Farmland investing has gained popularity in recent years as a diversifier. Times of high market volatility, such as what we are experiencing moving into 2025, are when farmland really becomes an especially attractive asset. Farmland is a hedge against inflation and has stable, long-term returns. In this article, we will go over why farmland is a good investment, why Michigan farmland particularly offers some advantages in farmland investing, and how you can go about investing in Michigan farmland.
Why Invest in Farmland?
Historically Strong Returns
Since the early 1990s, according to records from the USDA, farmland in the United States has averaged returns of over 11% per year. Farmland also has periodically outperformed many more traditional asset classes. That combination is attractive to investors focused on the long game.
Low Volatility & Non-Correlation
Farmland doesn’t usually have its price take a dive just because Wall Street does. When stocks begin to take a nosedive, the value of farmland usually holds-or just keeps going up-which gives it a high value in portfolio diversification.
Inflation Hedge
Inflation tends to drive up the price of commodities like corn and soybeans. That could translate into higher revenues for owners of farmland, which can drive up land values and/or rental rates over time.
Tax Breaks
Most states, Michigan included, provide unique property tax breaks for farmland. Other incentives can include credits for conservation or farming-related subsidies which can further decrease an investor’s overall amount of taxes owed.
Steady Income Streams
The significant ways in which farmland may generate income include:
- Crop Sales: If you farm the land yourself-or in concert with an operator-your income comes in the form of crop sales.
- Rental Income: In situations in which you let the farmland out to a tenant farmer, you bring in rental income without being actively involved in its day-to-day operations.
Michigan Farmland: What’s Unique About It?
Behind California, Michigan ranks as the second-most diverse state in America for the different types of agricultural products grown within it. From the fruit orchard and wineries in western Michigan to the field crops of corn and soybeans in central and southern Michigan, the investment options are huge in this industry. Let’s look over a few key items:
Acreage & Farms
Michigan has currently about 9.7 million acres of farm land, divided among approximately 46,000 farms (USDA, 2022).
Increasing Land Values
The average value of 2023 cropland in Michigan, according to the USDA Land Values report, is roughly $5,400 per acre and continues to increase on a year-over-year basis. Pastureland is generally less expensive but also has steadily increased.
Variety of Crops Grown
Michigan is in the top of major fruit crops such as cherries, blueberries, and apples. Diversification in crop production assists in stabilizing a decline in one specific market.
Rental Income
Leasing farmland in Michigan can differ depending on land productivity, location, and availability of irrigation; actual amounts may be anywhere between $148 per acre for cropland and $259 per acre for irrigated land.
How to Invest in Farmland
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1. Direct Ownership (Buying a Farm)
1. Direct Ownership (Buying a Farm)
Buy an Already Existing, Rented Farm
When the previous owner already leases to a good tenant, you can simply take over the property and begin to draw rentals.
Purchase a Farm and Seek Tenancy
This investment requires a little more work by interviewing and finding the appropriate farmer, but it could turn out to be much cheaper.
Change Land into Farming Land
Buying non-farm land and then converting it into farm use requires due diligence-soil testing, drainage, etc.-but has the potential for a long-term upside. If you need assistance down this path, a farmland broker can save you much time. A good broker will help you navigate the specific state legislation, financing options, and market valuations.
2. Farmland REITs
Farmland REITs achieve their scale by accumulating investor money to purchase farmland. You take ownership as a shareholder. You would collect a portion of the income distributed through rental incomes or farm product sales. Returns are likely to be lower compared to direct ownership. This, however, is farmland exposure that’s completely hands-off.
The key players that you need to know within the U.S. farmland REIT space include;
Gladstone Land
Farmland Partners
3. Crowdfunding Platforms
Farmland-focused crowdfunding platforms allow you to purchase fractional ownership of farmland. The platforms manage the properties and you get paid out periodically. Examples include FarmTogether, FarmFundr, Harvest Returns, Farmland LP, Steward, FarmFolio, and Farm
Possible Risks to Be Aware Of
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No investment is completely free from risk. What you need to take into consideration in the case of farmland:
No investment is completely free from risk. What you need to take into consideration in the case of farmland:Weather & Natural Disasters: Flooding, drought, and early frosts can affect crop yields and, by extension, your investment returns.
Vacancy
Vacant Land: When a tenant farmer vacates, you have to either find another tenant farmer or face a period of time when there is no rental income coming in.
Liquidity: Land is not close to the liquidity of stocks or bonds. Farmland may be sold more slowly, and market conditions have a bearing on precisely when you can divest.
Crop Price Volatility: The prices for commodities are in daily flux. A year when commodity prices go low means one thing: less farm income.
Policy Changes: Changes in agricultural subsidies or farm bills can affect profitability.
Is Farmland Investing for You?
Historically, farmland has been a very stable and productive asset class. With new structures, such as crowdfunding and REITs, farmland today is far more accessible than at any given time without having to raise enough capital for an entire farm. Michigan farmland is something rather unique owing to its unique diverse agricultural output, strong local foods movement, and increasing land value.
However, it would be a lot wiser to first do some serious research and have a consideration for your personal financial goals before getting into it. If you want more control of the farming operation or a direct tie to the farmland, then direct ownership would be ideal. You might want to consider REITs and crowdfunding if you prefer a hands-free investment approach.
Frequently Asked Questions
Is farmland a good investment?
Farmland has mostly yielded strong returns and relatively stable compared to other asset classes; that is why it’s considered attractive by many investors.
How do I invest in farmland?
You can directly buy farmland and derive income from leasing it to a farmer, or you can invest in shares of a farmland REIT, or you can crowdfund.
How can you make money from farmland?
There are the two main ways owners of farmland make money from it: sales of crops, in case he himself operates the farm, and in the form of rent from the tenant farmers. Crowdfunding and REIT investors get periodic income through distribution.
Taking the Next Step with Michigan Farmland
In an evolving marketplace, farmland is one of the tried-and-true opportunities for consistent growth and sound returns. If you’re ready to learn more about Michigan farmland, you deserve to have a partner by your side that knows the land-and the market-inside and out. Michigan Whitetail Properties have expertise in statewide farmland, serving you with everything from crop potential to local regulations. With deep roots in Michigan’s agricultural scene, they can not only better your chances of finding just the right property but also invest with confidence.