5 ways to make money with investments in Agriculture
There exist countless reasons why you need to invest in agriculture right now (2018). One major reason is that it is an investment with low-risk that keeps pace with inflation and increases in value over a long period of time. Another is that it is a worthy asset that provides a lot of benefit to the community you belongs to, and it can add up to your many streams of income. But how on earth does an investment like this make an individual some money? Depending on the type of investment and the type of farm (small, medium or large) runned, investors, can profit through a wide range of effective ways. In this article, we’ve covered five of the most common ways agriculture generates profits to an investor below.
1. Yield of Farmland
The first is through Yield. Many Investors can make good money from cash flow from crops that are harvested per month or per year. Majority of crops planted on farms are annual (planted and harvested within a year), although some other locations often record multiple harvests per annum.
In some cases, these farm yields are secured via long-term contracts with customers who agree to purchase the crops or tenant farmers. It will interest you to note that crop insurance, which protects the investor, also protects the farmer in the case of a bad circumstance or catastrophe. This simply means that even if part or every of your crops are destroyed or your profit gain drops due to the decrease in commodity prices, you (the farmer) will still receive funds with which you can pay your lease.
2. Appreciation of Land
we all know that the availability of rich farmland is limited. This resource is so because almost all arable land in Nigeria is already in use. Farmable land of good quality has decreased due to land development or urban sprawl, making the few remaining pieces of land, even more, costlier/valuable. As a result of this, farmland is fast appreciating in value, which is beneficial for many investors. In the past few years, residential developments have caused farmland to increase drastically in value; if the land is located close to a residential area, the land value increases with the potential to sell the land at a higher price as development spreads towards it.
3. Forced Equity
Similar to real estate investment, you as an investor can add up value to your property by making certain profit-wise improvements. For example, in agriculture, this can include turning raw land into pastureland or crop. Also, exchanging lower end crops such as row crops or commodity crops to higher end crops like trees, or converting farmland from the usual “conventional farming” to higher return organic farming can amount to an increase in the value of the investment. You can also improve the buildings and infrastructure on the land to build equity. These quick changes will increase the value of your land and will lead to larger profits when you (investor) decide to sell it.
4. Principal Pay Down
Like in forced equity, farmland can speedily accumulate equity naturally in the same way that real estate accumulates equity as mortgage payments are made. Should in case there is a debt on the land, income gotten from the farm will be used to settle the debt, and slowly equity will begin to accumulate through a natural process.
Investing in agriculture may not provide quickest returns on investment (ROI) as you want it, but in the long run, it can pay off greatly. There exists much less volatility in farmland and timberland than in other types of investments you can think of. This means that adding agriculture to your investment profile can provide you continual stability with the potential for an annual income.
- Other Income
There are about 101 different ways to generating income on farmland, and a lot of them are unrelated to the crops being grown.
If the farmland contains a large area/mass of water, water rights can be rented or sold. For a farmland that is located near a popular (major road), there may be an additional opportunity to generate more income from billboards or road banners placed on the farmland or from radio towers or cell that are built. Depending on your location, it may be possible to sell hunting leases to hunters or generate funds through recreation.
ABOUT THE AUTHOR
Balogun Owomide has a huge passion for spreading motivation, business, and personal finance. I often write on my How to make money, a finance blog on topics ranging from motivation, startup ideas, to small business financing and loans, business plans, marketing and franchise opportunities. You can reach me on Facebook at Balogun Owomide.