Farmland
Farmland Returns vs S&P
12.40%
Versus S&P
•
13 hours ago
12.40%
Versus S&P
•
13 hours ago
6m High
6m Low
Farmland
3,426.71
3,049.57
S&P 500
60.26
46.10
Farmland
S&P 500
Does not follow the Stock Market
Sources: NCREIF Farmland Index, SPX
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Highlights
Good For
Hedge inflation + Passive income
Time Horizon
7 - 10 years
Diversification
Environmentally Friendly
Farmland has demonstrated strong absolute returns over the past several decades. It averaged 11% total annual returns (income + price appreciation) from 1992 to 2020. Farmland has low volatility compared to most other asset classes. It provides stability for investors, especially during adverse market conditions.
Did you Know
Farmland was up 20%+ during the Great Recession of 2007-2009.
Bill Gates is the biggest private owner of farmland in the US, with 269,000 acres worth $690M. That’s nearly the size of Hong Kong.
Farmland represents a $10 trillion market globally while all gold ever mined is valued at $7 trillion.
Consideration
Provides attractive returns paired with low volatility
Good source of passive income
Uncorrelated with other asset classes
Natural hedge against inflation
Reasons to Invest
Farmland is very illiquid. If you need to exit your investment, finding a buyer can take a while.
Investing in farmland typically requires a large initial investment. Even if you're only investing in a percentage of a farm, most farmland investing platforms have minimum investment requirements of $10,000.
Weather patterns, wildfires, and natural disasters present a significant and unpredictable risk, and that risk is heightened if your investment is concentrated in one area or crop.
Drawbacks
How You’re Taxed
Capital Gains
Profits earned from farmland are taxed like stocks. Investors are subject to short-term capital gains when selling assets owned for one year or less, which are taxed at ordinary income tax rates. Long-term capital gains are applicable when assets are owned for more than one year with tax rates ranging from 0% to 20%, depending on your total taxable income. Any rental income your farmland generates is generally taxed as ordinary income, although if you're materially involved in the farm, you may also be subject to a self-employment tax.