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Farmland REITs - Rich people making bank on farms. Are these the stocks to buy now? - YouTube
Channel: Adventurous Investor
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welcome back to the channel everyone i'm
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skylar james and today
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i am filming from the beautiful
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agricultural neighborhood of lania poco
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i am choosing to film here today because
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we're going to be talking about
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farms and rich people like bill gates
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investing in farms
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so bill gates owns more farmland
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in this country than anyone else you
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might be asking
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shouldn't you be a farmer to own a farm
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it's a great question
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and the answer is no you can choose to
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invest
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just like bill and act as a landlord to
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farmers
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in fact when you include cash rent
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yields
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american farmland has appreciated in
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value
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every single year since 1991
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and at a whopping rate of 11 and a half
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percent not only is this a growth play
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in more ways than one but it also comes
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with
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dividends making this stable investment
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like
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gold bullion with yield today we're
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going to look at why farmland
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is such a great investment and how to do
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it
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the human population grows by six
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figures a day you'll hear this theme a
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lot in my videos
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i like to ask the question what do all
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these new people
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need and depending on the answer there's
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usually
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a good investing angle today's angle on
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population growth is
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farmland you already know what farms do
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but maybe you're thinking
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why should i invest in it it's simple
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good old-fashioned
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supply and demand we know that old
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saying
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buy land because they're not making any
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more of it well
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it's true there's a fixed supply of land
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and more specifically there's a fixed
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supply of farmland
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there's an important distinction there
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because not all land
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is suitable for farming think about the
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frozen tundra in siberia or
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rocky peaks in colorado these aren't
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places to grow corn or apples
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which brings us to point number two
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farmland
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as a specific type of land is actually
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shrinking
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it's happening for several reasons
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inefficient farming practices
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erosion over grazing but from an
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investment perspective
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what's most important to us is that
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supply is
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sure people are still born each day and
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they still require
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food there is a need a demand
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for productive farms and they need to
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eat
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every day three times a day
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as an investment farmland appreciates
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like gold
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but it has yield in that it generates
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revenue
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owning and leasing out farmland cuts you
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in on the farm's productivity
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you as the landlord receive rent in the
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form of dividends
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so not only is there a fixed supply of
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farmland
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but actually a dwindling supply coupled
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with a steady
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increase in demand every day three times
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a day
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and that's part one that's the why
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of holding farmland as an investment
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part two
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is the how how can i invest in farmland
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there are three different ways two i
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don't like
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and one where the porridge is just right
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the most traditional way to invest in
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farmland
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is to buy a physical farm quite
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literally buy a farm as if you bought a
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house or a condo
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why isn't this a good fit for everybody
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well for one it's illiquid
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henry david thoreau the recluse from the
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1800s heard of that guy
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he lived in a cabin cut off from all
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people and even he had
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the investing sense not to take on a
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physical farm
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plus buying just one farm isn't diverse
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because with
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one farm you're really going into one
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geography
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one climate one specific set of water
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risks
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and usually one farm grows one specific
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crop
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and a farm requires a big piece of
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capital to purchase
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billionaire investors well they create
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diversity by owning
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dozens of farms in their massive real
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estate portfolios
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most of us aren't there financially just
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yet
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the second way to invest in farmland is
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through
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investment funds only open to high
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net worth individuals and institutions
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now some of you watching
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no doubt do qualify for these but this
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means you're an
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accredited investor say that again
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accredited
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investor in the sec's eyes similarly
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there are private reits with
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minimum investments and long hold
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periods
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like this iroquois valley investment
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trust but
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we can do better than that that porridge
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is still a little too warm
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how well it's with publicly traded
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farmland reits
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real estate investment trusts reits as
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many of you
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already know are companies that exist to
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hold real estate
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then pay out their dividends or profits
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to investors
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currently there are only two publicly
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traded
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farmland reits farmland partners in
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gladstone
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land tickers fbi and land
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respectively these specialized reits
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hold a diverse portfolio of
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farmland made up of different crops and
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different geographies across the united
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states
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interesting reit side fact in the whole
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of u.s reits these two farmland plays
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together
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only equal point one percent
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of the ishares u.s reit etf
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by owning that big daddy etf you aren't
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really getting much exposure to the
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promised yields
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and outperformance of farmland looking
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at these charts
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we can see the stock price of these farm
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reits has run up in the last few months
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these prices more or less trace
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commodity pricing's equally impressive
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rise
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this is a common correlation between
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these two at a market cap of
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under 400 million for fpi i recognize it
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and gladstone land for that matter as a
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micro-cap investment
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these will tend to be riskier and
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possibly a little more volatile
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i'm not dismissive just cautious and
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want to highlight those traits
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so what does fbi hold they have an array
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of farms stretched across the country
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that's the diversity we identified a few
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minutes ago
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as vital for making farmland work as an
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investment
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gladstone similarly has a variety of
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farms in its portfolio
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different crops different states highly
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diverse when researching reits
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i'm normally asking a few questions
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what's the gist
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of the properties in play is this sector
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growing in importance
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or shrinking and what's the yield
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farmland reits
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are not that simple a farm on one side
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of the road
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might have soil strong enough to grow
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blueberries that can generate
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35 000 an acre upon harvest the farm
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across the street
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might only be able to grow potatoes at
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500
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an acre i'm not making this up this
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actually does happen
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as investors buying into these farmland
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reits
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requires a certain trust that the
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portfolio managers are doing their due
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diligence
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for example check out this property in
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the farmland partners portfolio
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i randomly chose this this fresno
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california area farm
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from the property list it's a
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three-piece lot
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the biggest piece is on floor avenue
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farm has almost
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500 total acres okay 40
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of the acreage is hanford sandy loam
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and 26 delhi loamy sand
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does that mean anything to you probably
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not
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you need to be an agronomist to figure
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these things out
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these are both types of soil by the way
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loamy sand and sandy loam
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each with specific properties that
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determine which
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crop is the best fit so farmland reits
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are not as simple as
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a warehouse reit i think with fpi and
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land
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i trust management with their
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acquisitions and trust the larger
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farm scarcity theme gladstone has a
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hundred thousand acres in its catalog
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farmland partners has 150 000
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both have shown they will acquire new
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properties
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as opportunities arise each of these
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reits
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pay a humble dividend 1.7 percent for
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fbi
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and 2.7 for land but i think the value
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of the underlying real estate will rise
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faster
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than other reits just as it's been doing
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for decades
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in the time it took for you to watch
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this video
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we lost 70 hectares of farmland
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and added 1300 people to our population
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preserving farmland will be vital to
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keeping all these people healthy
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and fed and that's why i think farmland
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partners
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in gladstone land are two companies
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worth investing in
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thank you for watching
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