The Holy Grail For Property Investors Right Now
Immediate cash flow from agriculture. For us global property investors, that’s the Holy Grail.
Colleagues in the coconut plantation business in Brazil have devised a way to deliver. Specifically, this group (that I’ve written about and recommended several times in the past) has persuaded their local partner to part with 100 hectares of mature coconut trees. As a result, it’s now possible for you to invest today for an immediate annual yield of 12.12% based on current production.
If you’ve been reading these dispatches for any time, you know how I feel about agricultural investments in general. For me, a productive land investment is the best possible use of investment dollars right now. One downside, though, is that, in most cases, you must wait for plants or trees to mature before realizing any cash flow.
With this new opportunity to invest in a mature plantation, both that wait and the development risk are eliminated. These 20-year-old trees have been producing for more than 15 years. The number of coconuts per year per tree is known. Further, these trees will produce for another 20 years at least.
Bottom line, this is an investment opportunity that would be very hard to beat. You’re looking at 20 years of 12% yields, with the cash flow starting immediately.
Coconuts are a multifaceted crop. Demand for their products is great and growing worldwide. While Brazilians have been drinking coconut water, for example, for decades, the health benefits of the liquid this nut produces are increasingly recognized and appreciated worldwide and especially in the United States, which is shaping up to become a very big market for this.
However, the water is but one product of the versatile coconut, which also produces oil, “meat,” and a husk. Coconut oil is a bio-fuel. Coconut oils are also used in pharmaceuticals (for make-up, etc.).
Coconut meat is a key ingredient in your piña coladas…and think of all those coconut-flake-sprinkled pastries. Coconut husks are used for mattress filler, car seat stuffing, and also as a bio-fuel for generators. The coconut processing plant I visited in Brazil used husks to fuel all the plant’s power needs.
Coconuts produce other by-products, too, including a mash of oil remnants and the inner shell (the outer part of the nut that you see on grocery store shelves). This mash (not the technical term) is used for animal feed; it’s very high in protein.
My point is that this is an investment that is naturally diversified. If demand for one coconut product falls, you’ve got many other products still from which to look for return. It’s very unlikely that the health-conscious will stop drinking coconut water…bakers will stop sprinkling coco flakes…the world will move away from bio-fuels…and women will stop wearing make-up…all at the same time.
Further, an investment in a coconut plantation in Brazil brings you other kinds of diversification, too, for your portfolio overall. Specifically, it brings you diversification of economy and of currency. Brazil’s is a growing, essentially self-sufficient economy. This country is energy independent and at the forefront of the development of bio-fuels. Brazil has a strong industrial base and a strong agricultural base, as well. Bottom line, they could be cut off from the rest of the world, and their economy could continue to expand unaffected. In fact, they didn’t experience a big impact from the “global recession” of the past several years, and this economic independence has helped their currency to remain stable in recent years, as well.
An investment in one of the largest economies in the world where the middle class is growing at a rapid clip would seem a reasonable idea.
The best part is that, to take a position in this opportunity, you don’t have to become a coconut farmer. The management company takes care of everything. In the case of this new mature plantation offer, with no development phase to worry about, the management company will maintain the existing trees, harvest the coconuts, and sell them to the processing plant. In addition, they pay all local bills for you from the cash flow from your trees, including local Brazil taxes. You don’t have to get your hands dirty at any level.
The investment for 2 hectares of mature coconut trees (with 145 trees growing per hectare) is US$85,000. The land in this plantation will be held leasehold. After the local Brazilian taxes, the crop care expense, and the 30% management fee, the projection for net cash flow is US$10,300, or 12% of your initial investment, per year. Of course, the projection is, simply, a projection. However, these trees do have 20 years of history on which to base the projections. And coconut prices are expected to increase as demand continues to increase for coconut water and coconut oil.
P.S. I invested in 6 hectares in one of this group’s earlier plantations. My trees are still in the nursery…not on the plantation yet. My projected annualized returns are better than 12%, but I won’t see any cash flow for another few years. There’s something to be said for an immediate cash return.
With only 100 hectares (50 units) available in this new plantation, I don’t expect this opportunity to be available long.
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