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How Agricultural Investing Earns You Passive Income

If you are an investor, you may struggle to navigate new challenges and discover substantial opportunities in a recovering global economy where the investment landscape has shifted. 2022 has already been an eventful year for investors. Economic fear is leading the narrative, and with global inflation, rising interest rates, and the ongoing conflict in Ukraine, insecurity of investments is of great concern. Since the first quarter of the year, the US S&P 500 stock index has plummeted by over 20%, which is giving investors cause to re-evaluate their investment priorities. 

Investments that generate passive income allow you to use the money to make money without needing constant input or management. Real estate is a classic example of an asset that produces passive income as the property appreciates over time but can simultaneously generate cash flow from renting. Passive income also benefits from a lower tax rate; it does not fall under the income tax bracket but instead under the capital gains tax, which maximizes the ROI value. This principle is also valid for investing in farmland. While it may seem counterintuitive that investing in farmland and its operations could generate passive income– revolutionary investment models like Agro Invest in Spain are now available. They will allow you to have a stake in productive farmland that will give you more than one revenue stream.

Benefits of Investing in Agriculture

There are multiple avenues for investors to explore when considering investing in agriculture. REITs, investment in agricultural commodities via ETFs, investing in farm debt, or even purchasing farmland are all viable investment options that connect investors to two trends that are unlikely to desist. Firstly, high-quality arable land is consistently diminishing as urbanization expands globally. Secondly, the demand for edible commodities is set to increase, tracing the growth of the world population continuously. What does this mean? High demand and limited ability to supply. In short- an investment in agriculture now should become more valuable over time. Investing in agriculture, be it by purchasing farmland or REITs, allows for passive income to be created via either the rental of the farmland to farmers or returns from yields produced on the land. 

Looking back at the performance of farmland investments, we can observe some encouraging results. From the years of the early nineties to the early noughties’ farmland saw a decade of positive returns, with a minor slip in 2001, where the last quarter saw a 0.1% downturn. Subsequently, the same positive returns pattern continued from 2002 until 2019, when the pandemic hit. Farmland has proven to have lower volatility and low correlation to other asset classes as its performance is counter-cyclical to stock market trends. Donned ‘gold with a yield’ farmland has also proven to be a strong hedge against inflation, as displayed most recently by the 12.4% increase in farmland values recorded by the United States Department of Agriculture between 2021 and 2022 with rising inflation. 

The opportunity to contribute to ecological and sustainable investment options, like Managed almond farmland of Agro Invest Spain, is another draw for investors. The green movement is advancing, and businesses, consumers, and investors alike are turning their attention to ways in which we can reduce our burden on the environment. Activities such as the farm-to-table campaign highlight farming and the demand for sustainable and organic edible commodities. So, we can see many compelling reasons investors may wish to dip their toes- or perhaps a little more in the agricultural pool. 

What Types of Investment Offer Passive Income?

Passive income in terms of investment relates to a one-time investment that continues to provide income without the need for the investor to be heavily involved. Here are a few well-known assets that generate passive income

Index Funds– This investment acts as a buffer from investing directly in specific companies. Each index fund purchases shares from a vast number of companies within one particular indexed segment of the market. Index funds are inherently diverse and, as they are passively managed, allow investors a low-maintenance addition to their portfolios.  

REITs are investment trusts that trade on the stock market and allow investors a relatively easy way to invest in real estate. Shares of most REITs can be bought at low costs and are highly liquid, as they can be sold quickly when the stock market is open for trade. Publicly traded REITs tend to specialize in particular areas of the market, such as commercial, industrial or residential, so they offer a variety of opportunities to earn passive income. 

Dividend Stocks– Perhaps the simplest way to create passive income is by investing in dividend stocks. To reward their investors, publicly traded dividends redistribute profits by cash or additional stock shares. An investor will make an initial investment and wait to receive their earnings.

Why Agricultural Investment is better than Other Sources of Passive Income

Farmland investing is uniquely placed compared to classic real estate and stock markets, which are vulnerable to crashes, making them a risk to your portfolio. In times of market turbulence, farmland values and the returns from agricultural commodities have remained relatively stable. 

Here are some more of the critical advantages of farmland over other passive income-generating assets:

  • Agricultural exemptions mean that taxes can be lower. 
  • As opposed to conventional real estate, it offers multiple avenues to increase returns.
  • Contrary to other real estate investments, farmland is not subject to vacancies or turnover concerns.  
  • Is it not subject to market volatility in the same way as dividends, real estate, and index funds
  • Farmland is at a much lower risk of being vandalized. 
  • There are both long-term and short-term opportunities for growing your returns.
  • Property taxes are lower due to exemptions made for agriculture.
  • Agricultural landlords do not have the same concerns about maintenance as commercial or residential real estate landlords.

Diversify your Portfolio and earn Passive Income

Although farmland investing offers excellent opportunities for generating passive income, it has been largely unavailable to individual investors. This is in part due to the historically high costs related to investing in farmland and, in part, due to a lack of access and information. Having the funds but not understanding the market or how to enter it has been a long-standing barrier for individuals interested in farmland investing. At Agro Invest Spain, we provide a robust investment model that breaks this barrier so our investors can watch their investments grow. 

Why not take the chance to capitalize on the rising value of edible commodities and agricultural land now? Please consult with one of our expert advisors to establish a world-changing investment to deliver you great appreciation and secondary passive income.

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