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October 4, 2023

Using Farm Property Loans to Expand Your Agribusiness 

Buying farmland is like investing in gold—and farm property loans can help you do it.  

“People sometimes refer to farmland as an investment in gold, plus a coupon,” says Bruce Sherrick, professor at the University of Illinois. “You get a fairly low annual cash flow, fairly high long-term rates of return and tax advantages to the asset classes.” 

But, considering cropland values climbed more than 30 percent from 2021 to 2023 alone, investment cost can be prohibitive without the right financing. 

The 2023 Farmland Report

Understanding the power of equity is key in helping farmers mitigate financial risk. Download AgAmerica's free land report to unlock market insights from AgAmerica's economic research team.

AA23_007_034 Farmland Report 04_Booklet Graphic

The 2023 Farmland Report

Understanding the power of equity is key in helping farmers mitigate financial risk. Download AgAmerica's free land report to unlock market insights from AgAmerica's economic research team.

Keep reading to learn how you can leverage interest-only farm property loans to buy farmland and increase your profitability. 

Why Buy Farm Property?

Create Multiple Revenue Streams 

Unlike a lot of other real estate, which is limited to generating income through rent or resale alone, farmland benefits from many different wealth-generating strategies.  

  • Land Value – Historically increasing year-over-year. 
  • Cash Rental and Crop Share – Generating income by renting your land to other farmers for planting.  
  • Soil Quality and Subsidies – Using sustainable farming practices can increase the health of your soil, increasing resale value and possibly qualifying you for government subsidies and tax breaks. 
  • Agritourism – Generating income through farm festivals, tours, venue spaces, and more. The Numbers 

Increase Your Equity 

Average Farm Real Estate Value

Since 2009, farmland values have increased year-over-year, even growing during a slowdown in the market after COVID-19. In the past three years, cropland value increased by $1,300 per acre. Farmland is such an attractive investment because there are few other options that can boast such a predictable increase in value.  

Hedge Against Inflationary Pressure  

Most experts are predicting that rate hikes will continue into 2024. So, what does this mean for U.S. farmland values?  

Historically, there has been a somewhat inverse relationship between interest rates and farmland values. This means that when interest rates fall, farmland values tend to rise more quickly. However, when interest rates rise, farmland values tend to increase at a slower rate but not regress into a full decline. This makes farmland an attractive investment even in times of inflation, especially when compared to more reactive investments like stocks. While rising farmland interest rates may lead to a slower rate of value appreciation, farmland values are generally considered relatively stable and resilient over the long term—even in a high interest rate environment. 

Preserve American Farmland 

America lost 25 percent of its farmland since 1950 due to urbanization. Of that lost land, 4.4 million acres were considered “nationally significant,” meaning it was some of America’s best land for food and crop production. Supply of arable land per capita has declined by 0.5 to 2.0 percent per year over the last 30 years, making farmland an increasingly scarce resource.  

“Buy land, they’re not making it anymore.”

– Mark Twain 

Farm Property Loans Are the Gateway to A $1T Opportunity  

The average age of the farmer has been on the rise, increasing nearly 10 years since the first ag census to 57.5 years old in 2017. This realization means that nearly half of American farmland is expected to change hands over the next two decades. That could total as much as $1T in land sales—a 300 percent increase from the last ten years. 

All this land is about to be transferred, but few farmers feel like they can take advantage of it to expand their own operations. The past few years have seen high interest rates and input costs, limiting farmers’ available capital.  

When used strategically and from a lender who understands the unique nature of the industry, farm property loans can keep farmland in the hands of next-generation farmers. Farm property loans can help you protect your capital while seizing this record-breaking opportunity to build a more profitable operation. For instance, AgAmerica’s interest-only farm property loans can keep your monthly payment low so you can focus on investing in your new ground. 

Find the Right Farm Property Loan from a Lender Who Knows Ag 

As the agricultural land market grows to unprecedented levels, it’s more important than ever to partner with a firm that understands the potential (and risks) in buying farm property to ensure your long-term success.  

AgAmerica offers custom loans and financial expertise to help you seize the opportunity when it strikes. With freedom through optionality, we have a range of conventional and alternative financing solutions that can adapt to an ever-changing market. Our fixed rate loans can help you lock in a rate in a rising environment, while our interest-only loans can keep your payments low when you need to preserve capital and invest in your agribusiness.  

Contact us today to learn how we can help you achieve land ownership with our spectrum of farm property loans.

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