Low-Cost Farmland Selection Model
Select resilient farms where productive advantages compound over time
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 94%
The model evaluates farmland as a productive operating asset rather than undifferentiated acreage. Investors first assess soil, rainfall, drainage, and water availability because these determine dependable crop yields and resilience to drought or flooding. They then examine whether local farmers compete to rent the land, since strong tenant demand supports recurring income. Location matters because proximity to processors, infrastructure, and population centers can lower transportation costs. Finally, the investor projects how climate migration, water restrictions, labor rules, and other regulations could alter future economics. The preferred farm combines low production costs, reliable natural resources, liquid tenant demand, and manageable regulation, creating an asset capable of generating income and appreciating across multiple commodity cycles.
Origin
Brandon Zick described how Säräs Farmland Fund applies these criteria while investing across twelve US states, with a concentration in the Great Lakes region.
Core principles
- 01Low-cost producers are best positioned to survive commodity cycles
- 02Reliable water and strong soil protect long-term productivity
- 03Location affects both operating costs and access to end markets
- 04Climate resilience must be assessed over the full holding period
- 05Regulatory burdens can erase otherwise attractive farm economics
How to run it
- 1
Evaluate Productive Capacity
Assess soil quality, crop suitability, historical yields, and the improvements required to keep the land productive.
Pro tip Compare expected yields with regional input costs to identify genuine low-cost producers.
Watch out Do not treat all acres as equally productive merely because they are in the same county.
- 2
Underwrite Water and Drainage
Verify natural rainfall, groundwater availability, aquifer recharge, irrigation options, and drainage. Map flood exposure and avoid farms beside major rivers when the risk cannot be economically mitigated.
Pro tip Prefer naturally replenished water resources over systems dependent on increasingly restricted withdrawals.
Watch out Senior water rights may help legally without solving the physical depletion of the water source.
- 3
Test the Tenant Market
Determine whether capable family farmers compete to rent acreage in the area. Strong tenant demand supports occupancy, rent stability, and access to local operating knowledge.
Pro tip Use farmer relationships to source off-market properties and validate local conditions.
Watch out A farm with weak tenant demand may require the owner to assume unwanted operating risk.
- 4
Measure Market Access
Review proximity to processors, transportation infrastructure, and population centers where crops ultimately move. Favor locations that reduce the cost of reaching buyers.
Pro tip Treat logistical advantages as part of the farm's productive economics, not merely a convenience.
Watch out High yields can still produce weak returns when transportation and handling costs are excessive.
- 5
Project Climate Resilience
Consider drought, flooding, warming trends, and whether productive growing regions may migrate over the intended holding period.
Pro tip Evaluate climate exposure over decades when the investment thesis assumes a multigenerational hold.
Watch out Historical weather alone may understate future risk.
- 6
Review Regulatory Friction
Assess water restrictions, labor rules, taxes, development pressure, and whether local government supports agriculture.
Pro tip Compare regulation with the value of the crop; low-margin commodities are especially sensitive to compliance costs.
Watch out An attractive crop or climate cannot compensate indefinitely for structurally misaligned regulation.
In the wild
An investor compares a Great Lakes corn-and-soybean farm with a similarly priced property in an arid region. The Great Lakes property has strong soil, natural rainfall, drainage, several competing tenants, and shorter routes to eastern buyers. Applying the model favors it despite the absence of a fashionable specialty crop.
→ The selected farm offers more dependable income and lower long-term water and climate risk.
A California row-crop farm appears productive, but underwriting reveals depleted groundwater, use-it-or-lose-it incentives, expensive labor, and likely water restrictions. The model rejects the acquisition because the commodity's margins cannot comfortably absorb those structural risks.
→ The investor avoids an asset whose historical productivity obscures deteriorating future economics.
Common mistakes
Buying Acreage Instead of Productivity
Investors may focus on price per acre without examining soil, water, drainage, and the cost of producing crops on that acreage.
Extrapolating Historical Water Access
Existing rights or past irrigation availability do not guarantee that an aquifer will recharge or that regulations will remain unchanged.
Ignoring the Local Tenant Network
A property can look attractive on paper but produce unstable income when few capable farmers want to rent it.
Is it for you?
Best for
It is best for long-term investors comparing commodity-crop farmland across multiple regions.
Not ideal for
It is not ideal for speculative buyers primarily seeking short-term development gains or vanity agricultural properties.
From the transcript
“these are commodities, so low cost producer wins”
“we prefer to invest in areas where you have that natural rainfall, you have strong soils, good drainage”
“we think it's more prudent to be in areas where there's an abundance of water or an aquafer recharge”
From the episode
At The Money: Farmland Investing