Everyone needs a place to live and EVERYONE needs to eat.
In good times and bad, we all need food. For centuries, agriculture has been synonymous with wealth and productivity.
(Maybe that’s why they call it “produce!”)
Agriculture relies on real estate. It also provides investors with an opportunity to create cash flow from cash crops.
So, we’re revisiting the opportunities in agriculture … even in the midst of a rapidly changing world.
In this episode of The Real Estate Guys™ show, hear from:
- Your high-growth host, Robert Helms
- His fruity co-host, Russell Gray
- Agricultural investing expert, David Smith
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Opportunities in agriculture
We love all kinds of real estate investing, and we’re spending a few weeks talking about what you might consider to be alternative investments.
Today, we’re talking about a real estate investment that can make a ton of sense if you’ll just open your mind … agricultural real estate.
Agriculture was THE original use of land. People have been investing in agriculture for thousands of years.
Agriculture produces something of high value … food and commodities for textiles!
The population is increasing. Everyone born needs calories … and yet the resources to produce calories across the globe are either diminishing or the costs are increasing.
So, today we see lots of opportunity in the agricultural space.
If you will, your tenants are trees … so things like tenant and landlord law go out the window.
And you don’t have to get the geographic market as exactly right as you do when you’re buying an apartment building.
Agriculture also offers an opportunity to diversify some of the risks that are present in other assets during changing times.
What does agriculture investing look like today?
David Smith is an agricultural investing expert. Why does he think people should consider agriculture?
“First and foremost is the diversification of your investment portfolio,” David says. “Also, agriculture in general creates generational wealth.”
Agriculture is a long-term investment in many cases. You’re looking at 10, 20, or even 25 years of producing … while most tenants typically stay a year or two.
When you think about agriculture, you may envision fields with corn or wheat or rice. But a lot of commercial produce grows better in a greenhouse.
“You just have to open your mind to see that agriculture doesn’t mean just rows out on a highway. There’s lots of different kinds of agriculture,” David says.
So, part of agriculture is picking the right market and product for you.
Paraguay
Let’s talk about markets. There are areas of the world that are just more prone to agriculture.
“It’s just as important to pick the right product and the right country,” David says.
David’s team focuses, for example, on Paraguay. Paraguay exports produce all around the world. But David and his team work with the internal market within the country.
Paraguay has more freshwater than any country in the world by way of aquifers and rivers. It also has very small changes in climate.
There are about six weeks of winter that take place between August and September. Then, it goes right back to warm weather … making it conducive to growing year round.
The land in Paraguay is also very fertile. “You can grow anything,” David says.
In farmland, the composition of the soil is critical. You need to know the nutrients, the density, and what is going to grow well there. It can also help you determine the best tactics for pest control.
David’s team uses a unique strategy in Paraguay. Instead of exporting to other countries, they focus on selling in the local markets.
Paraguay currently imports large amounts of food. But by growing locally, David and his team can sell their produce locally for a lower price than the imported products and carve out a solid piece of the market for themselves.
Getting started in agriculture investing
So, how does investing with an organization like David’s work?
There are currently two investments … oranges and greenhouses. And there are two main components.
The first component is simply a real estate transaction.
“You have a purchase contract for buying land. Then, the land is dismembered from the main master plan of the plantation. A new title is created in your name or the legal entity that you prefer to use,” David says.
The second component is the farm service agreement … an agreement between the investor and the farming company to operate the plantation and care for your land and your crops, harvest the produce, and take it to market.
From that point on, it becomes a completely passive, hands-off investment.
“The only exception is in the case of greenhouses where after 10 years, an additional amount has to be paid for refurbishing and renovation,” David says.
The greenhouses aren’t the small backyard version you are familiar with … each is 6/10 of an acre!
In the greenhouses, David’s team is growing vegetables that are used in almost every meal in Paraguay … tomatoes, cucumbers, and peppers. These can grow year-round and offer year-round cashflow.
The oranges on the other hand are a once a year crop with a large once a year payout.
Essentially, these are a hard asset, passive turnkey investment.
To learn more about agriculture investing … listen to the full episode!
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