GI122: Investing In Farmland via Crowdfunding with Brandon Silveira

Brandon Silveira is a fourth-generation farmer and real estate investor. He has bought and sold millions in real estate and currently manages over $100 million in assets. Brandon’s specialty is in farm management, land acquisition and a variety of farm and land financing strategies.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Brandon Silveira. Brandon is a fourth-generation farmer and real estate investor. He has bought and sold millions in real estate and currently manages over $100 million in assets. Brandon’S specialty is in farm management, land acquisition and a variety of farm and land financing strategies. So thank you so much for being on the show. Brandon,

Brandon:
Thank you. I appreciate it.

Charles:
So you have a very interesting asset class to us, to our listeners, and I want it to kind of break down how you got into it and your background both personally and professionally, prior to being involved in real estate investing.

Brandon:
Sure. well, you know, we are like you said, fourth generation farmers, so I’m kind of born into it, I suppose went to, went to college and got an agricultural degree and came back and started working with my dad, doing some custom farming things for other farmers and started buying land and selling land and just getting to know the intricate details of farmland and in different farms and whatnot. So that’s, that’s kinda how it got started. You know, I got really interested in the investment of agricultural and farmland cause it’s very unique and it’s, it’s a, it’s a great investment. It’s, it’s very rewarding. As far as, you know, what you’re growing and, and feeding, you know, the world is it’s it’s makes you feel good kind of investment as well. So I really dug into it and really enjoy it.

Charles:
Awesome. So you obviously four generations into this and what was your first real estate investment and what was it and how did it turn out?

Brandon:
Let’s say my very first real estate investment was actually a a rental house that I bought I bought with money that I made playing in a band, I believe it or not. And then I sold the rental house. Six months later, the market was going crazy. This is like 2006 seven, right. And, and then I did a young farmer rancher alone and which is available through the USDA, which allows a lower down payment on a ranch. And I bought a small ranch with, with the proceeds from that. And it’s, I mean, just kind of started from no money to a little bit of, you know, I can’t remember what I made off that house, maybe $20,000. Right. And, and the, and the USDA da loan allowed me to, to buy that piece of property and just start growing from there. It was pretty quick.

Charles:
Awesome. Awesome. So give us a little background on your current business farm funder and what, what do you guys do?

Brandon:
Yeah, so farm funder is is basically crowdfunding farmland. So we’re just doing fractional ownership in, in farms because historically farming is very capital intensive. It’s expensive to buy a farm. It’s expensive to develop a farm. And, and, you know, long hold periods, you know, especially if you plant a permanent orchard, you may not have a cash yield for five or six years sometimes. So there’s this barrier of entry. I think where a lot of large institutional investors had started to come into farmland, but you know, if you wanted to get in at a lower amount, you know, under $5 million or under even a million dollars was just, you know, the, the opportunities weren’t as available. And I really saw a lot of deals that were available that weren’t getting picked up. So you’d see a 500 acre ranch sell, but you wouldn’t see a 80 acre ranch.

Brandon:
So so, you know, I knew people were interested. I know I knew people wanted to buy farm land. And, you know, when I told people I was a farmer, you know, other investors and other people would say, Hey, this is, this is amazing. I wish I could farm. And it really just kinda morphed into, well, you know, these farmers need capital. These investors wanna invest in farmland. And, and I just, I just thought that it would be best for the, you know, the farmer and the family farm and a cool way to get people into this asset class for a lower amount. So, you know, farm funder, you can invest in one of our farms for as little as $10,000 and up. You know, we have a lot of investors that invest more than that, but we also do a a farm finder program where if you’re a larger investor and you want to own a farm on your own and, and, you know, you’re specific to a commodity or, you know, you want a more personalized farm that yours we’ll go out and we’ll find the farm for you.

Brandon:
We’ll buy it for you. We’ll, we’ll run it, we’ll manage it for you and give you all the proceeds you know, from that farm, but it’s your farm. So if you decide you wanted to sell it tomorrow, you could sell it tomorrow. So,

Charles:
Oh, interesting. That’s interesting. So I want to kind of go through why farmland is such a solid investment for real estate investors that POB probably have never heard of it. And they’re interested in diversifying their own. A couple of facts I found from your website, farming terms have average more than 12% since the great depression and the U S loses 500,000 acres of farmland every year. So that’s, I mean, that shows that you know, the, the product out there is diminishing and showing that it looks like it has very solid returns.

Brandon:
Yeah. Returns have been good. You know, over the long run. One thing I think that investors need to know is that, you know, there are these small cycles where, you know, farm, farm returns go down, but then they peak up, you know, as, and they’ll go down and they pick up and it, it takes, you know, anyone who wants to get in farming for a year, a couple of years or something like that. I would just say, don’t do it. It’s not, that’s not going to work. You know, you really gotta hold on. We prefer 10 years or longer and you know, we, you, you want to ride out the short cycles of, of commodities, but yeah, I, I think that, you know, farming has historically been a great inflation hedge. You’re, you’re producing a product, it’s a hard asset, right.

Brandon:
And the hard assets as you’ve seen with the excessive amount of money that’s going around have been peaking, you know, it’s, it’s been kind of crazy. And then, you know, when the dollar gets weak and you see that inflation, the, the commodity that you produce, those prices tend to go quite a bit higher with inflation. So I think that’s, you know, one of the reasons why farmland has been such a good investment over time but it’s, it’s it’s it’s historically a safe investment if you don’t over leverage yourself, leverage in a farming operation. So if you, if you do apartments or anything like that, a 70 or 80% leverage, maybe something that’s common we wouldn’t recommend anything ever over 60 and for our investors, if we, if we leverage something we want to be in that 40 to 50%, mark 40 is really, really a good a good mark that, that way we don’t have to ask for capital calls if we have a bad crop year. So that’s kind of where we’re at.

Charles:
So kind of see what the whole process looks like. So what types of farms are you guys looking to acquire and are there specific ones in specific areas of the country?

Brandon:
Yeah, so we, we want to focus on a little bit higher of a, of a cash yield. So if we’re not developing a farm which would be buying open land and developing it to a pistachio or an almond orchard, or some sort of a nut crop orchard, we want to buy an existing orchard that has a decent cash yield. And then, you know, we’re trying to realize that appreciation of the land as well. We, haven’t been focusing on row crops because, you know, the corn and soybean market, which is finally turning around now, but have been somewhat stagnant. So the, the, the cash yields have been sort of low and we want to keep them up. It’s I don’t like putting things on the platform. That’s a 2% or 3% cash yield. We want to try and get it up to, you know, six or 8% cash yield.

Brandon:
And then, and then have that appreciation of the orchard that we’re going to realize and try and get those investments up to a 10 plus a return. Ideally you know, so that’s kind of what we focused on. So mostly we’re in, we’re in California. We focus mostly in California. We’re looking on some other deals right now at a state. But they’re also permanent crops permanent plantings that are out of state. But we really like permanent plantings because they just seem to be strong. You can, you can take advantage of the market when the demand goes up. You know, if the demand goes up for say an almond almonds around the world, you can’t plant them and have a crop in 30 days, you’re going to wait four or five years. So, you know, there’s a, there’s a huge benefit to capitalizing on owning and producing, not crops when that demand goes up. So we, you know, that’s, that’s what we’re trying to do in the long run.

Charles:
How do you guys usually find your farms?

Brandon:
It just depends. Some are pre-funded, you know, we’re, we’re looking for anything that’s off market. Eh, some stuff is coming to us. Sometimes we’re searching out, looking for land and good water districts land that maybe we know the farmer wants to sell through word of mouth. Some stuff we do find through, through brokers. It’s, it’s, it’s, there’s such a demand right now for farmland that it’s, it’s not if you see something listed, it may be overpriced or probably is overpriced. So it’s, it’s a real game of trying to negotiate that price down or finding something that’s not listed. But mostly it’s through a network of connection of different brokers and, and, and word of mouth and knowing other farmers. Interesting.

Charles:
Interesting. So when how’s the value created when purchasing a farm, are you changing crops? Are you upgrading irrigation and other things on the farm?

Brandon:
It could be, it could be all of the above. So you know, we’d like to find young trees that are on the cusp of producing. So you usually can get those at a little bit better of a discount because they’re not fully in production yet, so you’re not getting that higher cash yield. And you know, we, we, we put a capital into the farm for, you know, two years, three years before we get to a full production when we get to full production, we’ve created that value in that farm. And, and yeah, like you said there’s, there’s, there’s permanent orchards that are flood irrigated that we can put on drip systems and save on save on water costs, things of that sort. You know, there’s you know, one thing I really like is finding a farm that say it’s a hundred acres and 50 acres are in a PR or producing trees.

Brandon:
And the other 50 acres is open ground. We can develop that and add value by planting an orchard and bringing it to a production. But then we also get the cashflow from the producing trees and we have really good depreciation, so we can appreciate a lot of these producing trees right off the bat. So you, you have a good tax benefit, but then you also get a a cash dividend at the end of the year when you sell the crop. So it can be pretty, pretty fun.

Charles:
Interesting. So what’s to normal timeframe on a normal farm investment from acquisition to the store to distributions. And as you said, I imagine there’s a, the majority of it comes one time throughout the year, but how does that usually work?

Brandon:
Yeah, so you know, if we, if we put something on the platform and we, we once we close escrow on a farm, it all depends on, you know, the time of the time of year, right? So if you, if you buy something in July, but when you close escrow, are you buying the crop that’s on the tree, are you not buying the crop of straight? So you might actually buy something in July, but you don’t take possession of it until December. So you won’t have a cash return for another, you know, say a year and a half. We try not to do those. We try and, you know, negotiate buying the crop that’s on the tree. So we harvest that crop and get a cash dividend to the you know, to the investors as soon as we close escrow. But it’s about once a year. We, you know, depending on what the market’s doing, it could be, we hope for January, but we’ve held nut crops into February and March and even April. So you’re looking in that first to second quarter after the first of the year that you’re going to be paid for the crop the previous crop year.

Charles:
Interesting. Okay. And is like, how are you minimizing risk and protecting capital? Like what type of strategies is there insurance that goes with it? Is there anything else like that?

Brandon:
Yeah, so luckily farmland has a crop insurance, so we’re always, we’re always buying possibly the maximum possibly around the maximum we can, you know, we price it to where we think the orchard is is going to produce. And if we have any what our inputs in that orchard are going to be, but we are lucky to have a a federal crop insurance program. So we put everything in the crop insurance, and then, like, I would say before we try and hold low to no debt. So our, our previous two offerings, we actually have no debt on, on those offerings. So that just, you know, any kind of wild swings, we know that, that we don’t have this large land payment that we have to make. So those two, and then, and then, you know, just good care of the soil, always making sure that we’re doing whatever the crop needs to to thrive.

Charles:
Awesome. The, you talked about tax we love tax breaks here as real estate investors, but tell me about when you do have financing on some of the properties, what what does that look like? And where’s that coming from? Is it coming from a government backed agency? Is it coming from a local bank?

Brandon:
It just depends who has the better rate at the time? So w there is a farmer Mac product out there, and a farmer Mac will guarantee 80% of the loan to the bank who underwrites that loan even, but it’s 80% of whatever the bank decides. So it’s probably, let’s just say a 60% loan to value. And the, and the farmer Mac will we’ll have you know, guaranteed 80% of that 60%, if that makes sense. We’ve done, we’ve done quite a bit under that under that model. And there’s also the the, the federal land bank program, which was enacted by Congress many years ago. And it’s, it’s sort of a co-op. So when you, when you, when you buy through this this bank, the federal land bank, you become a member of the co-op, so you get dividend payments back, and they’re very competitive. And, and one thing I like about the, the, the land bank loans is they’re just, that’s all they do is is agriculture. They do nothing other than agriculture, livestock, dairies. So they, they get it and their underwriting is good, and they understand how to underwrite a farm loan when, when some other banks may or may not understand, or may not even want to. So those are our go tos.

Charles:
Nice. I liked the idea of having very little, if any, leverage on it and going long-term. So what is the exit strategy with these, with these investments? Is it that you’re holding it for 10 years, then you’re selling it, are you holding it for 10 years and holding it for even longer than that for cashflow? And usually what are you guys, what is your plan from the beginning?

Brandon:
So depending on what we invest in, we have a set exit period. So for example, we bought we bought a young almond orchard, and we have a ten-year exit period, and we want it, we put seven to 10 years because we want to have that sort of, we may get out if the market’s good and you’re seven, and the appreciation is great. We may want to get out. If it’s not good that year, maybe we saw a dip in commodity prices. We may wait until you’re eight, but we want to have a defined exit period where we just sell the farm completely and move into something else. Now we do have some development opportunities that we’re developing from scratch. So we’re putting some pistachios in now and the pistachios not produce until, you know, you’re six, seven and eight when you get to a full production.

Brandon:
So you’re holding onto a lot of cash, but the appreciation of these pistachio orchards is, is, is very good right now. So we’re buying the land at a good price for putting the inputs in, to develop the orchard and holding onto it you know for until year five. And then we’re either going to sell the orchard, or we’re going to give the owners of the orchard, an opportunity to stay in at the appraised value, more exit at that appraised value. So if they want to stay in, they can they want to exit they can get out and, and realize all that appreciation. So we, we try and structure it. So there’s options. If it’s a really, really good investment and we think pistachios are gonna stay strong after they’re producing, then we you know, we would say, Hey, Hey, we think you should stay in. This is going to be a great cash yield, but if they don’t want to, we give them the option. And we’ll let other investors buy that, share of that orchard at the appraised value if they, if they liked.

Charles:
Interesting. Yeah, that’s a, that’s great. I usually see that where some, some groups like will allow some of their shares to be sold, but I always tell people, Hey, you know, you’ve already been in for the risky part now, you know, as the longer you own this, the less it’s going to be. Right. So it’s something that maybe you think twice you know, it’s a possibility, but maybe you think twice before you actually do that. But interesting. So what do common, what are common mistakes that you see that maybe other farm real estate investors make?

Brandon:
I think right now you know, w water is, is key. So if I see any mistakes right now, it’s, it’s, it’s, it’s planting in areas that does not have sufficient water or getting too small of a ranch where the depth of water, if you have to drill a well or something like that is very deep and it’s very, you know, it can really mess up an investment. So I mean, if I see any of these mistakes that it’s usually around water, or it’s usually over overpriced, I mean, I see when you have sort of a frenzy which has actually been a little bit better in the last year, but we’re really starting to see it kind of pick up right now. But you, you know, we, in, in the past, you’ve seen people just pay astronomical amounts for land, which, you know, now may not be okay, but, but they didn’t get to see that appreciation you know, five or six years ago, because what they paid for the land is what it’s worth today. And I see a lot of those happening. So I think you have to buy right, and, and make sure that you have enough water, the, for the, for the long run,

Charles:
When you’re see you, you plant those pistachios and go six to eight years, what kind of maintenance is happening in the first, other than watering, obviously, but in the first few years on that, and is there a large team that’s required onsite for that?

Brandon:
So there’s a, it’s not terrible, but there’s, there’s considerable amount of maintenance. So, you know, we’re, arrogating mostly, we control fertilizers and PEs, you know, so we’re gonna, we’re gonna take care of any type of insects that might be bugging the trees. We’re going to prune the trees to get to you know, the shape that we want and, and, and, and maximum production. And, and, and you wouldn’t believe when you’re, when you’re farming an orchard, all the little things you wouldn’t even think about. For example the coyotes could come through and eat the lines on the on the drip system that we put in. Cause we put drip emitters at each tree to save on water and, you know, things like that. So it’s just general maintenance that, that we’re, that we’re doing.

Brandon:
It, it does require a you know, quite a bit of a tractor work and, and labor but you know, we’re, we’re working in you know, economies of scale here. So we’re taking care of a lot of land w you know, we’re hiring crews that for example, to prune our pistachios that are pruning 20,000 acres. So they come through, they prune our pistachios in a day, they’re out, they go to the next the next farm. So it’s, it’s, it’s a lot of work, but it’s very manageable. When you’re, when you’re in it,

Charles:
Is there any, like, do you guys do anything like wine vineyards or anything like that out being in California?

Brandon:
We don’t offer anything currently. The wine market has not been great lately I think a little bit of over production of wine and, and, and didn’t see some of the demand that we thought was coming, but I think it will be a lot better in the future. But we personally have not done any on farm funder. I personally have some vineyards and they’re okay. You know, they, they have not produced as well as the, as the nut crops have here, here in California. Now I’m, I’m also speaking of certain regions you go to Napa the completely different you go to the Paso Robles area and depending on if you’re what region you’re in, in Paso Robles on the west side or the east side, and the, the prices of grapes are completely different. So it’s very, you know, I’m all these micro-climates that are priced accordingly, right. You know, according to the quality. So it’s a, it’s a whole different game. I would love to put some really cool vineyards on the platform, but we just haven’t found anything that’s worked yet as I think there’s a, an emotional aspect to vineyards and wine, but I don’t want to, unless I know I don’t want to put the risk up there, you know?

Charles:
Yeah. That’s, that’s awesome. It’s just interesting to to see, cause you, you go to these places and you see these vineyards and stuff, and you, you just wonder as a, you know, as an investor in other parts of real estate, kind of how this works and what kind of margins and how, I mean, how you do any of this, you know what I mean, how you’re placing anything. So it’s very interesting, but what do you think are some of the main factors that have contributed to your success, Brandon?

Brandon:
Passion. I mean, it’s, it’s, it’s, it’s you know, I, I love it. You know, when, when you, when you have nothing to do on Sunday, you go to the farm and, and you, you look around and you see what’s going on. So I think that’s probably the number one reason is you have to really enjoy it, especially in the agricultural world, you know, at times it can be unforgiving, you know, but it’s it’s, it’s really a cool, cool occupation being whether you’re, you know, you’re buying or actually farming or how you’re, how you’re doing it, but that’s, that’s, I’d say that’s number one.

Charles:
Interesting. Yeah. Unlike other real estate investments the people that, what you’re dealing with everyday is not people and not tenants. So that’s actually kind of, that’s a nice change from that. So how can our listeners learn more about you and your business, Brandon?

Brandon:
The best way would be to go to the website, go to a farm funder.com and, and there’s no E in there. So that’s F a R M F U N D r.com. Send us an email@infoatfarmfunder.com. We’re here daily. So we’ll, we’ll any questions you have about anything we’re doing or just in general? You know, also when we have investors, we encourage them to come out and take a look at the ranch. We’ve had people come by and take a look at not just their ranch, but hop in and do a tour of just all the different commodities that are growing around here. So we, we want to make sure we can accommodate you know, anybody in that way. They want to come out and take a look. Cause it is pretty cool.

Charles:
Yeah, it sounds awesome. So thank you so much for being on today. I’ll put all those links into our show notes, and I’m looking forward to connecting you here in the future and hopefully out I’m one of the ranches.

Brandon:
Thank you. I appreciate it.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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Links and Contact Information Mentioned In The Episode:

FarmFundr

About Brandon Silveira

Brandon Silveira is a fourth-generation farmer and real estate investor. He graduated from California Polytechnic University San Luis Obispo with an agricultural degree. After graduating, Brandon started his career in the agricultural industry, and has experience managing and farming a variety of crops.

Brandon has bought and sold millions in real estate and currently manages over $100 million in assets. Brandon’s farm management company was recognized in 2012 for achieving over 900% growth, and was listed on the “INC. Magazine” list of fastest growing companies at number 701. It was the only agricultural company on the list.

Brandon’s specialty is in farm management, land acquisition and a variety of farm and land financing and strategies. His passion is to bridge the gap between the farming and investors. Brandon launched FarmFundr in pursuit of that passion.

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