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FarmFundr allows investors to invest alongside an experienced management team in farmland and benefit from both land price appreciation and crop sales.
- Alignment with investors as the company takes a equity stake alongside investors
- Invest directly in farmland with experienced management team
- Several related-party transactions make us apprehensive
Bankruptcy Protection 8/ 10
Deal Flow 2/ 10
Deal Transparency 1/ 5
Diversified Fund Options 0/ 5
Due Diligence 8/ 10
Ease of Use 6/ 10
Fees & Commissions 3/ 10
Investment Minimums 3/ 5
Investor Resources 5/ 10
Leadership 4/ 5
Non-accredited Investor Offerings 0/ 5
Platform Financials 5/ 5
Skin in the Game 3/ 5
X Factors 5/ 5
Total 53 / 100
What is FarmFundr?
FarmFundr is a real estate crowdfunding platform focused on farmland investments. It offers the opportunity to directly invest in farms that produce crops. That makes it a bit different from other farmland-focused investments, which often buy farms and then lease them to other farmers.
FarmFundr, on the other hand, either directly manages the farm or hires a highly qualified farmer to manage it for investors.
Farming is in the DNA of FarmFundr. Founder Brandon Silveira is a fourth-generation farmer with a degree in agriculture. Because of that, he has extensive experience in managing and farming a variety of crops. He has also bought and sold millions of dollars in real estate over the years, most of it farmland.
One thing Silveira has found is that most farmland investing is out of reach to the average investor due to the high costs of acquiring a working farm. He founded FarmFundr to bridge that gap by making it easier for investors to participate in the sector without having to put up large amounts of capital.
The company currently offers investors two ways to invest in farms. First, they can invest via FarmFundr's crowdfunding platform with relatively low minimums. In addition to that, the company offers a FarmFindr program, which provides customized options for those looking to invest larger sums of money. They can do this through a variety of vehicles, including a 1031 exchange, solo 401k, or IRA.
Summary: Is FarmFundr a good investment?
Farmland has historically been a solid investment. Since the Great Depression, farmland returns have averaged more than 12% per year through a combination of crop yield and land-value appreciation. An investment in farmland also diversifies an investor away from stock market volatility and tends to be a better hedge against inflation than most alternatives, including gold.
Farms will remain vital in the decades ahead as both the global population and middle class expand, increasing the demand for food. At the same time, farms are disappearing due in part to urban sprawl. In the U.S. alone, an estimated 500,000 acres of farmland vanish each year. That makes those remaining even more valuable.
The dual drivers of needing to feed more people on fewer arable acres have the potential of generating strong returns for farmland investors in the decades ahead. It's an opportunity that FarmFundr aims to make available to the average investor through their crowdfunding portal.
FarmFundr pros and cons
- Some alignment with investors as FarmFundr aims to take an equity stake in most deals. However, it's usually not a direct capital investment; it receives an interest in the farm in place of management fees.
- The platform offers investors the ability to invest directly in farmland and agricultural facilities with experienced farmers.
- Two ways to profit from an investment: annual crop sales and land appreciation.
- The potential to earn high returns.
- Highly transparent management team.
- High minimum investments ranging from $10,000 to $15,000 per farm deal.
- Currently only available toaccredited investors.
- A limited number of available deals. Only one open at the time of the review with one more on the waitlist. The company aims to have three to four offerings available at any given time in the future.
- Investments are illiquid, and the holding period could last a decade or more.
- Its offerings lack geographical diversification, as FarmFundr focuses on California.
- It does not offer diversified fund options.
- Lots of related-party transactions. FarmFundr often purchases farms owned by its founder and pays companies he controls to manage the farms.
How FarmFundr works: How are investments sourced?
As mentioned, FarmFundr's founder, Brandon Silveira, is a fourth-generation farmer with an agricultural degree and experience managing and farming a wide variety of crops. This background helps Brandon and his team select the best properties to offer to investors via the platform. They perform extensive due diligence and analysis of all offerings before listing. They won't put a deal on the platform that FarmFundr wouldn't invest in alongside investors, which it often does. As part of the selection process, FarmFundr's team of farmers analyze a farm's:
- Crop history and yield.
- Current state and health of the crop.
- Soil quality and expected life span.
- Water quality, sources, and expected life span.
- Past financial performance of the farm.
- Industry-wide financial performance.
- Worldwide crop-specific financial performance.
- Future performance and land appreciation potential.
- All investments must pass a "worst-case scenario" performance review.
- FarmFundr's financial advisor reviews all financial models, and an independent analyst runs various structures to find the most beneficial one for investors.
In many cases, the company's founder already controls the farm to be offered to investors. For example, Silveira's company started developing FarmFundr's first offering, an almond orchard in California, five years ago, and made it available to investors in 2019 as it realized its first crop harvest.
Is FarmFundr legit? How strong is it?
FarmFundr is a legitimate crowdfunding platform that offers investors the opportunity to invest in operated farms alongside experienced farmers without having to "get their hands dirty." Their team is quick to respond to investor questions on offerings and are available by phone, chat, and email to take investor questions. Investors are also welcome to visit properties offered on the platform for a personal tour.
FarmFundr has only closed one offering and had one other live offering on its platform as of early 2021, so there isn't much historical data on the company's track record. However, the farm in the first closed offering produced 8.8% more almonds than estimated in its first year of production and sold them at a 6% higher price than anticipated. This outcome puts the offering on track to achieve, and potentially exceed, its estimated internal rate of return of 13.3%.
The FarmFundr platform, meanwhile, is 100% privately funded by the company's CEO and carries no debt. It has turned down outside investments to focus on creating a portal that offers investors a unique and strong deal flow rather than expanding for growth's sake.
FarmFundr also expects to hold equity stakes in most deals offered on its crowdfunding platform. Because of that, the platform would only make money on a deal if its investors also profit.
Brandon Silveira, FarmFundr's CEO, is a farmer by trade. That makes FarmFundr unique as it's the only farmland-focused crowdfunding platform owned by a farmer. He specializes in farm management, land acquisition, and farm and land financing and strategies. He founded the company out of his desire to enable more investors to participate directly in the farming industry.
Silveira has bought and sold hundreds of millions of dollars in real estate over the years, primarily farmland. He currently manages $100 million in assets, including farms and a farm management company.
Who can invest on FarmFundr?
Currently, only accredited investors can invest in farmland deals offered by FarmFundr. However, it's working on allowing a limited number of nonaccredited investors in future offerings.
What is the minimum FarmFundr investment?
The minimum investment via its FarmFundr crowdfunding portal typically ranges between $10,000 and $15,000.
The company's FarmFindr program, meanwhile, offers custom investment options to those looking to invest more than $300,000.
What are FarmFundr's fees?
Each deal has a different fee structure. For example, investors won't pay an annual management fee to FarmFundr for the California Almond Orchard offering it closed in 2020. Instead, FarmFundr will receive a 15% equity stake in that farm as compensation for managing it.
However, there are other costs and fees involved with this particular offering. Here's a breakdown of the usage of funds from this $900,000 offering:
- $760,000 will go toward purchasing the Almond Orchard from FarmFundr's founder, Brandon Silveira. It most recently appraised for $600,000 in 2014.
- $27,000 will pay broker/dealer fees, legal expenses, escrow charges, and other administrative costs associated with the offering.
- $113,000 will cover the costs associated with developing and operating the almond orchard as well as other expenses of the company.
To be clear, while investors aren't technically paying FarmFundr an annual management fee, they're giving up 15% of the farm's equity in place of management fees. Further, they're reimbursing FarmFundr's CEO for the cost of developing the farm as well as for all associated expenses of the offering.
In addition to that, the farm will pay a $15 per acre fee each month ($3,600 per year or 0.40% compared to the funds raised) to Farm & Land, which is an affiliate of FarmFundr's manager, to operate the farm. The almond orchard may also pay additional fees to Farm & Land in the future for other services related to cultivation and harvesting.
Meanwhile, in future offerings where FarmFundr doesn't take an equity position, it estimates that investors will pay an annual management fee of 0.75% to 1% of the funds raised and a 3% fee to the sponsors. That's the case for the second offering on its platform, a pistachio farm it's developing. It's not taking an equity stake in this farm but is instead charging a 1.5% annual sponsor fee. In addition to that, investors will pay Farm & Land an estimated $521,000 to develop the pistachio orchard on the vacant land.
FarmFundr returns: What should you expect?
Farmland returns come from two sources:
- Crop profits, which is an investor's share of the annual harvest.
- Land appreciation when FarmFundr sells the farm and realizes profits, if any, from the sale.
The company targets farms that can generate attractive internal rates of return (IRRs). For example, the projected average annual return on investment for the pistachio orchard was 13.33% based on a five-year holding period with a targeted unlevered IRR of 10.78%.
However, as with any direct real estate investment, estimated returns might not line up with actual ones. Several things can impact a farm's annual crop harvest, such as natural disasters, disease, insects, and lack of water. Meanwhile, even if there is a plentiful harvest, crop profits could suffer due to low prices or high costs for things like labor.
On top of the potential impacts to annual profitability, several factors could impact the value of the land, including persistently low crop yields or prices, deteriorating soil quality, and low comparable sales. Because of these factors, an investor could lose some or even all of their investment in a farm.
FarmFundr, however, takes steps to reduce the risk of loss by using hedges, like crop insurance. It also holds farms for a long time, often a decade or more, which increases the potential of a positive outcome.
When (and how) can you sell FarmFundr investments?
Farmland investments are illiquid, meaning there is no secondary market nor repurchase program. Because of that, an investor will need to hold until FarmFundr sells the farm. At a minimum, FarmFundr's founder likes to keep a farm for seven years, though he targets a holding period of 10+ years, with 12 or more years being ideal. The offering available on its site in early 2021 had a five-year hold period with a targeted 2025 exit.
Going mobile: Is there a FarmFundr app?
FarmFundr doesn't currently have a mobile application for investors. However, it has optimized its website for mobile devices.
FarmFundr risks: Is FarmFundr safe to invest with?
No investment is without risk. That's especially true of direct real estate investments, such as the agricultural deals offered through FarmFundr's platform.
However, the company does several things to reduce risk for investors. Topping the list is that it hires an experienced farmer to manage each property, with many operated by FarmFundr's founder. These skilled farmers know what crops to plant, how to care for and protect them, and when to harvest.
FarmFundr also takes several steps to protect investors from any potential business issues with the FarmFundr platform. First, the company forms a separate LLC for each farmland investment, which provides them with security against a platform failure. Meanwhile, FarmFundr is debt-free and 100% funded by Silveira, which reduces the potential of that platform running into financial troubles.
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