No matter how big or small your real estate investment portfolio, it should include agriculture.
We live in a world with an exploding population and dwindling arable land. We’re looking at more than 9 billion people on this planet by the middle of this century, a sobering reality that is translating to a global race for farmland.
Billions of dollars are being spent each year on research in efforts to prevent a disaster… and, of course, to make a tidy corporate profit.
Genetic engineering (GMOs) is usually at the forefront of this agro-tech, but the mere mention of the phrase “GMO” scares off a lot of hungry consumers.
Plus, the costs associated with GMOs mean they’re an investment opportunity reserved entirely for “Big Agro.” You and I are left on the sidelines to find other ways to take a position in this market.
That’s why I’ve worked over the past seven years to identify opportunities for individual investors like you and me to profit from the growing global demand for food. This market opportunity has become a key focus and a priority investment agenda for me.
Productive land always retains its potential to make money. It is an excellent option for investors who want regular cash returns, cash flow that can amount to a self-made pension to help fund your retirement, as well as a legacy that can be handed down to future family generations.
Over the past seven years, I have introduced Overseas Property Alert readers to the best agricultural investment opportunities I’ve identified worldwide.
If you’ve yet to act on one of these turnkey, ideal-for-the-individual-investor opportunities, I strongly recommend that you take action now. The cost of entry for these opportunities is rising.
If you’ve already diversified your portfolio to include this asset class, well done. Now I recommend that you, like me, continue to expand this portion of your holdings.
What, specifically, should you be looking to buy this year-end 2018?
Here are my top three picks as we move toward the New Year…
#1: Organic-Certified Fruit Punch Mangos in Panama
The farm operator manager is critical to the success of an agricultural investment, just as a good rental manager is key to the success of a rental property investment. A capable farm operator has systems (irrigation, water storage, pest control, etc.) in place to ensure optimum production levels and, as important, eager buyers lined up ready to pay top dollar for the harvests.
In addition to experienced farm management, you should choose this type of investment based on the crop being grown. You want to invest in a crop that taps into a big and growing global demand. You want to feel as confident as possible that your harvests not only will find ready buyers but also will yield premium prices. Your return on investment will hinge on the level of demand for your crops at the time they are ready for harvest.
I’ve worked with many farm management groups over the past 20 years, including one in Panama that has impressed me hugely. This group has developed successful plantation after successful plantation, and its agricultural projects check all the boxes.
This developer has a proven track record. They’ve got systems in place to ensure optimal production. They’re growing products that are in growing global demand, products that are more than simple commodities and that therefore command premium prices when they come to market.
Finally, very important, this development group has its route to market already in place. Crops currently being harvested are already in supermarkets, and the developers have commitments from major buyers from the United States and Europe for future harvests.
The entire plantation, and all produce grown within it, is certified as USDA Organic. This is a critical requirement for bringing the product to market in the United States.
As the farming and processing are all done in Panama, it means we’re getting a first-world-quality product at developing-world costs.
In addition, this plantation has a serious market advantage…
It is producing a product that is enjoying exploding demand.
The fruit in question here is an organic mango. Mango is a relatively new food for Americans, but demand is expanding rapidly. The mango is already one of the most consumed tree fruit on the planet, and that appetite is spreading fast to bigger consumer markets.
Which brings me to the opportunity on the table right now… the Fruit Punch mango.
The Fruit Punch mango trees being grown at the plantation I’ve identified in Panama have two strengths that give them an edge over other varieties of mangos: They are highly disease-tolerant, and they thrive in humidity.
In the context of Panama, trust me, these two things amount to superpowers.
Not only is this unique hybrid mango ideal for this environment, but it is also considered the most flavorsome mango.
The Fruit Punch mango is an oval-shaped fruit with blushed skin and a small seed. It has a tangy sweet flavor with a hint of honey and is referred to as the “peach of the tropics.”
You can now invest in 1 hectare of Fruit Punch mangos for US$39,000.
Returns begin in year four (because the trees need to mature), when the projected yield is 12.62%. In years five, six, and seven, the projected return is 24.08%. In year eight, it goes up to 32.4% and continues to rise steadily from then onwards.
The year three return works out to US$4,920 in net income per hectare. In year four, net income is projected to be as high as US$9,391; in year eight it is projected at US$12,639.
Keep in mind that mango trees often bear fruit for at least 80 years, so future generations of your family could continue to benefit from this investment for decades.
#2: Hydroponics in Thailand
Two years ago I traveled to a town nestled in the mountains of Thailand to check out an ancient farming method that’s making a big comeback. It’s a supremely efficient and holistic way of producing food that is completely organic… and it requires no dirt.
That’s an important advantage as the world’s arable land area dwindles.
Aquaponics is defined as the combination of hydroponics (growing produce in water rather than dirt) and aquaculture (farming fish in ponds).
The basic premise is that the waste from the fish provides the nutrients for the produce, meaning the process is self-sufficient, holistic, and utterly efficient.
The history of aquaponics is debated among scholars, but most agree that it was first used for agricultural production more than 1,000 years ago in two different areas of the world… by the Mayans (and then the Aztecs) in Mexico and by Asians in what is today China, Indonesia, and Thailand.
Today, the benefits of aquaponics are obvious. This method uses less than 1/10th the water of traditional farming, and, thanks to no chemical pesticides and fertilizers, it is easy to keep the production organic.
And, again, it requires no arable land. Instead, as an investor, you own the growing system and let someone else manage its production and maintenance for you.
Capping off the efficiency upsides, you can use land with low productive value to house your aquaponics systems, leaving more arable land for traditional crops.
One big benefit of an aquaponics system for the investor is that it begins producing cash flow quickly. Lettuce, for example, can be harvested every three weeks, more or less. With some fine-tuning, that cycle can be reduced by several days. The fish component of the system takes a little longer, with an average growth cycle of six months.
Taken together, that means you can have 2 fish harvests and at least 17 lettuce harvests a year.
With an investment like this one, you’re looking for two things—first, someone with the expertise to construct, maintain, and use your aquaponics system… and, second, you need a healthy and growing market to sell the produce from your system into.
The group I’ve identified in Thailand is focused right now on the production of lettuce and tilapia. R&D they’ve been working on for the last year has them moving into herbs and crayfish as those products offer higher margins. At this point every lettuce harvest is presold as soon as the seeds get planted.
As an investor, you’re buying the aquaponics system and then are contracting with a farm management company to operate it for you. They grow the produce, sell it, and send you your share of net revenues as rental income for your system. It’s completely turnkey.
The system is yours, so you can sell it, move it to another farm manager, or manage it yourself.
At the hydroponics project I’ve identified, the current purchase price of US$31,000 includes delivery and setup as well as access to the on-site infrastructure (greenhouses, water systems, etc.).
After two years of operations, the developer has announced that the next two greenhouses will be the final opportunity to invest at this price. The cost of investing will increase on Feb. 15, meaning right now is your last chance to act before the price hike.
The manufacturer rates the systems for 20 years. Over that lifetime, the annualized ROI projection (IRR) is 14.48%.
Again, one big benefit of this kind of farming is the quick cash flow generated. Grow cycles are counted in weeks rather than months or years.
#3: Truffles in France
The third agricultural investment that I want to put on your radar right now is in France… and it’s not a vineyard.
It’s a truffle plantation.
Truffles don’t grow on trees but rather on tree roots. Historically, farmers went into forests to hunt truffles with pigs. The pigs could smell when the truffles were ripe and would literally root them out of the ground.
Today, farmers use trained dogs to hunt for truffles. They’re cheaper to maintain… and they don’t eat the truffles after they find them.
Regardless, with a decades-long drought in the Mediterranean basin, wild truffles are harder and harder to find. Hence the creation of truffle plantations.
In fact, truffle plantations started as early as 1808 in France, but production peaked by the early 1900s. World War I and the loss of 20% of the male workforce in France along with the start of the rural exodus after World War I broke the knowledge base for cultivating truffles.
New plantations have only really started in earnest in the last 30 years… and truffle production hasn’t returned yet to the volumes produced at the beginning of the last century.
Of course, you can’t just plant trees in the ground and expect to find truffles growing on the roots. You need specific trees for specific truffles… and you need the spores.
Truffles require a network of spores before they’ll start producing in volume. That’s where the science comes in. The plantation developer that I found is working with a lab that has mapped the DNA of the truffles they grow. That knowledge allows them to confirm that the truffles they are using to create the spores for mixing into the roots of the trees are, in fact, the truffle they want to grow.
To ensure the quality and purity of the plantations, the lab checks every truffle used in the spore inoculations that are down on the tree roots.
Along with that quality-control step, the plantation manager uses other farm-management tools to help produce more truffles faster.
Despite renewed efforts aided by modern science, truffle production can’t keep up with demand.
In fact, estimated demand is at 10 to 20 times (or more) than production for the French black truffle.
That’s one reason this opportunity caught my attention.
Another is the up to 24% annualized returns projected by the plantation developer over the 15-year investment cycle.
In the first few years, cash flow is low, as the spores need time to multiply before large quantities of truffles get produced. By year 12, annual cash flow is projected to be as much as 75% of the initial investment. Then in year 15 you sell.
Why sell after 15 years if the yields are so high?
The plantation is in France, so taxes are the answer.
The French government gives a tax waiver to this kind of agriculture activity for the first 15 years, meaning your investment is completely tax-free up to that point. After that, you’re looking at the standard French tax burden… and France isn’t a low-taxation jurisdiction. And so our trees are sold right before they become tax eligible.
Along with taxes in France being high, the cost of segregating and transferring land is high. That’s why the plantation developer has organized the opportunity for investors to own the trees without owning the land itself… the sale of the trees is included in the annualized return calculation.
Indeed, this is a completely turnkey investment with minimal administrative hassle.
You own the trees and the harvest rights to the trees. The plantation manager manages the trees and the truffle production (using the science from the guys back in the lab).
The developer requires a minimum purchase of 100 trees. Right now, the cost of 100 trees is US$44,885.
The developer is pricing the trees in dollars to eliminate exchange rate risk up front, but your truffles will be sold in euros, as they’ll be sold in France. You can keep your returns in euros or convert them back to U.S. dollars… the choice is yours.