In the world of investing, thereâs a lot to be said for buying undervalued farm assets.
Occasionally the market provides some incredible opportunities to pick up high quality assets so cheap that, to paraphrase acclaimed investor Jim Rogers, all you have to do is walk over and pick up the money lying in the corner.
One of the benefits of traveling the world so extensively is that Iâm constantly exposed to these sorts of opportunities.
With the majority of the world’s economiesÂ practising Quantitative Easing Â (specifically in the United States, Japan and Europe) the world has created some spectacular asset bubbles. ie Sydney and London house prices
Here in Chile, thereâs a number of asset classes that are undervalued. Iâve been very vocal over the last year or two that farmland prices in Chile are some of the most attractive in the world.
For example, farmland with ultra-high quality soil can be had for $8,000 to 10,000 per hectare or less. In the New Zealand similar type land would be 4 times that cost.
Not to mention, the taxes, labor costs, regulatory costs, and overall operating costs are much lower in Chile.
Now, there are places in the world where farmland is cheaper. Africa, Bolivia etc. But youâre taking a lot more political risk. In most of those cases, youâre not going to find the same rich, volcanic soil and temperate Mediterranean weather and good access to irrigation.
Given that farmland yields in much of the developed world are more like 2% to 4% (or less), itâs obvious that farmland in Chile is deeply undervalued or Â that farmland in the developed world is likewise overvalued.
Now, we really donât recommend that people try to rush down to Chile and buy farmland. In fact, we strongly recommend against it. Most people who do that will be taken to the cleaners.
The hard truth is that it can be very difficult to buy property well in Chileâ¦ and the due diligence requirements can be exhaustive. There are few credible experts in Chile whose opinions can be trusted.
The market is very insular and informal. Itâs not like being in North America or Europe where you can ask Google to serve up the answers on a neatly organized web page. It takes access to local knowledge to be successful.
Not to mention, there are numerous pitfalls for an absentee foreign owner of agriculture property in a country where s/he doesnât speak the language. And if it goes south, it can be a multi-million dollar mistake.
This is why we at Gateway to South America – Chile advice a step by step process. First a scouting trip looking at selected farms for sale and then later an eventual purchase once you have completed your due diligence. We offer scouting trips and or direct sales services. Â We complement our services with some of Chile’s most trusted agricultural advisors.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.