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Agricultural Land a good investment farmer

For those looking for returns, there may be various benefits to investing in an Australian investment fund that focuses on agricultural land. The best aspect is that buying farmland in Australia does not require you to be a producer of livestock or crops to benefit from its potential. Hence you can own Farmland with assistance of The Company, contact us if you are looking for farmland for sale in Melbourne 

It is not necessary to buy farmland to raise animals or produce crops as part of an investment in agriculture. Investors have the option of investing in the value of the property rather than farming it. Comparatively speaking to other net exporters of agricultural goods, Australia’s farmland is fairly priced. The median price of farmland has been rising at the same period. According to a report by the Rural Bank, more than 10.8 million hectares of property were sold in 2021 for a total value of $15.6 billion. The robustness of the nation’s agriculture industry is one factor luring non-farmers to the real estate market for agriculture.  

Why Invest in Agriculture?  

Invest in Agriculture

Australian agricultural products are highly appreciated and desired for. The industry of primary goods is in a good position to lead in sustainable, high-quality exports and meet the growing demand for Australian agricultural products from a population that’s  growing globally.
Furthermore, market share has increased despite negative environmental effects, historically high oil prices, and disruptions in the global supply network.    

Australia is a positive exporter of meat and horticulture in addition to attracting foreign investors and seeing an increase in land values. Increased financial investment in food production and allied agribusinesses like processing, packaging, and supply chain management further supports the Australian agricultural industry and farmland values. Therefore, selecting a good agriculture endeavour can occur without prior farming experience.
 

Land Uses for Agriculture   

An agricultural investment fund offers the chance to consistently receive passive income through lease returns. This you can use to indirectly profit from the land. Due to the variety of resources found on the continent, Australia is home to a variety of farmers. According to the Australian Bureau of Statistics, Australia has 87,400 agricultural firms and around 387 million hectares of agricultural land. According to agricultural production, land use is divided as follows:  

On 332 million hectares of land, livestock forage.   

32 million kilometers are used for crops.   

0.7 million hectares are dedicated to forestry.   

Australia’s agricultural variety is a result of the country’s diverse climate, soil types, water availability, and market accessibility. Scale efficiency is a major factor in our farming sector’s success. The majority of the sector’s earnings and land use are accounted for by large farms with gross profits of $1 million or more. Interestingly, due to their organizational structure and reliance on technology, larger farms are more profitable than smaller, family-run farms. However, you can also find farmland for sale in Melbourne by taking assistance from The Company.  

Additionally, agriculture is a dynamic industry.    

As the proportion of farms within each sector category fluctuates, Australia’s agricultural production structure changes. While crop farming has fluctuated in its sectoral share over the last 50 years, livestock farms have grown consistently over decades. Additionally, cutting-edge practices like aquaculture and glasshouses can assist improve the value of the whole agricultural environment.    

According to the National Farmers Federation, agricultural output of the livestock, fish, horticulture, and grain that accounts for $47 billion in exports to Asia, Europe, and the United States must become more environmentally friendly and sustainable to remain competitive.  

Valuing Agricultural Land  

Understanding how the land (the asset) is valued makes it simpler to decide whether or not to join the agriculture investment market.    

Farm sales have historically used to estimate the worth of farmland as an asset class. Moreover, it can be challenging to locate farms in a particular area with similar property values. However, this necessitates using a different approach when valuing agricultural products.

Valuing Agricultural Land 

Fund managers frequently take into account a property’s capitalization rate (cap rate), which is the correlation between annual net operational income and the cost of the land.
The capitalization rate, for instance, is 5.71% if a piece of property costs $175 million and generates $10 million in annual net operating income.    

Because it basically reflects the annual return on a cash investment, the cap rate is significant to investors.  

Impacts on an Agricultural Fund’s Value  

The sustainability of the agricultural industry and the farmers’ capacity to make a profit from raising livestock or export-ready crops are just two examples of the variables. Furthermore, this affects the value of the agricultural property owned by a fund. Additionally, there are many underlying factors that affect agricultural producers’ profitability, including:  

  • Climate circumstances   
  • Management of diseases and pests   
  • Management of capital and risk by agricultural producers Australia’s goods are in demand.   
  • Explicit costs   
  • Agriculture-related innovations in cultivation, packaging, and processing   
  • Adoption of resource management and healthy farming   
  • Tariffs and trade ties   
  • Purchasing problems   
  • Financial support for study and development   
  • Access to institutional investors and debt funding.    

People have the chance to learn about a primary production sector at a time when demand is high for Australia’s agricultural products and the middle class is expanding in our eight biggest trading partners.  

Options for Agriculture Property Investment  

As an asset class, agricultural land investment through an investment fund can potentially generate regular income distributions and long-term capital gains. Furthermore,  let’s take a closer look at two specific types of investment. In this, individuals have access to through licensed fund managers with special expertise in farmland investing.   

Unlisted Agricultural Property Fund  

An unlisted agricultural property fund is, in the simplest words possible:    

not traded on a market like the Australian Securities market (ASX) or  is a type of direct investment in a fund that invests in agricultural property and may have a diverse portfolio of assets that include farmland with sound fundamentals.    

The revenue the property generates is the main factor from where land’s value  determine.  

When investing in farmland, the value of your properties is primarily based on the rental revenue that the farm generates. Moreover, agriculture property fund managers typically look for an asset with a solid lease agreement and a reliable tenant as part of the investment strategy to guarantee income. Consequently, a fund for unlisted agricultural property can look for acreage that’s easily located, has access to the necessary infrastructure, such as processing plants and transportation, and can either find or already has a lucrative agricultural operator as a tenant.    

An unlisted agricultural property fund offers investors the choice of investing on a closed-ended or open-ended premise.     

Until the underlying property is sold, the profits are distributed, and the fund is closed-ended, you cannot redeem your units.    

Open-ended funds have no set end date, which means you can periodically redeem all of your units in the fund at specific periods throughout the fund’s life.   

Unlisted funds are regarded as passive, long-term investment choices.    

Agriculture real estate investment trust (REIT)  

A-REITs are traded on the ASX as real estate investment trusts. (Unlike unlisted property funds). Moreover, this indicates that the agricultural property securities you own through the A-REIT openly trades every day. Without making a sizable investment, you can potentially gain exposure to a broad range of properties. But this may come with higher volatility than an unlisted agricultural property fund.    

An A-REIT has the potential to make regular distributions and makes it simple to liquidate your assets. Moreover, an advantage of purchasing agricultural land through an A-REIT is that the entry point price is typically quite cheap. However, unlike an unlisted agriculture property fund, the price of A-REIT securities might not be an accurate reflection of the land’s true worth.     

But keep in mind that all investments involve danger. Before making an investment in a farm property fund, speak with your financial advisor. Furthermore, do not forget to hire the real estate agent. So, if you are looking for farms for sale in Victoria then contact The Company in Melbourne, our seasoned experts will help you to get the land that you want.

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