Bill Gates is betting big on US farmland – should you?
Bill Gates is best known for revolutionizing personal computing, but lately he’s gotten back to the land.
The Microsoft co-founder and his former wife, Melinda, are the top farmland owners in the country, having acquired more than 269,000 acres over the past decade.
That might seem like a somewhat primitive place for such a technical whiz to put his wealth. But then again, when the onetime richest man in the world makes a major investment, he should probably get the benefit of the doubt.
So what’s the appeal of farmland for a proven fortune builder like Bill Gates? And with investing easier than ever to do via mobile apps, how can you get in on this opportunity?
Read on and find out.
What’s in it for Bill Gates?
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The farmland market remains very fragmented, both in the U.S. and globally: Most farms are still family operations.
The Department of Agriculture estimates that institutional ownership of U.S. farmland is just 2.2%.
But since the 2008 financial crisis, a growing number of financial institutions and rich individuals have been buying up the asset.
Gates is known as a shrewd investor, and his growing stake in farmland also fits in nicely with his charitable foundation, which aims to improve food production in poorer countries, among other objectives.
Gates made a splash in 2017 when he bought $520 million worth of U.S. farmland from the Canada Pension Plan Investment Board, and he’s continued to invest since.
When you consider U.S. farmland as a passive investment, it’s not hard to understand why.
Big returns from a booming business
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Farmland is a proven source of higher returns than you get from more traditional portfolios.
Farmland returned an average of 11.0% per year between 1992 and 2020, according to research from FarmTogether, an investment platform that allows qualified investors to purchase stakes in U.S. farmland without buying a whole farm. In comparison, the S&P 500 returned only 8.0%.
When considered on a risk-adjusted basis, farmland outperforms the stock market by a wide margin.
It’s even better than traditional real estate, better than bonds and gold.
Farmland investment combines the allure of stable income with gains from long-term productivity increases, as population growth and the subsequent demand for more and better food drive improvements in farming technology.
A rare opportunity
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Because some 96% American farms are family-owned, and tend to be passed down from one generation to another, farmland has always been a difficult asset class for an investor to buy into.
But that’s changing right now.
Over the next 20 years, approximately 370 million acres of U.S. farmland will change hands, according to the American Farmland Trust.
That’s because a large proportion of the next generation evidently isn’t interested in taking up farming: Farmers over age 65 own 40% of the land and outnumber farmers below 35 by a factor of six to one.
So, as more farmers retire and sell or rent out their land, a profitable but difficult-to-acquire asset is hitting the market during a rare window.
All this may eventually prove that Gates has been a smart early investor once again.
How can you get in?
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You can invest in farmland yourself and take advantage of this opportunity.
Technology makes it as simple as downloading an app and creating an account. Even if you’re not an accredited investor with the SEC, you can still get an idea of what’s available.
“As an asset class, there have been barriers of entry” for new investors, says FarmTogether’s David Perez, adding that part of his company’s roadmap is to open its offerings up to a wider swath of investors.
If all of this sounds good to you, what are you waiting for? If it’s good enough for Bill Gates, after all, it’ll probably do right by you too.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.