With the current economic uncertainty, some people and investors are turning to farmland as a long-term real asset to have in their portfolio. If a person has never owned farmland before, here are some tasks and decisions to consider before making the investment. These procedures work for both an individual investor or an investment fund.
• Establish the goals for farmland ownership including the targeted cash Return on Investment (ROI). This will be one factor in determining how much and how fast land acquisitions are accomplished.
• Confirm the size of the investment fund.
• Setup ownership structures to be used for land purchases and on-going operations.
• Many will initiate a Buyer’s Agency agreement with a trusted advisor such as Farmers National Company to authorize the company to represent the investor in due diligence and land acquisition.
• Establish the decision-making process including the information you will require to make the land purchase, due diligence procedures, decision-making timeline and who will have the final authority for the purchase. These procedures will be another determining factor in how quickly land can be acquired.
• Establish land purchase parameters including targeted tract size (minimum and/or maximums) and locations. Targeted parameters will be a factor in the timeline for acquisitions.
• Setup procedures for identification of possible land purchases including access to appropriate listings and auctions.
• Determine workflow for the legal issues of land purchasing and closings as well as who will handle those duties.
• Many farmland investors will engage a trusted professional like Farmers National Company for farm management decisions to be made including how to operate each farm, type of leasing arrangements used for each farm, handling cash, delineation of accounting, revenue collection and bill paying procedures, establishing reporting needs and putting in place oversight arrangements.
• Overall timeline for establishing the investment operation, purchasing farmland and bringing the farms into operation depends on ownership goals including expected cash ROI, tract size targeted, location of purchases and procedures employed.
