Reviewed by Aug 26, 2020| Updated on
Investment farm is simply a term used to indicate the farmland invested into by any investor, including its maintenance. Popularly, these are operations carried out solely to earn profits or tax planning done to reduce the tax burden of such investor.
Understanding Investment Farm
Investment farm is invested in by those persons who ideally do not stay or live on the premises as his/her primary residence. They, in turn, will hire workers to manage their farms and also to conduct agricultural operations or activities such as farming, cropping and harvesting.
It has been observed that investors grow cash crops which are sold as commodities. Some of the typical cash crops include livestock such as hogs and cattle and plants such as soybeans, corn, wheat, and cotton. These are used as inputs in various industries. They can have multiple uses on being processed as a primary product and by-products too.
Agribusiness is a business sector that is depending upon innovation and technology for farming and farming-related activities. Hence, an investment farm is one of the aspects of agribusiness.
In recent times, climate change is posing as a challenge to companies in the agribusiness. Further, there is farmland REIT (Real estate investment trust) formed for like-minded people interested in investing and making returns in investment farms but do not have deep pockets. Here, many such people come together can invest in the farmlands and its operations.
Factors to Consider
Some of the factors to be considered for deciding whether or not to invest in investment farm are as follows:
- It is a capital-intensive investment option since huge capital is invested in land and to set up the farm.
- Operational expenses are another factor that must be considered.
- Maintenance costs and return on investment depends upon the region and its climatic conditions and stability thereof, where the farm is set up.
- Equipment costs may or may not be there depending upon whether or not there are subsidies received by the Government.