Commercial Real Estate News / Investing / 7 Steps for Investing in High-Yield Farmland

7 Steps for Investing in High-Yield Farmland

Published: 03-22-22 Category: Investing

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Everything has its place in the greater commercial real estate world, including land. Of course, not just any land is worth talking about: today is a great day to talk about agricultural land.

Farming is more important than ever, especially as we’re seeing rising costs on food. In a way, commercial agricultural activities are the best balance between helping the greater community at large and also improving your commercial property portfolio.

Have you never been a farmer? Not sure how to invest in high-yield farmland? There are steps to buying land of any kind, but especially farmland.

Here’s what you need to know to have the best chances of long-term profitability.

#1 – Know Your Plant Hardiness Zones

Is it necessary to know where the land you’re most interested in purchasing is in terms of the Plant Hardiness Zone Map? Not necessarily. If you only plan on owning the farmland and having someone else manage it, then this step isn’t necessary.

Yet if you want to get hands-on or just have a better idea of what can and cannot grow on the land, it’s time to check out that map. The USDA has put a lot of time, money, and research into this map, so you might as well take advantage.

The zones are color-coded on the official map, and the map is available as both an interactive GIS-based map or static images for slower internet connections.

#2 – Evaluate the Land, Its Minerals, and Its Access

When it comes to steps to buying land, this is the most important one: you have to evaluate how productive the land will be. This isn’t just looking at one or two bullet points in a brochure hastily put out by the seller, but really digging deep into the important pieces. Here are a few considerations:

Does the land have enough access to water to make agriculture worthwhile?
What is the soil quality like?
What is the water quality like?
What buildings come with the land itself? Are those buildings sound?
How close are your potential neighbors? Are they also pursuing agricultural activities?

These are just the beginning questions to ask. Looking at water quality reports, soil quality reports, and the best crops to plant isn’t the most exciting reading, but making the most out of the potential land purchase does require some deep reading.

#3 – Figure the Legal Stuff Out Early

Zoning, land use ordinances, boundaries, and active development conflicts are all legal and legal-adjacent issues that can keep you from your high-yield farmland dreams. Getting landowner maps from the country can help with the boundary issues.

After all, having a neighbor that comes over to tell you that you’re in violation when you just purchased the property is no good.

Google Earth is also incredibly helpful when you’re looking at commercial real estate listings for land and even other commercial property types. Of course, nothing replaces going to see the land in person with your own eyes. You can even bring a friend to help you determine if this is the right space.

#4 – Size Matters (Unfortunately) and Affects Long-Term Profitability

Are there ways to make a small parcel work for commercial agriculture purposes? Certainly. In fact, some empty lots can be turned into urban farming initiatives, but most people looking for steps to buying land will want to be outside of the traditional urban zone.

Vertical farming is a subject even the USDA is getting involved with, as it can help revitalize urban spaces.

There’s nothing wrong with looking at a smaller portion of land compared to a larger one, but you will have to be realistic with how much your future agricultural operation can scale.

In addition, if you decide to sublease the land to someone else, space issues will rear their ugly head in that realm as well.

#5 – Explore Grants, Incentives, Loans, and Government Programs

Opportunities to get financing for farmland are everywhere. Connecting with groups like the Land Stewardship Project is a great way to explore options without jumping in too quickly.

In addition, the USDA has several programs to choose from, including a beginner farmer/rancher program that’s well worth exploring.

Beyond acquiring the money comes strong agricultural money management. Do you know how much to buy of everything? Do you plan to have someone that will ensure that the accounting is properly handled? These are all very important questions connected to investing in high-yield farmland.

#6 – Network With Other Agribusinesses

If you’ve never worked with farmland, it becomes obvious that it is truly its own weird and exciting animal. To combat the learning gap, it’s wise to network with other farmers, ranchers, and agriculture-adjacent professionals.

Just as you would want to cultivate a strong network if you were pursuing multifamily, storage, industrial, or warehouse, you want to surround yourself with people that speak farming.

Research is truly the difference between making the most out of high-yield farmland and acquiring a property that just sits idle. Sure, anybody can go out and look at a few listings, go and check out a piece of land.

If you want to have something that’s going to be appreciated, it’s time to make sure that you network with other people that have those same commercial interests.

#7 – Make Solid Offers

One of the things that the average landowner lacks the most is time. So offers that do not take into consideration the hard work they’ve put into improving the land will fall flat.

The best thing to do if you’re really serious about investing in high-yield farmland is to pair up with an agent that is well versed in making offers to farmers and ranchers.

The offer should be fair without either side feeling like they’ve been taken on a wild stallion ride, so to speak. Everything is negotiable, of course, and that means that it’s quite possible to get good land at a fair price without feeling like you’re ripping someone else off.

Seize the Day, Offer for the Land

Overall, these steps to buying land are designed to give a proverbial bird’s eye view into the process.

No matter where you’re located, the tips in this guide are enough to get you started with looking at listings for land, as well as looking into the steps to grow the type of things that will truly help you reap the rewards of the field.

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