The Best Long-term Real Estate Investment: Farmland

From CNBC.com

Author: Richard McGill Murphy

From his office on Broad Street in lower Manhattan, Jeff Notaro oversees a modest portfolio consisting mainly of dirt. Specifically, Notaro's Black Sea Agriculture fund invests in farmland in northeastern Bulgaria, near the Black Sea. The .5 million fund buys prime agricultural land and leases it back to local farmers.

Notaro is riding a growth market. Since 2004, Bulgarian farmland has been appreciating at an average annual rate of 19 percent. Yet Bulgarian land is still cheap compared to the United States. The average price per acre for good-quality land is ,850 in Bulgaria versus ,000 an acre in Kansas.

Land along the Black Sea coast commands higher prices because it's especially fertile and also close to deep-water ports. Black Sea wheat land costs ,300 an acre on average but yields an average of 71 bushels of wheat an acre, compared with 42 bushels an acre in Kansas. "That's about half the cost per acre on a yield basis," Notaro said.

The rise in local land prices has been fueled mainly by a worldwide agricultural commodity boom that has driven food prices up by more than 100 percent since 2003, according to the Food and Agriculture Organization of the United Nations (FAO).

"More people need to get into farming; otherwise, we won't have any food," said commodity investor Jim Rogers, who launched the international Quantum Fund with George Soros in the early 1970s and went on to create the Rogers International Commodities Index, which tracks the performance of numerous commodities in global markets, ranging from agriculture to metals and energy products.

Rogers and Notaro belong to an increasingly active...