There are four practical ways to invest in a farm: buy shares of agricultural companies or ETFs, buy into a farmland real estate investment trust, take a fractional stake through a crowdfunding platform, or purchase farmland outright. The national average for farm real estate reached $4,350 per acre in 2025, so direct ownership is capital-intensive, but the other three routes let you put money into agriculture for the price of a single share.1USDA National Agricultural Statistics Service. 2025 Farm Real Estate Value by State Each option has a different profile for liquidity, taxes, and how involved you need to be.
Agricultural Stocks and ETFs
The simplest entry point is the public stock market. Companies across the agricultural supply chain trade on the major exchanges: seed and biotech developers, fertilizer producers, equipment manufacturers, grain processors, and animal health firms. You buy shares through any brokerage account and can sell them the same day. That liquidity is the main advantage over owning land, where a sale can take months to close.
Exchange-traded funds bundle multiple agricultural companies into a single ticker, spreading your money across a basket that tracks an agricultural index. Some funds focus narrowly on crop inputs; others cover the full chain from seed to grocery shelf. Expense ratios and holdings differ, so compare a fund’s actual portfolio against what you want exposure to before buying.
The trade-off is that you’re investing in companies that serve farming, not in farmland. Returns track corporate earnings, commodity prices, and broader market sentiment. You won’t capture land appreciation or lease income the way a direct landowner would.
Farmland REITs
Farmland real estate investment trusts own large portfolios of agricultural acreage and lease it to professional farm operators. Your return has two parts: rental income the trust collects, and appreciation in the land itself. The trust handles the leases and the land, so you get real estate exposure without ever negotiating a contract.
Federal law requires a REIT to distribute at least 90 percent of its taxable income to shareholders as dividends each year, which is why REITs are popular with income-focused investors.2SEC.gov. Investor Bulletin: Real Estate Investment Trusts (REITs) The shares trade on public exchanges just like regular stocks.
How REIT Dividends Are Taxed
Most REIT dividends are ordinary income rather than qualified dividends, so they’re taxed at your regular income tax rate rather than the lower long-term capital gains rate. The Section 199A qualified business income deduction lets eligible taxpayers deduct up to 20 percent of qualified REIT dividends, which softens that tax hit.3Internal Revenue Service. Qualified Business Income Deduction The deduction was originally set to expire after 2025 but was made permanent by the One Big Beautiful Bill Act signed in July 2025. For the REIT dividend portion, the deduction is not limited by W-2 wages or property basis, which makes it more straightforward to claim than the general QBI deduction.
Farmland Crowdfunding
Crowdfunding platforms let you buy a fractional stake in a specific farm or project. Unlike a REIT, where you own a slice of a diversified portfolio, crowdfunding lets you pick individual properties and target a region, crop type, or farming strategy. The platform handles the legal structure, usually by creating a separate LLC for each investment that holds the title or a leasehold interest.
Accredited Investor Requirements
Most farmland crowdfunding offerings are limited to accredited investors. The SEC defines an accredited individual as someone with a net worth over $1 million (excluding a primary residence) or annual income over $200,000 individually, or $300,000 jointly with a spouse or partner, for each of the prior two years with a reasonable expectation of the same in the current year.4U.S. Securities and Exchange Commission. Accredited Investors Certain professional licenses, including the Series 7, Series 65, and Series 82, also qualify you regardless of income or net worth.
If You’re Not Accredited
Regulation Crowdfunding (Reg CF) opens some offerings to smaller investors. Under Reg CF, a company can raise up to $5 million in a 12-month period, and non-accredited investors face caps on how much they can commit across all crowdfunding offerings during that same window.5U.S. Securities and Exchange Commission. Regulation Crowdfunding Those caps are tied to your income and net worth, and the platform must enforce them before processing your investment. Not every farmland platform operates under Reg CF, so confirm the offering type before assuming you’re eligible.
The biggest drawback is illiquidity. Unlike REIT shares, you generally can’t sell your position whenever you want. Positions are often locked up for five years or longer, and there’s no guarantee of a secondary market when the term ends. Only commit capital you can afford to leave in place.
Buying a Farm Directly
Direct ownership gives you full control over the land, the operation, and the long-term strategy. It also carries the highest capital requirement and the most responsibility. The national average for cropland specifically was $5,570 per acre in 2024, though prices swing dramatically by region. Prime Iowa farmland can run well above $10,000 per acre, while rangeland in parts of the West may sell for under $1,000.
Documentation and Due Diligence
Before making an offer, gather several categories of information about the property:
- Legal land description. The surveyor-prepared document defining the exact boundaries. It’s different from the street address and is the description used in the deed and the purchase contract.
- Soil quality reports. County soil surveys from the USDA’s Natural Resources Conservation Service are free and widely available. A private soil test will measure nutrient levels, pH, organic matter, and drainage.
- Water rights. In most western states, the right to use water for irrigation is separate from ownership of the land. Water rights follow a priority system where earlier users have senior claims during shortages. Confirm what rights transfer with the property, whether they’ve been used consistently, and what permit obligations come with them.
- Zoning and land use restrictions. Agricultural zoning can limit your ability to subdivide, build non-farm structures, or convert acreage. Some properties also carry conservation easements that permanently restrict development in exchange for tax benefits a previous owner already received. County planning offices maintain these records.
- Seller disclosures. Sellers are generally required to disclose known issues, including environmental contamination, boundary disputes, drainage problems, and structural defects in any buildings.
Water rights in particular catch first-time farm buyers off guard. A property can look perfect on paper, but if the water rights are junior or have been abandoned, the productive value of the land drops substantially.
Environmental Site Assessment
Agricultural land has contamination risks that residential property doesn’t. Decades of pesticide mixing, fuel storage, livestock waste, and equipment maintenance can leave soil and groundwater contamination that passes to the next owner. A Phase I Environmental Site Assessment reviews historical records, inspects the property, and checks federal and state databases for known contamination sites within about a mile of the parcel.
This isn’t only about health. Under federal law, a new landowner can be held liable for cleaning up existing contamination. A proper environmental assessment before closing helps you qualify for the “innocent landowner” defense, which can shield you from cleanup costs that predate your ownership. The assessment typically costs a few thousand dollars and takes two to four weeks, which is small money against the remediation bills it can help you avoid.
Agricultural Appraisal
Farm appraisals are more involved than a home appraisal. The appraiser evaluates soil productivity, water access, improvements like irrigation systems and outbuildings, and the highest and best use of the land. Lenders generally require a state-certified general real property appraiser with demonstrated experience in rural and agricultural properties.6Natural Resources Conservation Service. Specifications and Scope of Work for Appraisals of Real Property for ACEP-ALE The appraisal compares your property against recent sales of comparable farmland, considers the income the land can generate, and evaluates the replacement cost of improvements. If you’re financing through a USDA program, the appraisal must follow either USPAP or Yellow Book standards.
Closing the Transaction
Once due diligence is complete and the appraisal supports the price, the transaction looks familiar but has agricultural wrinkles. You submit a written offer and, on acceptance, deposit earnest money into an escrow account held by a title company or attorney. A title company then examines the property’s ownership history to confirm clear title and to flag undisclosed liens, easements, or competing claims. On farmland, pay particular attention to whether mineral rights and water rights are included or have been severed from the surface rights in a prior transaction. At closing, both parties sign the deed and remaining paperwork, funds are released from escrow, and the deed is recorded with the county recorder’s office. If you plan to lease the land to an operator rather than farm it yourself, have the lease agreement finalized before or shortly after closing so there’s no gap in productive use.
Financing a Farm Purchase
You don’t need to walk into a bank with the full purchase price. The USDA Farm Service Agency runs loan programs designed specifically for agricultural land, and the Farm Credit System offers another dedicated channel. Check these before defaulting to conventional financing.
FSA Direct Farm Ownership Loans
FSA direct farm ownership loans carry a maximum of $600,000 and are available to borrowers who cannot obtain sufficient credit from commercial lenders.7USDA Farm Service Agency. Farm Ownership Loans You need at least three years of farm management experience within the ten years before applying, though education or military service can substitute for part of that requirement. You must also be a U.S. citizen or legal resident, have an acceptable credit history, and plan to be the owner-operator after closing.
Beginning Farmer Down Payment Loans
If you’re new to farming, the FSA down payment loan program is built to get you into ownership with less cash upfront. You put down a minimum of 5 percent, and the FSA finances up to 45 percent of the purchase price, to a maximum of $300,150.8USDA Farm Service Agency. Beginning Farmers and Ranchers Loans The remaining balance comes from a commercial lender, a private lender, or the seller through owner financing. The layered structure keeps individual loan amounts manageable and opens the door to beginning farmers who couldn’t otherwise clear the capital bar.
Guaranteed Loans
For larger purchases, FSA-guaranteed farm ownership loans allow up to $2,343,000 for fiscal year 2026.9USDA Farm Service Agency. 1-FLP Amendment 292 – Maximum Loan Authorities These are issued by commercial lenders but backed by an FSA guarantee, which makes banks more willing to lend for agricultural purposes. Eligibility is less restrictive than for direct loans because the FSA’s role is limited to guaranteeing repayment.
Farm Credit System
Separate from the FSA, the Farm Credit System is a nationwide network of lending institutions chartered by Congress to serve agriculture. Eligibility extends to bona fide farmers and ranchers, part-time farmers who supplement with off-farm income, and businesses that provide farm-related services.10eCFR. Part 613 Eligibility and Scope of Financing Farm Credit lenders don’t require you to prove that commercial credit is unavailable. Rates and terms vary by institution, so shop around.
Tax Benefits That Reward Direct Ownership
Direct farm ownership carries federal tax benefits that other asset classes don’t offer. These are worth understanding before you invest.
Schedule F Deductions
If you actively operate a farm as a sole proprietor, you report income and expenses on IRS Schedule F. Deductible operating expenses include seed, fertilizer, feed, fuel, chemicals, hired labor, equipment depreciation, land rent, repairs, property taxes on farm assets, utilities, and interest on farm loans.11Farmers.gov. Schedule F: Profit or Loss From Farming – A Line-by-Line Discussion Depreciation can be powerful. Under Section 179 and bonus depreciation, you may be able to deduct the full cost of qualifying equipment and improvements in the year you place them in service rather than spreading the deduction out.
1031 Like-Kind Exchanges
When you sell farmland at a profit, you can defer capital gains tax by reinvesting the proceeds into another piece of real property through a 1031 exchange. The replacement property doesn’t have to be farmland; any real estate held for business or investment use qualifies as like-kind.12Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Property Held for Productive Use or Investment Two deadlines are strict: you must identify potential replacement properties within 45 days of selling the original, and you must close on the replacement within 180 days or by the due date of your tax return, whichever comes first. A qualified intermediary must hold the sale proceeds during the exchange period. You can’t touch the money yourself, and your own attorney, accountant, or real estate agent cannot serve as the intermediary.13Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031
Long-Term Capital Gains
If you hold farmland for more than one year before selling, the gain qualifies for long-term capital gains treatment. For 2026, the federal rates are 0 percent, 15 percent, or 20 percent depending on taxable income. High-income taxpayers may also owe the 3.8 percent Net Investment Income Tax on top of those rates.
Estate Tax: Special Use Valuation
Federal law lets the executor of an estate value qualifying farm property based on its agricultural use rather than its fair market value, which is often much higher when the land sits near a growing metro area. Special use valuation under Section 2032A can reduce the taxable value of the estate by up to $750,000, adjusted annually for inflation.14Office of the Law Revision Counsel. 26 US Code 2032A – Valuation of Certain Farm, Etc., Real Property To qualify, at least 50 percent of the estate’s adjusted value must consist of farm property, the decedent or family members must have actively used the property for farming for at least five of the eight years before death, and the property must pass to a qualified heir who continues farming it. If the heir stops farming or sells to a non-family member within ten years, the tax savings are recaptured.
Managing the Risk If You Farm It Yourself
Weather, pests, and commodity price swings make farming one of the more volatile land uses. The federal crop insurance program, administered by the USDA’s Risk Management Agency, helps manage that volatility. Yield-based policies pay out when production drops below a guaranteed level. Revenue-based policies cover both low yields and low prices, so you’re protected even if you harvest a full crop and prices have collapsed.15Economic Research Service, U.S. Department of Agriculture. Risk Management – Crop Insurance at a Glance Revenue policies have been the dominant choice among farmers for over a decade. The federal government subsidizes a significant portion of the premium, so the out-of-pocket cost is well below what a private insurer would charge. You buy policies through approved private agents, not directly from the government, and coverage elections happen during specific enrollment windows before planting season.
Conservation Reserve Program
If your land is environmentally sensitive or marginally productive, the Conservation Reserve Program offers an alternative income stream. You sign a 10- to 15-year contract with the FSA to take the land out of crop production and establish conservation cover like native grasses or trees. In return, you receive annual rental payments based on the county’s average cash rental rates and soil productivity, plus cost-share assistance covering up to 50 percent of the cost of establishing the conservation practices.16Farm Service Agency. Conservation Reserve Program CRP payments won’t match what prime cropland earns through active farming, but the income is steady and the management burden is minimal.
Choosing the Right Approach
The right entry point depends on your capital, your tolerance for illiquidity, and how involved you want to be. Stocks and ETFs suit investors who want agricultural exposure with daily liquidity and no operational burden. Farmland REITs add real estate appreciation and mandatory dividend distributions while still trading on public exchanges. Crowdfunding gives you targeted exposure to specific farms and regions but locks up your capital and often requires accredited investor status. Direct ownership produces the most control and the richest set of tax benefits, but demands capital, expertise, and attention. Many investors combine approaches, holding REIT shares for passive income while working toward a direct purchase as experience and capital accumulate.