Notwithstanding farm selection factors (soil, climate, enterprise type and proximity to market), the level and volatility of income received by a farmland investor will depend on whether the agricultural asset is leased to a tenant or operated by / on behalf its owner. (Click here for more detail on the different management options.)
Leases produce a fixed income with the tenant bearing all operational, climatic and commodity pricing risk. With operational management on the other hand these risks are born by the agricultural investor, so income is more volatile, however, averaged over the long term, incomes will also generally be higher (subject of course to selecting the right management team).
The table below provides a general guide to the different levels of income investors can expect on a range of Australian broadacre agricultural assets. Rates of income are stated on the basis of rainfall zone and management model, with farms in lower rainfall zones and those under operational management attracting higher rates of income.