Today I’ll be writing an in-depth AcreTrader review – my favorite farmland investing platform and management company that lets you reap the rewards of farmland without having to know your grapevine from a bovine.
If you’re interested in farmland investing, you’re in good company. Not only has it provided incredible historical returns, but it has also been the ultimate in wealth protection. Unfortunately, until recently, you had to commit to an intimate understanding of farmland before you could invest in it. While I love the idea of riding a tractor every day, I’m not prepared for the major life change that would entail. And that’s why I love AcreTrader.
Table of Contents
What’s The Deal With Farmland Anyway?
I’ve written extensive articles on this topic, but here’s the Cole’s notes:
- Historically, farmland value and revenue have gone up – 11% on average over the past 20 years.
- Farmland investing is uncorrelated to the stock market – making it a good recession-proof investment.
- Farmland is also inflation-protected.
In essence, farmland investing is your best bet for wealth protection.
Read more about why farmland investing is the secret sauce to a real estate portfolio.
AcreTrader Review – Quick Overview.
What I love most about AcreTrader is that they tend to offer great returns on thier investments while making the super complex field of investing in farmland easier than ever before. Let’s have a quick look before diving into all the details.
- AcreTrader only requires approximately $10K minimum investment. Considering that it’s only for accredited investors, $10K is an easy pill to swallow compared to buying an entire property.
- Their management fees are well-below standard for crowdfunded real estate. (Annual fee of 0.75%, 5% disposition fee at termination date, and up to 2.5% reimbursement of formation costs advanced to an SPV with each investment upon initial closing.)
- AcreTrader goes through an extensive screening and approval process ensuring that they invest only with farms that can meet their revenue goals.
- Many farms operate debt-free, reducing your risk potential.
- It’s an online portal – what could be easier than that?
- AcreTrader lets you be completely hands-off – they deal with the financial and the management side, you just collect the profit.
|Historical returns:||Up to 11% annually on average|
|Revenue method:||1 – Land appreciation (upon sale)|
2 – rent income (annual distributions)
|Fees:||0.75% annual management fee|
Up to 2.5% reimbursement to AcreTrader for SPV operating and startup costs advanced per offering
5% disposition fee upon sale
|Minimum investment:||Approx $10,000|
|Holding period:||Usually 5-7 years|
|Accredited investors only:||Yes|
|Risks||Mitigated risks due to rigorous screening and due diligence and debt-free investing.|
What is AcreTrader?
AcreTrader is a crowdfunded farmland investing platform. So investing with AcreTrader is kind of like buying a share of a fast-growing company. Except you’re buying into a Special Purpose Vehicle (SPV) that owns farmland.
AcreTrader’s founder and CEO prides himself on being raised in a farming family and combined his passion and education in both farms and finance to create a platform that makes it easy for investors to tap into farmland in a transparent and straightforward way.
They do all the rigorous screening and handle the details for you, so you don’t end up making emotional decisions based on a childhood memory of pistachios. And they also allow for genuine diversification by working with farms across the country.
How does AcreTrader Work?
AcreTrader’s site showcases which farms you can invest in. To invest you’ll need to create an account. Let’s say you invest $10,000. Your money will be pooled with other investors to buy a farm and receive regular payouts from rent, as well as help an existing farm expand its operations.
Your investment can make money in two ways:
- Land appreciation.
- Annual cash rent payments from farmers.
That means that the $10,000 you invest could bring you $300-$500 per year (in rent payments) as well as an additional $2400 in net returns upon sale (assuming a 3-year holding period, although it could be 7-years and net extra compounding) See more about historic returns below.
After a farm passes AcreTrader’s rigorous selection, the investment process looks like this:
1 – The farm is purchased by an LLC entity.
AcreTrader creates a legal entity for each farm – usually a LLC. The LLC would own the land, and as an investor – you would own part of that LLC.
You can see all available offerings on the AcreTrader site, but will need to create a free account to invest in the offerings.
2 – Your investment.
The “shares” generally correspond to a tenth of an acre and they vary in price. For each farm, there’s a minimum buy-in and a minimum holding period. Looking at the some of the most recent options, the minimum buy-in has been around $12,000 with an up to a 5-year holding period.
If you choose to invest with a specific farm, the investment process takes a few minutes and is done online.
One or two new farms are added each week, so finding the right opportunity should not be a problem.
3 – Financial and farm management.
AcreTrader deals with the legal and financial matters like: insurance, accounting, entity filings, and taxes.
AcreTrader also works closely with the farmers and other third-party managers to ensure things like land sustainability, best farming practices, and optimized crop yields.
AcreTrader collects rent from the farm operators, holds it for taxes and capital improvements, and provides any net payout to investors in December.
4 – Annual distribution.
Each December, investors receive an annual distribution corresponding to the rent collected. (Similar to dividends for stock investors.)
5 – Selling your shares.
At the end of the holding period (typically 5-7 years, with some exceptions) the farm is sold and the net proceeds are distributed to investors. The gains (or losses) correspond to the price changes in farmland value.
Farmland’s historic net annual returns have been in the 11% range (that’s including the distribution) due to their extensive screening for farms.
What else you need to know:
Minimum investment: $10,000. (However, the amount varies – some farms require a smaller or larger amount.)
Minimum holding period: Generally 5-7 years, with some options needing up to 10 years.
Accredited investors only: YES. (See below what that means.)
AcreTrader is for accredited investors only.
This means that you have to prove that you either:
- You are an individual with gross income exceeding $200,000 in each of the two most recent years or joint income with a spouse or partner exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.
- You are a person whose individual net worth, or joint net worth with that person’s spouse or partner, exceeds $1,000,000, excluding the person’s primary residence.
This regulatory oversight is usually necessary to make sure that you don’t dump all of your net worth into an investment with nothing left to live on. Most crowdfunded real estate platforms require you to be an accredited investor. (Though there are some that don’t.)
However, even if you’re not an accredited investor, I’d recommend creating an account because it will let you peruse the farms that are available and start getting more “fluent” in the world of farmland investing.
How does AcreTrader choose its farms?
One huge selling feature when it comes to using an investing platform is that you can be completely hands-off when it comes to choosing what farm to invest in. (That means you won’t get carried away investing in any new crops like the cucumelon.) AcreTrader only accepts about 5% of the farms it reviews and undergoes strict selection criteria that will ensure profitability. This includes:
- Overview check. AcreTrader assesses the overall value and profitability of the farm.
- Document check. AcreTrader combs through the data and documents and uses financial models to predict the expected returns.
- Context check. AcreTrader visits the farm and does its due diligence in terms of tenant viability, sales data, etc.
AcreTrader Review – Historical Returns
As we’ve mentioned, your investment will earn money in two ways:
- Gross cash yield: Annual distribution that comes in as farmers’ rent.
- Net Return: Land appreciation upon farm sale.
Gross cash yield:
Many farms will provide around 3% in annual distributions with some as high as 5%.
That means that if you invest $10,000, you could receive $300-$500 annually in distributions.
Net annual return:
With most farms you can expect around an 8% average annual appreciation.
That means that if you invest $10,000 with a 3-year holding period, your net return will be $2,400.
When you add those two together, you can expect around 11% annual returns – which is unheard of for most investors.
AcreTrader actually provides tons of data on historical returns on their site and even breaks it down by state. According to NCREIF, the average annual returns on farmland since 2000 have been 12.2%.
AcreTrader Review – Holding Period
When you invest in farmland through AcreTrader, expect your holding period to be 5-7 years for row crop farms, and sometimes as long as ten years. AcreTrader is transparent about the estimated termination date, but they choose the exact sale date to optimize profits for their investors.
The holding method is a partnership, which means that you can’t sell your shares as easily as you could sell a stock. You have to commit for the long haul. This is in part why they do business with suitable accredited investors – to make sure the investor is not in a situation where they need to get out before the termination date.
AcreTrader Review – Risks
Any investment has its risks, but AcreTrader seems to manage theirs pretty well.
- They have A+ grade from Better Business Bureau.
- They screen out risky farms.
- You own part of the Special Purpose Vehicle (SPV) that owns and rents out the land, so there’s less worry about someone not paying rent.
- Farmers pay rent prior to the planting season, so investors’ revenue is not dependent on crop risk or weather risk
- The investors of each farm own everything debt-free in most cases – the ultimate safety bet!
Another potential risk is that your investment is not liquid. That means that if you should change your mind and need to get your money out before the termination date – you’re out of luck. (Unless you want to take matters into your own hands with a private sale.)
I don’t consider this a bad thing though, because I view farmland investing as long-term wealth protection, not a quick flip.
AcreTrader Review – Fees
What I love about AcreTrader is that they are very transparent about their fees. Their fees are also very reasonable compared to other crowdfunded real estate platforms.
I do want to especially let people know that AcreTrader does give a kickback to me if people sign up with them. They didn't pay me to write this post, and I wrote it because I do truly believe in the digital platform they set up and the general idea of investing in farmland, although I don't have any opinion about any specific type of farm...that’s what they are for, farms all look the same to me. However, due to financial regulations, I need to put an extra disclaimer.
This is a sponsored promotion for the AcreTrader platform. FiveYearFIREescape may have investments in companies represented on the AcreTrader platform. This informational post is by no means a promotion, solicitation, or recommendation of any specific investment.
Management fee – 0.75% annually
The annual fee – 0.75% of your shares’ value – covers organizational management needs like accounting, reporting, and farmer communication.
Reimbursement of startup costs fee – up to 2.5% of purchase price
This fee is charged right at the beginning of your investment and covers the closing fees for the deal.
Sale Fee – 5% of sale price
You incur this dispostition at the termination date when the farm is sold. This is similar to the closing costs you would pay a realtor when you sell your home. The seller pays a commission to any agents.
AcreTrader Review – TL;DR
- Farmland investing is your best bet for wealth protection because of its great historical returns, as well as recession and inflation protection. AcreTrader is the top farmland investing platform.
- AcreTrader – farmland offers amazing returns (up to 11% annually on average.)
- They have the lowest fees (0.75% annual management fee, 2.5% startup expense reimbursement, and 5% selling fee.)
- AcreTrader has significantly mitigated its risks through thorough due diligence as well as operating debt-free on most farms.
- They make it easy to jump in with only a $10K minimum investment.
Want more farmland investing resources?
Top 5 Farmland Investing Platforms And Reviews To Amp Up Your Portfolio
I’ll give you a hint – AcreTrader makes it to the top, but you can get the lowdown on the other platforms including their fees and historic returns.
Farmland ETF and Agriculture ETF. In-depth Review Of Top 3 Funds For Investing in Farms.
There are other ways to invest in farmland – namely through funds (basically on the stock market.) There are pros and cons to investing this way – but it’s a great place to start if you’re not an accredited investor.
Farmland Investing | 5 reasons it’s the secret sauce for your portfolio and the easy way to invest
A deep dive into why farmland investing can be your best friend for wealth protection.