. Powers shift, and there seems to be a shift coming. Whether it happens in 20 years or 100 years, it may be wise to diversify your portfolio.
Rather than focusing on the right economic location factors such as the job market, agricultural investments rely on getting the right geography.
From there, if you get the crop right, the entire world is your customer.
Don’t think you need to sprout a green thumb to yield results from agriculture.
YOU don’t have to be the farmer. Product distribution can be hired. Your mission as the investor is simply to own the LAND the product comes from.
Read on (or listen in!) to get juicy insights from experts at the New Orleans Investment Conference 2016 on what growing assets can look like for you.
In this podcast you’ll hear from:
- Your coconut-loving host, Robert Helms
- His coco-nutty co-host, Russell Gray
- Managing Partner of Fischer & Schickendantz, Juan Fischer
- CEO of Precious Timber, Alex Wilson
- Editor of Gold Newsletter and CEO of the New Orleans Investment Conference, Brien Lundin
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A New, Safe Option for Agriculture … Uruguay!
Juan Fischer makes a compelling case for“why Uruguay?”
Known for its stability and safety, Uruguay has the lowest crime and poverty rate in South America. Did you know Uruguay also enjoys the highest GDP per capita?
The country (about the size of the state of Washington) is called the Switzerland of South America.
With a population of 3.5 million people, Uruguay produces food for 50 million. Uruguay is in the top six food producers in the world in beef, rice, grain, and dairy exports.
What’s more is the land is fertile and not over farmed. The country recently realized its opportunity in agriculture.
Just 15 years ago Uruguay was what Juan termed “a big cattle ranch” with only 250,000 acres of farmland.
Then the food revolution spurred large demand from countries in Asia …
Uruguay evaluated its land, finding one-third of the country’s highest yielding land underutilized. Agriculture has since jumped to more than 2.5 million acres.
Something we LOVE about Uruguay’s agriculture is its transparency!
Every lot has a number you can plug into a website. There, you see a map with soil types, the percentage of each soil type, productivity index of each type, and a weighted average productivity of the whole product.
Uruguay was the first country to provide this service on a national level. Today it is only offered by both Uruguay and France.
Why overpay for high quality soil? Nutrient-rich soil is perfect for crops, but sandy soil is good for forestry. Uruguay boasts two of the world’s biggest paper mills, and the demand for trees is growing.
Does Uruguay Fit into Your Portfolio?
People who gravitate toward agricultural investments are usually playing the long game. Some profit comes at harvest, and more with land appreciation.
Juan reports that right now prices are lower than they have been in 12 years. “The last time we had a price drop was in 2002,” said Juan.
After the China slowdown in 2014 and the resulting drop in commodity prices, U.S. land prices dropped 12-14%, and currently Uruguay land prices have dropped sometimes 30% less than their 2013 peak.
“A window has opened for the first time in 20 years,” said Juan. “This is a great buying opportunity.”
Juan thinks the opportunity will last through 2017, followed by an upward trend as appreciation continues.
Land prices in Uruguay range from $700-$800 per ace for lesser quality soil, to $3,500 for best land. Typically good acres can be bought for between $2,500-3,500.
As Managing Partner of Fischer & Schickendantz, Juan realized there was interest in foreign investments about 10 years ago.
“We offer a passive, hands-off experience for any size investor- large, small, individual, and institutional,” said Juan. “We are fed all the properties in the country by the three main brokers.”
The company learns what size of land, or amount of money an investor wants to begin with, and takes it from there.
They source all properties, classify them, help clients understand them, and take clients on a tour of the area. Once an investor decides on a property, they structure the purchase, manage it, find a tenant, and do the bookkeeping.
Why Timber is a Great Investment
Next we spoke with Alex Wilson of Precious Timber about his forestry in Central America.
In 2004, Alex and his partner started growing precious hardwoods, including Mahogany, Cedar, and Teak.
Three years ago, they brought on private owners. Like many investing in agriculture, most of his clients are looking for long-term investments.
“The geography in the tropics is ideal for precious hardwoods,” said Alex. “There is plenty of sun, rain, nutrients in the ground, and access to putting product into furniture.”
He mentions the local artisans are VERY HELPFUL. “Growing it is one thing, processing it is something else,” said Alex.
When talking about the lifecycle of timber, Alex mentions the “liquidity premium,” a little extra return you get for holding assets that are less liquid. He credits the term to Bob Rice, author of the book “The Alternative Answer.”
Those with a high net worth like investing in timber because of the security and added bump in ROI. Timber has an 8-10 year harvest cycle.
When first planting, investors need to wait until the trees mature to harvest, then re-plant and repeat the cycle. With a diversified plan, harvest times can be staggered.
So Why Coconuts?
Coconut plants yield more regularly, but Alex wasn’t always interested in the exotic crop. His inspiration came from an unlikely place …
When Alex’s daughter, who was then age 13, had acne, she read about coconut oil, tried it, and the break out was cleared up. That led to coconut lotion, coconut milk, and other products in their home.
Alex called his friend in Central America and asked if he knew anyone with coconut trees. Alex and his partner tracked down the only certified coconut seed pollinator in Central and South America.
Then they took a leap of faith, planting several hundred thousand acres of coconut trees a few years ago.
Though his partner Ken lives in Central America now, neither of them directly manage the day-to-day farming operations, as they opted to hire professionals.
“If you come to my house you might notice a plant bought on Tuesday from The Home Depot could be dead by Sunday,” laughed Alex, “I’m not a green-thumb guy.”
Their lack of garden know-how doesn’t stop their operations from thriving. Precious Timber collected a modest harvest this year, and are looking forward to a harvest next year. Coconut trees fully produce after six years and have a lifespan of 60 years. “I call it my agricultural annuity,” said Alex.
Alex and Ken generally work with accredited investors, with a minimum of a $100,000 investment. Alex advises clients to invest with people they know and like.
“If it feels good, do it,” said Alex, “if it doesn’t feel good, don’t do it.”
He regularly invites new investors to visit the plantation. “In the beginning it’s a good idea to get down and get to know the people,” said Alex. “Walk the plantations, shake hands with the people doing the work, meet accountants and attorneys.”
He and his partner plan scheduled visits, guided tours, and can meet almost any time spontaneously because Ken lives in the area.
Are you interested in more information on Precious Timber and Coconuts? Email timber [ at ] realestateguysradio [ dot ] com to have a packet of information about investing with Precious Timber sent to you.
New Orleans Investment Conference
2016 marks the 42nd annual New Orleans Investment Conference. It was incredible to broadcast from the LONGEST RUNNING investment conference in the United States
Brien Lundin, CEO of the conference and author of Gold Newsletter, has some great insights for you.
People gather from all over to discuss everything from the economy, gold and silver, oil, real estate, and politics.
“Until people come here and experience it, you don’t realize all the benefits and advantages of being able to talk to people,” said Brien, “to talk to big name speakers in the hallways and mingle with other investors who are very successful and have great ideas to share.”
Brien notes that this year gold has been a BIG performer, which has caused mining stocks to look different. “There are lots of smiles this year.” Said Brien.
Last year the market made a turn for the better around this time as well. Brien credits it to the fed trying to “squeeze in a quarter-point rate hike” at the end of the year, marking a launching point for gold.
The new year is around the corner, and we’re always fans of meeting with like-minded people to get closer to your goals. Whether you’re a seasoned investor or just getting started, planting a smart investing plan will yield profitable results!
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