Key Benefits of Farmland Investment

Investing in stocks and bonds can increase your wealth, but farmland investment is another option you should consider.

FREMONT, CA: When making financial decisions for your future, you may consider investing in stocks. While buying stocks and bonds may increase your wealth, there is another strategy that many investors ignore. Farmland is a valuable limited resource that appreciates with time.

Here are a few reasons to invest in farmland.

Price of farmlands is increasing

The University of Missouri reports that land values are rising across the state, frequently faster than anticipated. Non-irrigated cropland increased by 2 percent to $5,555 per acre between 2019 and 2020. During this time, the value of pastureland increased even further, reaching 6 percent annually to $3,374 per acre. Before investing, take your time investigating various sites because the value of farmland varies by location. You may opt to buy irrigated or non-irrigated crops, pastureland, timberland, or recreational/hunting land, depending on how you intend to manage your investment.

High demand for food

By 2050, the food we currently produce will need to be almost doubled due to the growing world population. Only 7 percent of the planet's land can be used to grow food, and the vast majority of that area is already in use. Demand for land rises along with rising food prices. The shortage of land ideal for growing food raises the value of your investment, whether you decide to farm yourself, lease your land to another farmer or rancher, or sell the land later for a profit.

Some taxes are exempt from farmland

Agricultural land investors are eligible for various tax deductions and exemptions. Compared to residential property, which is assessed at 19 percent, agricultural property in Missouri is assessed at 12 percent of its market value. Federal tax deductions for mortgage interest on agricultural property can help you pay less yearly taxes. A working farm on your property entitles you to several tax exemptions on your Missouri state taxes and exemptions from the federal government's wealth tax.

Your portfolio can diversify with farmland

Both immediate and long-term wealth-building opportunities are provided by farmland. The land parcel usually retains its worth in your investment portfolio as a physical asset. Its low-risk profile can assist in holding diversity and provide a counterbalance to some of your riskier stock market investments. Land can be transferred to your heirs through a revocable living trust.

Farmland is a good source of passive income

According to the USDA, there are 911 million acres of farmland in the United States, and more than half of them are rented out. In Missouri, 60 percent of agricultural land is utilized for personal farming, 25 percent is rented to others, and 12 percent is used for non-farming purchases.

Stable source of income

The housing market bubble and stock market meltdown have unfortunately occurred more than once in our nation's history. Farmland can be the solution if you want to add a reliable asset class to your portfolio. Farmland often experiences steady price growth rather than erratic price changes. Your portfolio can experience stable growth by including farmland property in your investment mix, shielding it from market turbulence.