Profitable Niches – Agricultural Investing

Throughout our Profitable Niches series, the message has been clear … there’s more than one way to invest in real estate. It’s so much more than single-family homes and apartment buildings. And, in today’s market, when some of the more traditional investments are stretched, it’s a good idea to think about something new and fresh.

Agricultural investing may not have been on your radar, but that’s about to change! And no, you don’t have to have a green thumb to participate. We’re talking with an expert guest who has blazed a trail into a market that’s energizing AND tasty.

As a sweet bonus, you can support a socially sustainable program as well. Check it out!

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your cultivating host, Robert Helms
  • His growing co-host, Russell Gray
  • Friend and farmer, David Sewell, Founder of International Coffee Farms

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From beans to mug or bar … picking a crop

Just like everyone needs a roof over their head, everyone has to eat. That means there’s a demand for agricultural products and an opportunity for investors to do well in agriculture.

All it takes is a little education on the language of agricultural investing. In housing, it’s all about markets and demands. Agriculture has the same learning curve. Once you understand the geography, the demand for products, and a little of the science behind growing, you’re on your way to getting a foothold in agriculture.

But, agriculture is a wide world, so we’ll narrow our focus.

Our guest, David Sewell, started in agricultural investing with one product: coffee. It has a long shelf life, doesn’t perish quickly, and there’s enormous demand for specialty coffee with limited supply.

Specialty, socially sustainable coffee has been David’s niche since 2014. He purchases farms that are managed poorly, spends time working on the soil, understanding the climate, planting trees, and building a system that delivers product at a great return.

“Specialty coffee is a unique product that’s managed by the tree,” David says. “Specialty coffee is hand-picked, one cherry at a time.”

One of the best things about specialty coffee is that the limited growing geography drives up demand. But it takes some time to get a farm turned around to producing. Just like any gardening project, it takes patience and skill.

Since David started his business in 2014, he has worked through plenty of challenges and developed an amazing model that is blazing a trail in agricultural investing.

And now, he’s moved into a second crop.

“A good way to start the day is with a good cup of coffee and, in the evening, end it with a couple pieces of chocolate,” David says.

The demand for specialty, fine-flavored cacao is rising, and the supply is even MORE limited than specialty coffee. David’s cacao choice is particularly a specialty in Belize.

David took what he learned from coffee in Panama and rehabbed a few farms in Belize with the same, successful model.

With a little science, ingenuity, and care, David has capitalized on the demand for specialty products. He has 154 farmers who sell their crop exclusively to him, in his centralized processing facility.

“It’s what they needed,” David says. “So, we can control the cacao.”

David has three farms as well as a trading company that buys and sells literal tons of beans every weekend.

They’ve all been trained on organic processes, and together, they use the centralized processing systems he has built to make an efficient product that is ready for market.

Socially Sustainable Investing

Conditions on a coffee farm aren’t known for being great. That is different on David’s farms. He takes care of his 35 farm hands, and it has paid off.

“We’re proud to say that with the compensation program we’re able to provide and with the love and attention we’ve paid them, we haven’t had one turnover in 3 years,” David says. “We take care of the people.”

David’s farms change the way workers live. They receive good rain gear, so they aren’t picking cherries or tending to trees in the rain wearing a trash bag. Kids aren’t allowed on the farm … they attend school.

Families live in provided housing with electricity, flushing toilets, and other amenities that we often take for granted.

And, while these benefits for employees are key to David’s business, it’s not all altruistic. Labor turnover is expensive, and taking care of workers keeps them from leaving.

Beyond just the living conditions, workers are sent to seminars and congresses to build up their skills so they become even more educated and grow with the company.

This dedication to his workers shows by the passion and dedication they bring to the field and to the job every day. His workforce is expert in cacao and coffee, and that drives the superior flavor … and price.

That makes investing in opportunities like David’s even more exciting and sweeter for investors. Not only can you make money, but you can also make a difference.

Small-scale agricultural investing

One of the drawbacks to agricultural investing is understanding the science and process to growing, processing, and distributing a product. It takes time and experience to know a good opportunity and to succeed.

For instance, David learned early on that the biggest hurdle was the deeding process for international property. He warns that it is difficult to do on an individual basis.

But, David has found an interesting way to let people play with agricultural investing.

“We’ve focused on the delivery part of the investment vehicle,” David says. “That’s the hard part and where failure happens in many cases.”

With David’s business, he wanted to use his knowledge of syndication to make agricultural investing more accessible for people, regardless of their knowledge level and even for those who couldn’t buy an entire farm.

David’s farms are broken out into ½ acre parcels that can be bought individually or in groups. The parcel is deeded an individual investor or entity’s name, and it’s essentially a turnkey investment. It’s managed and operated by David’s team and investors not only get the returns, but also the knowledge that they’re participating in a socially sustainable program.

For investors looking for a legacy investment to pass on to their kids, or to invest in a program that’s socially sustainable, this is worth a serious look.

To learn more about David’s coffee and cacao operation and how you can get involved, send an email to beans [at] realestateguysradio [dot] com, and we’ll get you his special report on both opportunities!

And, we’d love to see you in September with David at our Secrets of Successful Syndication seminar. Here’s where to sign up!


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Agricultural Land / Farmland

Agricultural Land / Farmland

 

Money growing on trees. It’s fun to imagine … but what if you really could grow money with the power of plants?

 

In our view, agriculture land and agricultural commodity investments are the hottest alternative real estate investment out there right now … for good reason.

Unlike other markets, agriculture is global. Think about it … besides basic housing, what is another commodity that everyone needs? Food!

Every time you step into a grocery store or a farmer’s and make a purchase, you send money to agriculture land investors and farm owners.

And agricultural profits aren’t just limited to edible commodities.  Think your hardwood floors … A valuable source of profits for farmers of teak and other prized woods.

So why not get in on the profits yourself?

Demand for agricultural products is consistent … and growing steadily as global populations increase.  The world population is expected to grow from 7.4 billion to 9.7 billion by 2050.  More people = more food = more money in the pockets of food producers.

And with modern technology, agricultural products can be distributed in markets across the world.  World-wide demand provides stability.

The Food and Agriculture Organization (FAO) forecasts that a 60% expansion in food production is needed by 2050. This increase in demand is occurring when 80% of arable land is already in use and current arable land degradation is occurring at a pace 100x greater than the rate of formation and recovery.

In the United States, annual returns on farmland have averaged over 11% for the past 25 years.  But agricultural investment opportunities are not limited to the United States … they are available across the world, providing you a way to extensively diversify your portfolio.

Agricultural investments can act as a buffer to market volatility. In 2008, farmland was one of the few assets that ended the year up despite the sobering market crash. One of the best assets to own during times of crisis, and especially during a period of growing inflation, is farmland.

When investigating agricultural opportunities, consider …

  1. Global markets > local markets. When investing in a real asset like agriculture, global markets are more important than local markets. Investigate global demand for various agricultural products before checking out local specifics.
  2. Aim for sustainability. Agriculture is often considered a steady investment … but only when crops can be sustained for generations without harming the land they grow on. You want investments that will be consistent for the long term.
  3. Consider the land. Based on your chosen crop, consider the natural climate, soil, and weather conditions that will be most conducive to profitability.
  4. Take a look at local factors. Although agriculture meets a global demand, investors need to consider local factors such as labor supply, land ownership rights, and tax climate.

Sound like a lot to figure out?  As with any investment, it’s essential investors build a team of experts to manage and grow their investment.

Finding the right farmers and on-site management team is a crucial piece of a successful agricultural investing … and why syndicated investments can be a great option.  Economies of scale attract quality farming teams and create greater returns.  Passive investors buy a parcel of land without having to worry about hands-on, day-to-day operations.

Agricultural investments can be a great addition to your investment portfolio.  Just be sure to plan how your chosen commodity fits into your portfolio.  Some crops, like hardwood trees, are a great legacy investment, while other crops can provide more immediate cash flow.

Investing in agriculture can mean wildly different things … from coffee and cacao beans, to teak trees, to coconuts.

Below is a list of helpful resources.  Do your homework … and then considering giving this “green” investment a shot!

Radio Shows

Reports & Articles

Market Field Trips & Property Tours

Boots-on-the-Ground Teams

Clues in The News

Farming for Profits Part 2 – Cash Flow vs. Legacy Investing

 

Real estate serves many human needs. Whether you’re investing in rental properties or agricultural properties, you’re reacting to basic human demands—and agricultural products will ALWAYS be in demand.

In our latest episode, we hear from agricultural investment expert Rachel Jensen about how agricultural investments can take decades to yield profits—but they tend to have an ENORMOUS payoff in the long run, not just for you, but for your posterity as well.

Specifically, we’re talking about investing in teak—an extremely valuable hardwood that provides tremendous value and security by mitigating investment risk. It allows you, the investor, to sit back and relax, knowing your investment could grow into serious profit in the long run.

In this edition of The Real Estate Guys™ show you’ll hear from:

  • Your seek-the-teak host, Robert Helms
  • His teaky-and-cheeky co-host, Russell Gray
  • Vice President of Sales at Teak Hardwoods, Rachel Jensen

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Diversifying your personal investment philosophy

When it comes to real estate investing, everything you do has to go back to YOUR personal investment philosophy.

If you’re investing, you have to line up liquidity points with your own liquidity needs.

Agricultural investing is NOT the same as investing in residential properties! A property owner and manager is used to monthly cash flow from rental payments.

BUT … trees can’t complain! While investing in agricultural properties may not provide a monthly cash flow, it does mitigate many of the risks of traditional real estate investment, including vacancies and turnover costs.

When you invest in agriculture, you have to be able to step back from the idea of monthly cash flow and add a zero to your thinking by calculating the long-term growth of your investment.

Investing in agricultural properties like hardwood plantations provides a myriad benefits that can match needs outside of basic monthly income. These benefits include:

  • International diversification
  • Privacy and asset protection
  • Mitigation of investor risk in MULTIPLE ways

Secure, stable, and sticking around: The ultimate long-term investment

Rachel Jensen, vice president of Teak Hardwoods, was kind enough to pay us a visit to talk about a hardwood investment that’s been popular for centuries: teak.

When you think about timber, the first think you might think about is the risks. Teak is different: it’s resistant to fire, rot, termites—all the traditional risks to owning what is essentially a giant lot of wood.

It’s also an extremely secure investment. During the recessions of 2008, when global markets were shrinking, demand for teak was high—in fact, demand increased by 9.5% during the period, Rachel tells us.

Teak is NOT an investment with short-term payoffs. In fact, teak is best harvested at age 25 and age 60.

It might not be easy to make the transition from working on a monthly or yearly timeline to working on a 25-year timeline. “For those who see the benefits of generational wealth stewardship, it’s an investment that pays off,” says Rachel.

If you have the patience to wait 25 years for the payoff, you end up with a lump sum of cash at the end of those 25 years.

This is especially important when you consider that tuition could skyrocket by 2030. Teak investment provides security for those who have kids, grandkids, nieces, nephews, or even causes they want to support in the long term.

Growing in fertile land: the benefits of South American teak

Around the world, teak is harvested at a rate of 8-12 times more than it is planted, especially in countries where it’s grown naturally. As you can imagine, this is a huge problem.

One area of the world has solved this problem, however: South America.

How? South America provides incentives to investors for reforestation. This is an unbelievable opportunity that provides benefits not only to investors, but to the local community, world economy, and environment as well.

In Panama, these reforestation incentives include zero income tax at time of harvest and zero property tax.

Investing in South American countries provides other HUGE benefits to investors.

Most obviously, investors can diversify their portfolio internationally. Rachel’s teak plantations rest in the fertile lands of Panama and Nicaragua.

Investors are also eligible for the Friendly Nations Visa, a residency that’s one of the most popular in the world because of its simple requirements and low cost. This visa allows users to get work permits, obtain eventual citizenship, and even move their families to Nicaragua.

How YOU can invest in teak

If investing in hardwood properties is starting to sound pretty darn good, we agree!

How can YOU get started? It’s quite simple.

Investors in Teak Hardwood interested in a plot of land in Panama can start with as little of ¼ acre of ownership. The title of a ¼ acre parcel goes for $15,700—investors typically start with two to four parcels.

One benefit of this specific property? The teak trees are already 17 years old, meaning investors get a payoff in just eight years.

This is an incredibly accessible investment, especially for millennials who are willing to look at the big picture. Investors even have access to a five-month, zero-interest payment plan, says Rachel.

As a millennial herself, Rachel says, “I like knowing I don’t have to do anything.” Teak is what Rachel calls a “peace-of-mind turn-key” investment.

You make the investment, and Mother Nature basically just does her thing—usually with the help companies like Geo Forestal, an experienced plantation management company that manages Teak Hardwood’s properties in Panama.

For someone who wants to get in on the ground floor, Teak Hardwood also has a new program in Nicaragua with trees planted just this year. Proceeds start in year 12, when the trees are thinned.

Interested in learning more about investing in this tried and true wood? Rachel compiled a packet of information just for us. Email teak (at) realestateguysradio (dot) com for more information.

Diversification: Security in an unstable world

It’s important for investors to think about global issues when they make an investment.

“Currently, there is worldwide pushback against established institutions,” Russell reminds us. “This means there is potential for radical, substantial change in coming years.”

Investors have many concerns to consider: market crashes, climate change, the collapse of established traditional institutions, disruptive technology to name a few.

In the face of these concerns, teak investment is one way to insulate wealth.

And it’s not a time bomb—unlike other agricultural investments, teak has a shelf life. So does coffee.

Robert reminds us of David Sewell, founder of International Coffee Farms. David buys coffee farms and turns them from commodity farms to specialty coffee growers and harvesters. This allows him to narrow his target market and eliminate commodity competition.

He’s insulating his wealth from potential dangers by investing smartly and finding a competitive edge.

If you’d like to learn more about investing in coffee, we’d love to provide you with more information! Email coffee (at) realestateguysradio (dot) com.

There’s many reasons people are getting off the beaten path when investing—it may take a little more time and diligence, but the path’s not as crowded, and the risks are much lower.

If you want to step into the world of agricultural investing, consider investing in your future with a whole week for YOU to talk to experienced agricultural investors and look at investing from a global perspective!


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Farming for Profits with Agricultural Investing

Start your day with a cup of jo today? Yeah, we thought so.

We’re java-jazzed to share our latest interview with you. We spoke with David Sewell of International Coffee Farms about a unique real estate investment opportunity.

David and his team make it possible for anyone to become an agriculture investor. They produce specialty coffee beans in Panama, yielding both reliable crops and profits for savvy investors.

Yes, investing in offshore coffee farms is a way to perk up your portfolio and caffeinate your cashflow.

Tune into our latest java-driven edition of The Real Estate Guys™ radio show with personalities:

  • Your green-thumb host, Robert Helms
  • His greenie co-host, Russell Gray
  • International Coffee Farms Founder, David Sewell

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Why invest in coffee farms?

One way to diversify your portfolio and is investing in harvest-producing land, like coffee farms.

Think about it.

When you own the LAND the coffee beans grow on, the tenants are your trees (in a manner of speaking) and the coffee farmers are your property managers.  So the coffee farmers deal with the trees.

Wouldn’t you like to invest in something many people consume every day?

Millions of people DRINK coffee every day, which means they BUY coffee regularly.

Coffee is an interesting commodity because people are only drinking MORE of it over time. It’s a booming industry.

What sets International Coffee Farms apart?

“God provides the coffee cherry. The cherry turns red on its own. It’s what you do with it from there,” said David.

David and his team at International Coffee Farms have developed a premium process for their specialty coffee. This includes everything from how it’s picked, harvested, and profiled. “The process is key,” said David, “and all our cherries are picked one by one and the trees managed individually.”

International Coffee Farms buys underperforming, commercial coffee farms. In the company’s first year and a half of operations they have acquired six coffee farms in Panama, totaling 34 hectares (85 acres) with plans to acquire another 50 hectares in 2016.

“We turn them around into specialty coffee farms in three years,” said David. “It’s takes a bit of art with the people, science with the agriculture, and capital to make it work.”

Also, David treats his workers well, paying them more than other farmers, and offering them bonuses.

“We take a 20% slice of the revenue and use it for our workers,” said David. “It’s not purely altruistic, although it does do good. We do it for efficiency and because happy farmers equal happy coffee.”

International Coffee Farms invests that money in running water, showers, better working cloths, and overall better conditions, enhancing the quality of life for the coffee farmers.

Why Panama?

Panama is a well-proven, traditional source of high-quality coffee at high altitudes. In fact, many coffee buyers come to Panama to bid on the most premium types, which can go for $15-$35 a pound.

Panama is known for having a climate perfect for coffee farming, with no temperatures or hurricanes.

Also, Panama residents include many, many coffee farming harvesters who’ve been harvesting coffee all their lives – they are the world’s experts with coffee trees.

Turn-key ownership for investors

“We take a coffee farm, make it more efficient, and create an opportunity for investors,” said David.

We’ve been encouraging investments in real assets for a long time. Those interested in creating a future with asset protection should at least consider it.

The nice thing about owning a piece of producing land with a turn-key provider is YOU don’t have to manage it, pick it, or learn the secrets.

You get to sit back and rely on the company’s expertise to harvest it.

They subdivide into half-acre parcels for those who want to own a producing well-managed coffee farm.

Where you own your acre of the farm is irrelevant. All the income and expenses are divided among the number of owners.

Invest off-shore, reap the rewards

The minute you get a piece of land in another country, you are an international investor.

International Coffee Farms has a low entry point for investors: It’s an $18,000 investment for a half-acre, and over a 20-year period the average annual ROI is 12.5%.

Protecting your assets through diversification and off-shore investments is state of mind. It can feel scary, until you educate yourself, set the goal, and give it a try!

Then again, it’s everything like that?

Investing in these coffee farms allows you a chance to cross those mental hurdles, and you’ll have a legacy investment you can own forever and leave to your family.

If you’re interested in investing in this incredible opportunity, reach out to us at coffee (at) realestateguysradio (dot com). 


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

9/14/14: Sustainable Income Through Sustainable Offshore Agriculture

Sustainable real estate investing can be rewarding in more ways than oneWhen it comes to cash flow from real estate, we LOVE “sustainable”.  There’s nothing worse than vacancy and turnover to ruin your income stream.

Of course, your income comes from tenants.  And if the cost of living (food, gas, healthcare) is going up faster than their wages, it puts pressure on your tenants’ ability to pay rent.

If it goes on too long, it becomes unsustainable…and that’s bad…for both your tenant and for you.

Happily, there’s usually a solution to most of our investing dilemmas.

What if your tenants actually benefited from inflation?  And once planted, tended to stay in place for a very long time?

That’s the topic of this episode of The Real Estate Guys™ radio show.

Serving up a hot cup of conversation this week:

  • Your connoisseur of conversation, host Robert Helms
  • His peon of palaver, co-host Russell Gray
  • International entrepreneur and investor, special guest David Sewell

Investing 101 says if you buy what everyone else is buying when they are buying it, you’re going to pay more…which potentially lessens your returns.

It doesn’t mean you can’t make money.  And the opportunity window isn’t an on/off switch.  There are shades of grey.

As you may recall, demand for real estate slowed, then temporarily died as we entered the Great Recession.

As we’ve come out of the Great Recession, demand for real estate has gradually grown.  And with that growth, it’s been harder (not impossible) to find the same quantity and quality of deals.

Turnkey operators we talk to tell us their margins are shrinking and it takes more offers to land a property.  Simply stated, it’s more competitive.

Of course, right now it’s still worth doing in many markets…especially where you have properties available at or below replacement costs, relative affordability, low interest rates, and great property management.

With all that said, another tenet of investing is to look for value before others see it.

Smart investors look for value that others overlookWhen the real estate market was crashing in 2008-10, our friend and Summit at Sea faculty member Ken McElroy (Robert Kiyosaki’s Rich Dad Real Estate Advisor) was on a shopping spree.

During that window of opportunity, he acquired over $300 million of under-performing apartment buildings.  He didn’t have a lot of competition, so the price was right.  And he had the capital and operational savvy to immediately improve financial performance.

So Ken and his investors did very well by buying undervalued assets before they were popular.

If course, now in 2014, apartment cap rates (operating cash flow in purchase price) are lower because apartments become popular and more investors started competing for them…driving prices up.

It’s a simple concept, but it still amazes us how many people like to wait to buy at the top…all the while ignoring alternative markets and product types that haven’t yet attracted mainstream interest.

That’s a big introduction to tee up our conversation with David Sewell.

David is a Canadian native, who has been living in Latin America for the last 25 years.  A former Canadian naval officer, David has been around enough of the world to recognize opportunity when he sees it.

In this case, he’s discovered an income producing real estate asset class that’s under-performing.   And just like Ken McElroy, he’s found that by adding capital and operational savvy, there’s money to be made.

Except we’re not talking about residential apartments.  We’re talking offshore coffee farms.

We find the premise…stimulating.

And after meeting David a few years back at a conference, we’ve been staying in touch.  We’ve been fascinated by farmland investing and how it fits into a real asset investing strategy.

David’s business model is simple:

He and his team find and acquire locally owned coffee farms in places renowned for ideal coffee growing conditions.  They subdivide the farmland and sell it off to investors.

A substantial portion of the sales proceeds are used to upgrade the operations and convert the farm from producing lower value commercial coffee to high premium “specialty” coffee.

The idea is to reduce operating expenses, increase volume of production and raise the price per pound of coffee.  When you put that all in the pot and brew it, you get a tasty cash on cash return…without leverage.

Nice.

Sustainable investing produces profits while benefiting people and the plantTo make it even better, there are some distinct tax and asset protection advantages to owning income producing assets offshore.

And to top it all off, there’s a nice social benefit.

When the farm operations rehab is done, the original farm operator makes more money, has better working conditions, enjoys more stability, receives employment benefits and ends up with better skills.

So it’s not just the farm being fixed up… and the profit for the investors is more than just money.

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed.