Updated: Mar 10, 2021
There's been several posts on this blog regarding crowdsourcing real estate. However, this post is in regards to a more niche corner of the market. Farmland. AcreTrader crowdfunds the purchase of active farmland, and then rents it back to the farmers who utilize it. Like private REITs such as Diversyfund and Fundrise, investors can make money in two ways: from appreciation of the land should the property be sold, and from rent payments from farmers. In addition, the yield is an excellent 11.5%!
While farmland investment returns can be stale some years like any other real estate investment, the historical data shows the amazing resilience of this asset class. So why aren't more people investing in farmland? Well that's because directly investing in farmland has been very difficult and unattainable for most investors. That is until now. This post will show you how to use Acretrader to create a healthy stream of money.
What is Acretrader?
AcreTrader specializes in farmland, producing healthy safe yields for investors. While the site's investment opportunities are mostly open to accredited investors, many of the deals have had lower investment minimums. In addition, much like Worthybonds --which lets you invest in small businesses-- being able to help farmers can be quite appealing. Lastly, farmland has outperformed every other major asset class for the last 30 years. As it says on the website, "It provides significant relative capital preservation during times of economic turmoil." Hence the impressive annual yield of 11.5%.
AcreTrader provides the due diligence investors wouldn't want to do. This includes interviews with the farmers operating the land and in-person visits to the land. Acretrader does charge fees of course, but they are only about 1% annually. They are able to keep their fees that low because Acretrader acts like a real estate broker, making commission every time a property is bought and sold. By having this dual role, Acretrader profits from this fee enabling them to keep other fees for their investors lower.
Benefits of Acretrader
With the growing population plus the ever shrinking acreage of U.S. farmland, the laws of supply and demand are clearly in favor of investing in farmland. AcreTrader now brings retail investors into this asset class, something that was unheard of until now. Here are some of the many benefits to investing in farmland with Acretrader:
1) Unique Asset Class. Farmland represents an attractive, long-term investment that's resilient during times of economic turmoil.
2) Lucrative. As mentioned earlier, farmland has a great track record. With farmland having a strong streak of gains, Acretrader is able to provide its investors an 11.5% annual yield.
3) Experienced leaders. Investors can feel assured their money is in good hands when you consider Acretrader's leaders have many years of experience in agriculture and finance. AcreTrader's founder and CEO, Carter Malloy, came from a farming family before investing for investment banks. Garrott McClintock, the VP, is a fifth-generation family farmer, with experience in farm operations and agricultural start-ups.
4) Low fees. At 0.75% to 1%, Acretrader offers low fees in comparison to competitors.
5) An altruistic investment. Knowing you've helped a farmer grow his or her business can be satisfying, unlike buying more google stock.
Disadvantages of Acretrader
1) Newbie. Acretrader is a young platform, having only been created a few years ago. Therefore, it's difficult to gauge it's track record.
2) Accredited Investors Only. Because AcreTrader is so young, most of its offerings are for accredited investors only, which means those of you who are worth $1 million or more or who earn at least $200,000 per year.
3) Minimum Investments. Minimum investments on Acretrader can range anywhere from $5,000 to $50,000. While this is on the lower end for minimum investments, it's still quite a bit when compared to some of the private REITs we mentioned in a previous post.
While AcreTrader may be a new player in this industry, they are also the first in this niche market. At this time, this may be the only way for a retail investor to have direct exposure to farmland real estate.
So far, they have closed the acquisitions of several farms on its platform since its launch. Keep in mind, AcreTrader has a thorough underwriting process that eliminates >99% of the parcels they evaluate, resulting in downtime between offerings. Therefore, new farms are listed every 1-2 weeks. Regardless, you can create an account to get notifications of new offerings. Whether you prefer to wait it out until Acretrader has a bigger track record or not, keep this platform on your bucket list!