Seventy deeded acres in one county, or a slice of eight hundred through a fund

Coming from zero here, so forgive the basic angle. If both options pay roughly 3 percent, and one of them takes 1 percent off the top in fees, isn't the fund starting a third of the way behind before anything happens? Or is the diversification supposed to make up that gap somewhere I'm not seeing?

The part that jumps at me is the operator. I've spent months reading about tenant screening for a single rental and the whole lesson is that one bad tenant undoes three good years. On 70 acres you have exactly one tenant. That's not automatically bad, farm operators with land nearby tend to stay for decades, but I'd want to know how long the current guy has farmed it and whether the rent has ever been renegotiated down.

Some vocabulary for anyone reading who hasn't seen these terms.

Cash rent is the fixed per acre payment a farm operator pays the landowner for the season, usually paid in one or two installments and set by written lease. The owner takes no crop risk and gets no upside if the harvest is unusually good. Crop share is the alternative, where the owner takes a percentage of the crop instead and therefore shares both the yield risk and the price risk.

The NCREIF Farmland Index is a benchmark that tracks the performance of institutionally owned US farmland, reported as an income return plus an appreciation return. It posted a rare negative total return in 2024 before stabilizing, which is why you see people in this room referring to farmland as steady rather than as a growth asset. Income returns on farmland have historically sat in roughly the 2 to 5 percent range, so most of the long-run return has come from the land value itself rather than the rent check.

On the choice in the post, the structural difference is control and liquidity. Direct ownership means you sign the lease, you decide about any solar or carbon program, and you decide the hold period. A partnership interest means a manager makes those calls and there is usually a lockup. Fee terms, promote calculations, and what happens if the sponsor wants an early sale all live in the operating agreement, and a securities attorney reviewing that agreement is the right person to tell you what you're actually agreeing to.

I look at rural ground at much smaller price points than this and the thing I'd weigh heaviest is drive time. A county you can reach in two hours means you can walk the field after a wet spring, meet the operator at the co-op, hear when the neighbor is thinking about selling. That local information is worth real money and it's the one thing a fund can't hand you. If your 70 acres are eight hours away, most of the direct ownership advantage evaporates and you're just a landlord with paperwork.

Everyone underrates the admin. My small portfolio taught me that the second and third property don't cost twice the attention, they cost about four times. One farm lease is genuinely light work, an annual invoice and a tax bill. But you also carry the insurance, the tile repairs, the fence, the property tax appeal when the assessor reclassifies something. It's small in dollars against $620k and large in the number of times a year you have to think about it.

Direct, and I'd say that even at a lower going-in yield.

The reason is optionality on the land itself. Over 20 years the things that change a farm's value are rarely the corn price. It's a solar developer needing interconnection near a substation, a wind option, a carbon program, a road going through, a neighbor who has to sell and offers you first refusal. Every one of those decisions belongs to whoever holds the deed. In a fund, the manager captures those and you get your pro rata slice after the promote.

meridian, the fee drag is real but it's the smaller of the two costs. The larger one is that a fund will sell when its hold period says so, and land rewards people who never have to sell.

I'll be the dissent. A 3 percent income return with a ten or twenty year horizon is a return I can't relate to at all. I turn deals in months on thin margins and I'd rather have the money working. If the answer to "why hold this" is "appreciation eventually," that's a bet on the price of dirt, and you're paying tax and management to wait for it.

flint, that's a fair objection but it's an objection to the asset class, not to meridian's question. Farmland isn't competing with your flips. It's competing with bonds and with the boring part of a portfolio.

meridian, the comparison I'd run is against my small multifamily. My units yield better and demand about forty hours a month. Farmland yields worse and demands almost nothing. Once I priced my own time honestly, the gap narrowed more than I expected.

The thread mentions farmland had a negative year in 2024 and then recovered, and I've gone back over it a couple of times. Does that mean the land price fell, or that the rent fell? I can't tell which part of the return went negative.

juniper, it was the appreciation side going negative enough to overwhelm the income, not the rent stopping. Rent is the stable part.

meridian, from the renovation world I'll add one thing arbor touched on. Drainage tile is the scope creep of farmland. It's invisible, it's expensive, and a seller has no obligation to know how old it is. I'd budget for a system that's older than the disclosure suggests.

I've been stuck in analysis on a much smaller version of this for a year, so what I want out of this thread is a rule. Something like: direct if you can visit it twice a year and read a soil map, fund if you can't. Is it really that simple or am I just trying to make it simple so I can stop reading?

Practical question from the trades side. On direct ownership, who fixes what? If there's a grain bin, a well, a culvert under the field road, is that on the landowner or written into the lease as the operator's problem? That split is where I'd expect the surprise costs to live.

Running solder's and ember's points as numbers, since nobody has.

$620k at a 3.0 percent gross income return is $18,600 a year. Direct, subtract property tax (call it $2,000 to $4,000 depending on the county and any agricultural use assessment, which varies by state), insurance, and either your own time or a farm manager at 6 to 8 percent of gross rent. If you self-manage you're netting something in the 2.4 to 2.6 percent range.

Fund, subtract 100 basis points on $620k, so $6,200, which takes 3.0 down to about 2.0 before the promote on exit. The fund's property level costs are already inside its reported number, so the honest comparison is roughly 2.5 net direct against 2.0 net fund, plus a promote that only bites if it works.

Half a point a year on $620k is about $3,100. Over twenty years compounding that's real money, and it's the price of not having to be right about one farm. I don't think the answer is obvious. I think it's cheaper than most people assume to buy the diversification, and more expensive than most people assume to give up the solar option orchard mentioned.

The farm management piece ledger priced is an actual service business in these counties, and the good ones do more than collect rent. They rebid the lease, they push for tile repair, they document yields for the eventual sale. If meridian goes direct and hires one, the effective fee gap against the fund narrows a lot, which maybe means the real question is how much you enjoy the work.