Growth in nontraditional commercial real estate investments has drawn some courageous entrepreneurs who are beginning to reap rewards. Agricultural properties have shown consistent and positive financial returns, billboards offer low start costs, and data centers have shown that demand for their services continues to grow. With innovative investment opportunities, the time has never been better to diversify.
Farms and other agriculturally designated properties have been steadily appreciating in value, creating a new opportunity for investors. The three most common options when investing in agricultural land are investing in real estate investment trusts (known as REITs), directly farming the land, and leasing out the land for farming operations.
REITs are companies that own and operate income-producing real estate. REITs offer the least labor-intensive option for investing in agricultural land, since you will have little to no interaction with the land itself. As an investor, your financial contribution could be part of a larger pool of funds that has been used to purchase, maintain, and improve a portfolio of agricultural properties.
Purchasing the property to farm on your own is the most labor-intensive option, but you will have the most control over the day-to-day farming operations and the overall return on your investment. Calculate whether you have the know-how and ability to tackle the complexities of the farming lifestyle.
Hiring local expertise to work your land is less laborious but requires that investors find willing farmers to lease and maintain the workable area. Investors interested in leasing out their land have less control over the day-to-day operations and risk assuming responsibility for remediation of poor environmental practices of the lessee, factors which would negatively impact the overall return on investment.
We’ve all seen billboards as we travel. These offer an entry-level investment, as the capital outlay is often significantly less than that of other real estate investment vehicles. Billboard locations usually involve a land lease where the signage will be placed and a small capital investment to install a frame. Investors can either lease out the advertising space themselves, hire a company to lease out the space, or sell the space for a profit.
As we become more reliant on technology, data center growth continues. Data centers require a building with a series of networked computing equipment, infrastructure to support the network systems, and parking space for employees. The networked technology can support cloud-based computing, off-site data storage, or information distribution. Investors have the option to lease or buy a property, and they must also consider the large capital outlay for the infrastructure to support the operation of the computing equipment.
For optimal operation, the specialized computing equipment requires three-phase electrical systems, alternative power sources or the option to transfer to generators, and adequate climate and humidity control. If you are considering an existing property, a retrofit of these systems will likely be required. Significant research during your site selection process may be necessary to ensure that your data center can offer reliable service.
If you’re considering a nontraditional investment, let us help you determine the best options for your portfolio.