Wealth Podcast Post

Farmland Investing with Peter Badger

George Grombacher March 18, 2022

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Farmland Investing with Peter Badger

LifeBlood: We talked about farmland investing, how it works, why it makes sense, who it’s a good fit for, and how to get started, with Peter Badger, Agripreneur and Chief Strategy Officer with FarmFolio.  

Listen to learn it’s essential to trust, but verify!

You can learn more about Peter at FarmFolio.net, Facebook, Instagram and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review wherever you listen and subscribe as well. 

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, YouTube and Facebook or you’d like to be a guest on the show, contact us at contact@LifeBlood.Live.

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Our Guests

George Grombacher

Peter Badger

Episode Transcript

Come on

one life, this is George G. And the time is right look at today’s guest strong, powerful. Peter badger. Peter, are you ready to do this? I am ready, George, let’s go. Let’s go. Peter is an Agripreneurs Chief Strategy Officer at Farm folio. They’re an organization making investing in farmland easy. excited to have you on Peter, tell us a little about your personal life more about your work and why you do what you do. So I am a father to two teenage daughters, my partner Kiki, and I have she has two early 20s sons. So we do a lot of what we do for them, trying to be a good role model and other possibilities in life, make them independent adults, we’re at that stage. But outside of that myself and Kate, we love to travel and we invest in alternative assets have been burned a couple of times in the stock market dips. Nice. I appreciate that. So I think that if you’re like most folks, like me, you’ve been hearing over the past couple years that people have been buying farmland, and it sort of makes you scratch your head and you think okay, that’s interesting, I never really thought about that. And then you think about it, and you still can’t really get your brain around it. So break it down for us, Peter. I mean, you nailed it. So the reason I go into this crazy journey of farmland is because I spent 18 years in Wall Street, I was in the bubble, you know, stocks, bonds, mutual funds are lost 90% of my portfolio in the.com, bust, lost another sway than the global financial crisis. And I then went to Silicon Valley went through a full VC Series A Series B got acquired. And at the end of that journey, I was like, I do not want the assets that I’ve just spent eight years building to disappear due to sentiment based trading on Wall Street.

Peter Badger 2:03
And that was when I started reaching out to my peers, my network assets, or my, you know, Silicon Valley startup people who had like three or four acquisitions, and they’ve been through it, I said, What do you do to basically keep and grow your wealth. And they all said, we all make our money in private or public company stock, and then invest the gains in real assets, real estate, farmland, and other type instruments. And so then the question became like, Yeah, well, you know, I get real estate, but why farmland, and a couple and said, you know, the thing you don’t realize, you know, because we are the little people in reality, then we don’t realize is that, you know, the very high net worth individuals, I was told by a couple of senior asset management people that they hold between eight and 14% of their wealth in agriculture. And that because it’s, you know, intergenerational wealth, because the key to agriculture is that, you know, for permanent crops, you can plant a coconut tree, wait five years for it to produce coconuts, and it produces coconuts for 60 to 80 years, right. And so by owning agriculture, they’re not only passing wealth through.

And complete completely uncorrelated asset. And I mean, seriously uncorrelated? Because it doesn’t matter if real estate prices go up, people still need to buy food, you know, stock market crashes, you’re still getting a Corona with alignment at the end of the day, you know, so

it’s kind of one of those things, which, you know, when you when you finally find that out, you’re like, oh, yeah, I get it. And so, you know, to question George, how do you get involved in it? So I sat down, okay, thanks for telling me that that’s not very useful.

And then I went on this crazy. So Mickey, he’d love to travel, we love to invest internationally. So we spent the best part of three years going to, you know, Eastern Europe, Latin America, trying to find farmland investments, because ultimately, you can’t make money in the US. The yields are too low land, expensive. Labor is too expensive. The climate is a mess, especially on the West Coast. And generally, most farmland in the US is owned by very high net worth individuals, or very large private companies. So you can’t access it as an individual. And so you know, that’s what started our journey is how do I kind of think about and so I’m curious to know, from your perspective, George from the asset allocation, how do you view asset allocation your portfolio today? How do you view that for yourself?

george grombacher 4:40
Well, I think I think just traditionally we think about it like equities and fixed income and then alternative assets.

Peter Badger 4:50
And so when you think about the game has changed, you know, I’m early 50s feel like I’m 30 But I’ve been through 30 years of these cycles. And the old in the 90s, the 6040 equity bond portfolio has now become 9010, and even 100, zero, you know, bonds aren’t performing during the game changed for all of us. And therefore I’m down the alternative asset route, because I keep, you know, third in the stock market for liquidity. I put about 40 to 50% in the US real estate, and then a good portion of the remainder is in overseas agriculture. And the reason I do that is because stomach is gonna do it’s gonna do, you can’t control it, you have no control. us real estate is a steady Eddy, you get cash yields and appreciation. You know, it’s it’s equation driven, you know, if you buy the right property in the right market with the right fundamentals, right property manager, it’s a spreadsheet and equation, then, okay, we’re stood here today, I want to pass my wealth on to my next generation. And my worried about 30 trillion in debt. Yep, I am, I’m going to like completely change master allocation, because but no, but let’s take a portion of my asset allocation and find an asset class, which is not only not correlated with the all the other stuff I own, but it’s also overseas and outside the US dollar. And that’s why Kiki and I went on this crazy travel journey to try and find providers who offer agriculture as an asset to people like you and me.

george grombacher 6:32
Nice. All right. So you’ve got this, this immense amount of experience on Wall Street, you’ve you’ve worked inside the belly of the beast, and then you actually started and grew and sold an organization and then talk to smart people and they said, farmland, you set up all somehow and recognize that the United States is not necessarily going to provide that. So you and Kiki get on the plane and you start hopping around. That must have been a fascinating experience. I don’t even like how did you even know who to talk to, I guess, but then I guess what I want to get to is how, how is the deal structured? Who who owns what how do I how do I participate if I’m not a citizen of these places?

Peter Badger 7:21
Yeah, so you basically is a large English speaking expat contingent in every major foreign city. There’s always organizations marketing, your asset class, and you kind of like you know, so we go to Medellin, Colombia, you go to Panama City, and Panama, you go to, you know, Belize, Placencia Lima, you can just start going hitting the major cities and you always find somebody selling something. Now most of these things in the past were private equity, or you know, syndications. And so you would club your money together with 50 other people. And this local person, often a gringo as we call them, will be there with some local knowledge, maybe that marriage would family in that country, and they now speak Spanish and, you know, they find some land from some, you know, relatives and they start to plant a crop. And then they say, Okay, now let’s raise some money from us in a syndication basis and make this successful. Now, the reality is, is that, honestly, we lost that money in probably one of every two deals in a two year period. And that’s because I realized on this journey, it’s like, when you go into an asset class, because there isn’t the education out there like multifamily single family, you know, buying gold, silver, you could find education everywhere for this for free, YouTube, mentors, you name it, there’s nothing for agriculture. So I had to go through and learn that myself trial and error. And so I say I’ve had a an MV AG. And it took losing a bit of money to work out what was what. And I realized very quickly, actually, that people aren’t necessarily fraudulent or corrupt going into it. They just are fairly aspirational and believe they can pull something off which they don’t necessarily have the full background in doing. So anybody can go overseas, buy some cheap land, try and plant some crop and hope they’ll work out how to sell it by the time the fruit grows five years later, but honestly, I call this hope ag investing because you’re hoping they’ll work out how to do it. By the time the fruit gets produced five years from now, and I’ve just found this model to be pretty terrible. So our journey ended up actually with a company called font folio. I mean, I started investing in their deals in 2016 2017 2018. And what they we do differently inadequate my phone folio cap on from Peter and Kiki traveling south America. We basically reverse engineered it. We built a pack house for limes for him Since and then sent to all the Colombian farmers, South America, deliver your lines to our pack house door, will wash them sawed them Pathan and export them to the states will give you the double the price you normally would in the Colombian market. And they say, Okay, we’ll start delivering some, we start to pay them cash. And then we go around the US and talk to big retailers, the wholesalers and basically start to sell that fruit. And that means you taken away all the farm development risk, because the farms exits the producing lambs, you just pack it and sell them. And then what we do in the final stage of this has been going back and we buy the farms back from the farmers, we break them into individual parcels or lots. And we sell them as real estate to regular people like you and me. So this is non accredited, anybody can buy it. And so the way to think about this is from from a farmland ownership perspective with farm folio, instead of buying a plot of land with a single family rental, you get rental income, you’re buying a plot of land that’s being managed, the lines have been sold at Walmart, Costco, trader, Joe’s Albertsons, Publix, the major growers of the US. And there are 220 to 80 line trees on your land harvesting lines, year after year, you’re getting harvest income instead of rental income. That is the model. That is how we’ve actually built this upon foot. And that’s why I joined the company a year ago, having invested in our deals for five years. Right.

george grombacher 11:31
Nice. Okay. Well, that’s, that’s pretty cool. Congratulations on, on sort of figuring that out. And then structuring it the way that you did. So my experience was just use me as an example, I say, This is great. How do I how do I get in? How do I get started?

Peter Badger 11:51
Yeah, so find folio dotnet, slash George, head over there. Basically, you’ll you’ll see the farms currently offering and so the process is simple. Go to the website, look at the farms available, click through read about them. There’ll be a brochure, it’ll talk through the farmer ownership model, how it runs, distributions, financials for these farms. And basically, you can then just click on it and chat one of myself or the sales team will talk you through it. And you know, the price for farmland lot is different based upon tree age. The yield that’s happening based on entry age, the crop type, you know, coconut slimes, you got to choose the crop you’re interested in. And basically, you buy a farmland lots between 32,060 $5,000. And the goal really, is to get people a 12 to 18% annual cash yield, year after year for decades. Owning agriculture.

george grombacher 12:56
Nice. Okay, so I go to the site, I check out all the different plots, or is that the term? Yeah, lots of different lots of different lots that are available. They range roughly speaking from 30,000 to 65,000. And there’s information about why it is that a coconut tree is better than XYZ tree or whatever it might be in the current production, the age of all those things and the x. And what the hope is, or the desire is that you get a 12% annual cash 12 18% annual cash yield into perpetuity.

Peter Badger 13:34
Yeah, that’s it. And so it’s very straightforward. So the thing we’d like to say is, you know, you’ve got a portfolio, you know, don’t commit everything to farmland, I mean, it is an amazing asset class, but take a small portion, your asset allocation, you know, five 10% Just like your work, you know, put 5% in Bitcoin, trust me, you should be putting 5% in farm instead, because at least this isn’t volatile in that way, you know, so take 5% asset location by a couple of farm lots and add a farm folio to your portfolio.

george grombacher 14:07
So, so I am I pick out I pick out some coconut trees for $50,000. And I am buying that now from from your entity because farm folio acquired this from the local farmer. And then now I am taking ownership from farm folio.

Peter Badger 14:27
Correct. And then the key to this whole thing is that I’ve seen this phone line model work in the past some places where I lost lost money early on. The entire goal is that you shouldn’t be just farming your lot and receiving the proceeds of the harvest your lot. Farms are designed to be farmed at scale. So we farm the farm, as it was originally purchased at scale all the lots together. But you as a titled landowner are part of what we’re calling a cooperative or farm owners association. So you’re all together in this group, we farm it in its entirety. And let’s say as 100 Lots for your lot, you will get 100 the income minus 100, the expenses. And that way we farm at scale, the way farming is meant to be done. And we share in the proceeds of that activity through a third party file management team.

george grombacher 15:22
Got it? And that seems like an important thing, right? That, that there’s that and it makes sense that we’d all be there so that all of a sudden, the farmers don’t just, you know, decide to walk away, and then I just am owning a bunch of coconut trees and in South America.

Peter Badger 15:38
That’s right. So I mean, real estate, I tell people, you know, listen, if you decide to hire a third party property manager, your investment funds will live or die based upon the property managers performance. That is the biggest problem in real estate. And it’s the same in file management. And so what we do is with our, you know, we’ve got 155 people down there, and Columbia is one country. We have packhouse people, we have agronomists, we have, you know, administrative staff, we have a whole bunch of people who are responsible for going out and finding those high end multi generational farming families with the skills and the breadth to manage these farms at production scale we have so

george grombacher 16:21
nice. I can’t help but just ask the question, what was it like a building a distribution facility in Colombia, and then telling the United States Hey, I just built this big distribution thing in Colombia, I’m going to bring in fruit.

Peter Badger 16:38
So we built the pack house during the pandemic, amazing by the team because it shut down construction, Colombia, like everywhere else for three or four months. And we went live, probably October of 20. And we are now shipping, seven to 10 containers of Tahiti limes a week into Philadelphia, to be sold through all these stores, the retailers on the East Coast. And you know, we all know that number one exporter of 280 line from Colombia will add coconuts to that very soon. And yeah, I mean, it’s, it’s amazing because the retailers are looking for a steady supply. The thing that people don’t realize about agriculture, if they’re not in it is that if you think about it, Brazil, and Mexico are the biggest citrus providers in the world. All of the Mexican citrus goes straight into the states, all the Brazilian goes to Europe, but they are seasonal, have massive, you know, summertime produce, that we as American consumers, you make down Costco and Walmart, you’re not saying oh, let’s wait for the summer months to get those you know, Mexican lions. You say we’re in December, you know, for Super Bowl and all this other stuff that’s coming January. And so Colombia, we have different altitudes, and we have fruit production all year round because of it. So we’re able to actually supply seven to 10 containers right now easily to the east coast on a you know, 52 week basis. And that’s why it was easy to sell the major retailers on receiving our juicy Colombian loans.

george grombacher 18:19
Peter, people ready for your difference making tip? What do you have for them?

Peter Badger 18:23
Born upon my experience the past seven years in far flung lands. It is trust but verify. Shame on us. If we accept a nice glossy marketing brochure, and a tip from a friend or a family member or somebody we work with. Verify the data everything these people tell you in the marketing brochure. Go deep. Ask them questions. If you don’t know what the questions are, find someone who knows what questions to ask. Trust me, if you don’t go deep on question and marketing brochure, you’ve got a higher chance of losing your wealth. I think that is

george grombacher 19:01
great stuff that definitely gets a come up. Peter, thank you so much for coming on. I appreciate you and Kiki’s adventure and putting this thing together and now bringing it out to the world. That’s super exciting. How can people learn more? How can they get involved?

Peter Badger 19:15
Yep, so go to farm folio dotnet slash George, learn all about farmland ownership Made Easy. Our goal was to democratize farmland ownership. So anybody can buy a title business real estate with 200 Coconuts or land rezone? And yeah, and if you reach out to me, reach me directly, Peter at font folio dotnet. And I appreciate you having me on today, George.

george grombacher 19:38
Excellent. If you enjoyed this much as I did, so Peter, your appreciation and share today’s show with a friend who also appreciates good ideas, check out form folio dotnet and we’ll put the landing page in the notes of the show and get in touch and find out if it’s something that that makes sense for you. Thanks. Good Peter.

Peter Badger 19:56
All right. I’ll see you down in Colombia one day

george grombacher 20:00
done keep fighting the good fight we are all in this together

Transcribed by https://otter.ai

Thanks, as always for listening! If you got some value and enjoyed the show, please leave us a review wherever you listen and we’d be grateful if you’d subscribe as well.

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