Three Ways to Add Land to Your Portfolio
One of them works much better than the two others.
One of them works much better than the two others.
Land is one of the best financial assets.
It is scarce, in limited supply, tangible, uncorrelated to the stock market, and no one can steal it from you.
In this article, we discuss how retail investors can get exposure to land.
1. Real Estate Investment Trusts
A real estate investment trust (REIT) is a company that buys and manages real estate with the money that a group of investors pools together.
The REIT subsequently distributes the rent from the real estate it bought as dividends to its shareholders.
Some REITs are private and demand a minimum invested sum to become shareholders. Other REITs are traded on the stock market and are easily accessible to retail investors that wish to diversify their portfolios.
There are, however, several problems with REITs.
First, most of them concern actual real estate (offices, apartment buildings, malls, data centers, etc), not land.
There are almost no REITs specialized in farmland only.
Out of the 250+ active REITs in the US, 2 contain some farmland.
These are Gladstone Land (LAND) and Farmland Partners (FPI).
In the EU, there are 151 REITs, and one of them only is dedicated to farmland (Advanced Terrafund).
The second problem is that investors in REITs don’t have any control over what the REIT buys and sells.
Unless they are major shareholders that can influence the decision of the REIT board, they’ll have to contend with whatever the REIT invests in.
The third problem is that if the REIT is bought on the stock market, it will invariably suffer its swings. While it’s interesting to buy discounted REIT shares, it’s much more annoying to sell shares at a loss.
If the REIT is private, there may be some conditions regarding the sales of the shares, which means it is not as liquid as it ideally should be.
2. Buying the Land Itself
Retail investors can invest in land by buying it outright. The advantages are that the investors can use and enjoy the land, and choose the land they want to invest in.
There are, however, a few disadvantages.
The first one is that it’s a slow process. Investors must find a land management company, research which lands are interesting to invest in, visit the land, then sign a deed of purchase.
The land is eventually transferred to the investor after a visit to the notary.
The second problem is that buying land demands minimum knowledge of the legislation.
Third, it’s expensive. The number of intermediaries, namely the seller, the buyer, the land management company, and the notary make buying land pricey.
Fourth, buying land demands huge sums of money. Investors must de facto invest at minima €7000 to buy a plot.
Fifth, the land must be managed or at least watched over to make sure no one else uses it for their own purpose.
Unless retail investors are willing to invest time and effort, buying the land directly is not a great solution!
3. Using LandEx
The last (and best) way to invest in land is through LandEx, for a variety of reasons.
First of all, LandEx only offers high-quality lands that have high chances to appreciate in the future. Our team is constantly looking for appreciating plots that will bring our investors great returns.
Second, investors have the freedom to choose which land they want to invest in.
Third, shares in the land can be bought and sold in our secondary market at any time. As a result, investing in lands on LandEx is much more liquid than buying the entire plot.
Finally, signing up and investing on LandEx is entirely free and fast. Sign up, charge your account, and begin investing in minutes.
Conclusion
There are three ways to invest in land.
Real Estate Investment Trusts
Buying the land
Investing through LandEx
Each of these options has its advantages and disadvantages.
LandEx was created to help retail investors invest in land simply; benefit from the upside of investing in land; and not having the hurdles that go with owning the land.
Sign up for LandEx today, and begin your land investment journey.
The content LandEx’s blog is for informational purposes only, you should not construe any such information or other material as investment, financial, or other advice. Nothing contained on the LandEx Medium blog constitutes a solicitation, recommendation, endorsement, or offer by LandEx or any third party service provider to buy or sell any financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.