Investing in Farmland: Why Ag Real Estate is the Future

Chris Rawley (00:00)
the underlying asset appreciates and you

you

have cash flow from the rents.

in agriculture very similar. the ground itself appreciates. Farmland is becoming scarcer and scarcer. We have more people on the planet. We’ve got what, eight billion now. We’ll have 10 billion by 2050. Those people have to eat, right? They have to live somewhere and they have to eat. So they consume more calories. So the amount of consumption of calories is going up. The land that you can produce calories on is going down. So that scarcity produces appreciation in the land.

Cody Crabb (02:03)
Welcome to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. And today we’ve got Chris Rawley from Harvest Returns. Chris focuses on agriculture real estate. And in this episode, we’re breaking down why farmland should be thought of a lot more like traditional real estate than most people realize. We’ll get into the similarities, the investment case, and why agricultural debt is an opportunity worth paying attention to. Chris, thanks so much for joining us today.

Chris Rawley (02:28)
Happy to be here. Thanks for having me, Cody.

Cody Crabb (02:30)
So first of all, I apologize to everyone for my mispronunciation of agricultural. That’s a very tricky word to say on a podcast, so I’ll do my best. But Chris, I’d love to get into kind of your story. I how did you get into real estate in the first place, and what specifically drove you to agricultural real estate?

Chris Rawley (02:49)
Yeah, there’s a reason we say ag because it’s easier. ⁓ now great question. So I’ve got kind of an industry career. I was in the military and I worked in tech and I worked in commercial real estate. And that commercial real estate job got me interested in real estate investing. So

probably 25 years ago, I did my first single family real estate investing experience like a lot of people new to the space do. And that was fun, and so I did that over and over again and built up a little portfolio of single family duplexes, that kind of thing. And then I also started looking at commercial real estate, and then I decided I wanted to be a land developer about 12 or 13 years ago. So I played around with land developer, and as I was driving,

around to the country ⁓ looking at vacant land I saw a lot of land with with cattle on it. In fact one of the one of the pieces of land that I bought had like some cows on it that were just there the previous owner like leased the cows for and enabled them to get an agricultural exemption. around that same time I saw that there were real estate platforms that allowed you to invest in real estate a lot more easily seamlessly and so I decided to you know I wanted

buy a farm but there wasn’t really an easy way to do it. You need a lot of capital, you needed know-how, which I didn’t have. I don’t come from really a farming background, interestingly enough. So we skipped some steps and built a platform to allow people to invest in other farms. So we syndicate farming deals and we’ve been doing that like I said since about 2016 and we’ve raised almost 40 million dollars and deployed that into farming operations.

Cody Crabb (04:33)
Wow, okay, so that’s quite a bit of, I find that pretty interesting. The amount of, the amount that kind of, one thing that pops up often on episodes like this is like nobody plans to get into the niche that they’re in. They kind of just fall into it or they accidentally get a deal and then it works out well and then they just keep going for it. So that definitely tracks with what I’ve heard previously. So something that you said in the intro that I’d love to kind of get into a little bit was,

farming and real estate are really not different things. They’re very, very similar. I’m not sure exactly how you phrased it. It’s another type of real estate is what I believe you said, is that right?

Chris Rawley (05:10)
It is. mean,

we call it agricultural real estate. The similarities are they’re tangible, right? So we’re not talking about like stocks, bonds, CDs. These are tangible.

investments, they’re tied to something that’s real and they’re both tied to a location, right? So if you have a single family home, it’s a place and that market is hot or it’s cold or it’s, you know, in between, it’s a, you know, their luxury or their, you know, low rent, different types. So the same thing with agriculture. The other sort of similarity is there’s two ways that you make money from investing in agriculture, just like in real estate, you,

the underlying asset appreciates and you

you

have cash flow from the rents.

in agriculture very similar. the ground itself appreciates. Farmland is becoming scarcer and scarcer. We have more people on the planet. We’ve got what, eight billion now. We’ll have 10 billion by 2050. Those people have to eat, right? They have to live somewhere and they have to eat. So they consume more calories. So the amount of consumption of calories is going up. The land that you can produce calories on is going down. So that scarcity produces appreciation in the land.

And then they also produce cash flow. So instead of tenants paying you rent, like you might have in a multifamily, like an apartment building, you have, sometimes you have tenants, sometimes the landowner has a farmer tenant on it. Sometimes you have the crops, you sell the crops and that’s essentially your rent or what pays the bills is the, or cattle. So we also do livestock operations. So a lot of similarities and a few differences.

Cody Crabb (07:34)
Gotcha, yeah, think that’s pretty interesting. think most people wouldn’t think about it that way. ⁓ They think about kind of like old McDonald kind of in their mind, but like a lot of times, our perception of what these things are, that’s not really what they’re like.

Chris Rawley (07:53)
Yeah, for sure. Most people, they don’t really have a connect.

you most of the population of the U.S. is urban. their connection to their food is from grocery stores and restaurants. And it’s not necessarily, you know, a realistic perception because they can access fruit and vegetables here in the U.S. that are grown on the other side of planet. And they’re available, you know, 24-7-365, whereas, you know, kind of traditional food consumption is seasonal. a lot of people just don’t have that, you know, they take our food for granted and they

Fortunately,

we’re blessed to have an abundance of food in the US. Not always affordable, but it’s there. it’s a thing that, part of our deal is you invest in agriculture and you become more connected to the food system.

Cody Crabb (08:40)
Now one thing you mentioned before we started recording was that the debt side of this so it’s and you said it was a big opportunity I’d love to kind of know what What you meant by that?

Chris Rawley (08:50)
Yeah, so another similarity to real estate is a lot of farmland contains debt. It can be leveraged just like a mortgage on a house or a building. so farmers come to us. They want to acquire a new piece of land.

There’s an agricultural lending system. It’s you know, agriculture credit, farm credit. It’s very well established, but there’s sometimes needs that aren’t met. know, so there’s a piece of farm credit between like very high quality U.S. Department of Agriculture guaranteed loans and sort of the hard money, just similar to the hard money you might find in…

commercial real estate or real estate. And right in the middle, there’s this sort of mid-trench of debt, which the interest rates and the risk are sort of in the middle of the road. And that’s where we focus in our debt funds.

Cody Crabb (09:43)
So give me kind of a snapshot of who would be an ideal person to maybe look into this as an investing strategy. Where would you want to live? What would you need to know? I’m curious about the profile of somebody that you think would be ideal to get into this.

Chris Rawley (10:34)
Yeah, mean, if you want to invest, you don’t want to have any connection to the land, definitely you can come and we can help you with that. If you actually wanted to do, you know, farm loans, I think that’d be a hard business to get into without the connections. It’s not as easy as doing like, you know, notes and trading notes and things like that on, say, single family side. Geographically, obviously you need to have some connection to agricultural land.

if you’re gonna do.

sort of thing but they’re you know most interesting thing about farms is most farms are owned by families so you hear a lot about industrial farming and there’s that’s very small piece of agriculture and even you know the family farms are can be very very big but most farms are smaller ⁓ say that I think it’s about two million farms in the US so there is a lot of opportunities out there for you know lending into this space but it’s a very fractional business I guess is

the term so that presented an opportunity for us and our investors.

Cody Crabb (11:37)
Let’s say they’re looking into it. They want to start learning about it. They think it might be good fit for them based on where they live, all that stuff. What would be a couple of red flags that you think you might see early on that go, maybe agricultural is not the best fit for this person?

Chris Rawley (11:43)
Yeah.

Yeah, you know if you don’t have the background in it, I’d say that’s probably a red flag. Although, you know, we’re designed, our company helps people get into the space that have never been in the space. Most of our investors are first-time investors in farmland or farming. You know, others are…

Very similar to real estate is you have to understand the risk. If you don’t understand the risk in a particular, say property or farm operation, then you probably shouldn’t invest. ag, there’s a lot of risk, just like anything else. But it’s like disease, weather, water, all the things that make plants grow or cattle grow. That’s all something that we consider when we’re underwriting these deals.

Cody Crabb (12:43)
And so do you feel like the market follows the general real estate market similarly or not so much when we’re talking about …

Chris Rawley (12:52)
No, not

really. know, agriculture is local. It’s localized, but it’s also a global market at the same time. So, you know, if you look at like Midwest row crop farming, that’s a very large part of it. US agriculture, we’re talking about corn, wheat, soybeans, those sorts of things.

You know, that all depends on local land prices, weather, irrigation, soil quality, those sorts of things. But it also is impacted by, you know, what’s going on China, in tariffs, in Brazil, in soybean markets, you know, in the trade.

fertilizer interrupted from the straight of four moose, all those sorts of things can impact agriculture. And so it’s much probably more complex. I know I have learned so much being in the space 10 years that I didn’t even conceive of when I got into the space.

Cody Crabb (13:43)
So if somebody wants to if somebody’s looking to invest What is it that your company can provide tell us about your company and kind of what they provide to somebody that is kind of looking into this for the first time or maybe not for the first time maybe they just want to Streamline things or change things up

Chris Rawley (13:56)
Yeah, yeah, I mean.

Yeah, if you have any interest at all in agriculture and maybe seeing how you could diversify into your portfolio into the space, we’d love to talk to you. We have funds. these are funds, like I mentioned, the debt fund, which is a multi asset. So multiple loans. ⁓ We sometimes we syndicate individual farms. So a vineyard is raising capital and we bring together investors and syndicate those investors into essentially an LLC and allow them to invest into

⁓

that vineyard. We do some really unique sort of stuff. You know I mentioned vineyards. We’ve done mushroom farms. We’ve fish farms. We’ve done you you name this sort of specialty crop. We’ve probably dabbled in it a little bit and we do a lot of livestock as well.

Cody Crabb (15:24)
So it sounds like this, you’re into real estate but you’re kind of nervous about the, maybe you’re not very diversified, this sounds like a kind of an interesting way to kind of maybe do that while still staying within real estate. Would you say that?

Chris Rawley (15:37)
Yeah, for sure. I you know, I’m still a real estate investor, so I’ve still got investments in like multifamily sort of things. So this is just another piece of real estate that you can add more diversification to your portfolio because, you know, that’s kind of name of the game in managing risk, If you’re into alternative investments, so real estate specifically, you want to make sure your portfolio inside of that is diversified too.

Cody Crabb (16:02)
For sure, yeah. And like I said, this operates in a different way than a lot of real estate, sounds like. It’s dependent on very different things than a lot of other markets are. So this sounds like it could be an interesting thing for our listeners that are thinking about diversifying and maybe know a little bit about this, who knows? So if people wanna invest with you, they wanna find out more.

Where can they go online to kind of visit you and find out more?

Chris Rawley (16:31)
Yeah,

mean probably the easiest place to start is harvestreturns.com. Of course we’ve got all the social media venues as well, but our website, there’s some blogs, there’s some information on there, but most importantly there’s a way for you to sign up to our platform and see what our current opportunities are.

Cody Crabb (16:46)
That’s great. Yeah, thank you so much for all the all the info you’ve given us today. I think our audience is really going to like this one. And thank you all our listeners that have joined us today. If you like what you heard, please go ahead and give us a like, subscribe, comment, all the things and make sure you follow us so you don’t miss another awesome conversation like this one where we learned about something that I didn’t really know a lot about. So this is a perfect example of why the ongoing education is so important because.

Who knows what we’re missing out on when we don’t keep just getting the information coming in? I’m sure you can relate to that.

Alright listeners, thanks so much one more time. thanks so much for joining us today. I really appreciate it.

Chris Rawley (17:25)
appreciate it Cody.