Have you ever thought about investing in farmland? If not, you might be missing out on one of the most stable and profitable alternative asset classes in the world. Farmland investing can help you diversify your portfolio, generate passive income, benefit from capital appreciation, and hedge against inflation and stock market volatility. Sounds too good to be true, right?
Well, not anymore. Thanks to AcreTrader, a farmland crowdfunding investment platform, you can now buy shares of farmland online and earn rental income from farmers. AcreTrader was founded in 2018 by Carter Malloy, a former finance professional and a farmer’s son. His mission is to make farmland investing accessible, transparent, and hassle-free for accredited investors.
But is AcreTrader really the best way to invest in farmland online? How does it work? What are the requirements, fees, risks, and returns? How does it compare to other platforms and asset classes? And most importantly, is it worth your time and money?
In this AcreTrader review for 2023, I will answer all these questions and more. I will explain what AcreTrader is and how it works, who can invest in it and what are the requirements, how it selects and manages the farmland properties, how to sell your shares on AcreTrader and what are the options, what are the pros and cons of investing in AcreTrader, and my final verdict on whether AcreTrader is a good investment option for you.
By the end of this article, you will have a clear understanding of AcreTrader and its suitability for different types of investors. So if you’re ready to learn more about this exciting opportunity, let’s get started!
What Is AcreTrader And How Does It Work?
AcreTrader is a farmland crowdfunding investment platform that was founded in 2018 and is available for accredited investors only. You can start investing in farmland between $10,000 to $40,000 without worrying about land management (the average cost is about $10,000 to $25,000). Once you know which farms you want to invest in, all you do is collect your annual dividend checks from the farmland rent payments and collect your potential profit once the land itself is sold.
But how does AcreTrader work exactly? And what are the benefits and risks of investing in farmland through AcreTrader? Let’s break it down step by step.
How to invest in farmland online with AcreTrader
Investing in farmland online with AcreTrader is a simple and straightforward process. Here are the main steps involved:
- Create an account: To start investing in AcreTrader, you need to create an account on their website and verify your identity and accreditation status. You can also browse the available properties and learn more about them before signing up.
- Find a property: AcreTrader lists various farmland properties across the country that have passed their rigorous due diligence process. You can filter the properties by location, crop type, investment type, minimum investment, expected returns, etc. You can also view detailed information about each property, such as soil quality, water sources, crop history, tenant profile, financial projections, etc.
- Buy shares: Once you find a property that suits your investment goals and risk appetite, you can buy shares of it online. Each property is owned by a unique entity (usually an LLC) that is divided into fractional shares. You can buy any amount of shares at or above the minimum investment amount. The minimum investment amount varies depending on the property, but it typically ranges from $7,000 to $25,000. The average holding period for each property is also variable, but it usually lasts between 5 to 10 years.
- Receive returns: After you buy shares of a property, you become a passive owner of that property. You don’t have to worry about any land management aspects, such as rental payments, insurance, taxes, maintenance, etc. AcreTrader handles all those aspects for you and charges a flat annual administration fee of 0.75% of the overall farm value. You receive annual cash returns from the rental income paid by the farmers who lease the land from AcreTrader. The rental income is usually paid in advance of the planting season, so you take virtually no crop risk, weather risk, etc. The rental income is kept in a unique bank account held by the entity until payout in December. Historically, farmland has an unlevered yield of 3% to 5% for lower-risk properties.*
- Sell your shares: At the end of the holding period, AcreTrader sells the property and distributes the net proceeds to the investors. You receive your share of any capital appreciation that occurred during the holding period.
Source: USDA NASS Historical Land Values and Cash Rents over a 50-year period.
Who Can Invest In AcreTrader And What Are The Requirements?
AcreTrader is not for everyone. It is only available for accredited investors who meet certain income or net worth criteria. It also requires a relatively high minimum investment amount and a long holding period. In this section of the AcreTrader review, I will explain who can invest in AcreTrader and what are the requirements.
What is an accredited investor?
An accredited investor is an individual who has either:
- A net worth of at least $1 million (excluding the value of their primary residence), or
- An annual income of at least $200,000 for the last two years (or $300,000 together with their spouse) and a reasonable expectation of the same income level in the current year.
These criteria are set by the Securities and Exchange Commission (SEC) to protect investors from risky or fraudulent investments that are not registered with the SEC. AcreTrader is one of those investments that are not registered with the SEC and are only offered to accredited investors under Regulation D.
To invest in AcreTrader, you need to verify your accreditation status by providing documents such as tax returns, bank statements, brokerage statements, etc. You can also use a third-party service such as VerifyInvestor.com to verify your accreditation status.
What is the minimum investment amount?
The minimum investment amount on AcreTrader varies depending on the property, but it typically ranges from $7,000 to $25,000. This means that you need to have a significant amount of capital to invest in farmland online with AcreTrader.
The minimum investment amount is determined by dividing the total purchase price of the property by the number of shares available. For example, if a property costs $1 million and has 100 shares available, the minimum investment amount would be $10,000 per share.
You can buy any number of shares at or above the minimum investment amount. However, you cannot buy more than 10% of the total shares available for any property. This is to ensure diversification and compliance with SEC rules.
What is the holding period?
The holding period on AcreTrader is the length of time that you have to hold your shares before you can sell them or receive your share of the proceeds from the sale of the property. The holding period varies depending on the property, but it usually lasts between 5 to 10 years.
The holding period is determined by several factors such as the expected appreciation rate of the property, the market conditions, the tenant agreements, etc. AcreTrader provides an estimated holding period for each property on its website.
You should be prepared to hold your shares for the entire holding period and not expect to access your money quickly or easily if you need it for any reason.
How Does AcreTrader Select And Manage The Farmland Properties?
One of the most important aspects of investing in farmland with AcreTrader is how they select and manage the farmland properties. After all, you are entrusting your money to a platform that claims to have the expertise and experience to find and manage the best farmland opportunities for you.
But how do they do it? And what are the criteria and process that they use to analyze and vet the farmland properties before listing them on the platform? And how do they handle the land management aspects, such as rental payments, insurance, taxes, maintenance, etc.?
Let’s find out more in this section of our 2023 AcreTrader review.
How does AcreTrader select the farmland properties?
AcreTrader has a rigorous and comprehensive process to select the farmland properties that they list on their platform. They use a combination of data analysis, market research, and boots-on-the-ground experience to find and evaluate the best farmland opportunities for their investors.
Here are some of the main steps and criteria that AcreTrader uses to select the farmland properties:
- Data analysis: AcreTrader uses proprietary software and algorithms to analyze millions of data points from various sources such as USDA, NASS, FSA, NRCS, etc. They look at factors such as soil quality, water availability, crop history, yield potential, climate risk, etc. They also use satellite imagery and drone footage to assess the physical condition and location of the land.
- Market research: AcreTrader conducts extensive market research to understand the supply and demand dynamics of the farmland market. They look at factors such as population growth, food consumption trends, commodity prices, trade policies, land availability, etc. They also compare the historical and projected returns of different regions and crop types.
- Boots-on-the-ground experience: AcreTrader has a team of experts who have decades of experience in farming, real estate, finance, and technology. They visit each property in person and conduct due diligence on the land owner, the tenant farmer, the local market conditions, etc. They also leverage their network of local partners and advisors who have deep knowledge and connections in the farming industry.
- Vetting process: AcreTrader has a strict vetting process that filters out most of the properties that they review. They only list properties that meet their high standards of quality, profitability, sustainability, and ethics. They also ensure that each property has a clear title, a fair valuation, a favorable lease agreement, etc.
According to AcreTrader’s website, they only select less than 5% of the properties that they review. This means that they reject more than 95% of the properties that they come across. This shows how selective and meticulous they are in choosing the best farmland opportunities for their investors.
How does AcreTrader manage the farmland properties?
AcreTrader not only selects the farmland properties for their investors but also manages them on their behalf. They handle all aspects of administration and property management, from insurance and accounting to working with local farmers and improving soil sustainability.
Here are some of the main features and benefits of AcreTrader’s land management service:
- Insurance: AcreTrader provides comprehensive insurance coverage for each property that covers natural disasters, crop failures, liability claims, etc. They also monitor and update the insurance policies regularly to ensure adequate protection for their investors.
- Accounting: AcreTrader handles all aspects of accounting for each property such as collecting rental payments from farmers, paying taxes and fees, distributing income to investors, providing financial statements and reports, etc. They also use third-party auditors to verify their financial records and ensure transparency and accuracy.
- Maintenance: AcreTrader oversees all aspects of maintenance for each property such as repairing fences, roads, drainage systems, irrigation systems, etc. They also work with local contractors and service providers to ensure quality and timely work. They also monitor and improve the soil health and fertility of each property by using sustainable farming practices such as crop rotation, cover crops, no-till farming, etc.
- Tenant relations: AcreTrader works closely with the tenant farmers who lease the land from them. They ensure that the farmers are reputable, experienced, and reliable. They also negotiate favorable lease terms and conditions that align with the interests of both parties. They also provide support and assistance to the farmers such as access to capital, technology, best practices, etc.
- Performance monitoring: AcreTrader monitors and reports on the performance and valuation of each property on a regular basis. They use data and analytics to track factors such as crop yields, market prices, land appreciation, etc. They also provide investors with online dashboards and updates that show their portfolio performance and returns.
How To Sell Your Shares On AcreTrader And What Are The Options?
One of the biggest challenges of investing in farmland with AcreTrader is the lack of liquidity. Farmland is an illiquid asset that cannot be easily converted into cash without losing some value or paying some costs. This means that you have to hold your shares for a long time (typically 5 to 10 years) and not expect to access your money quickly or easily if you need it for any reason.
However, there are some ways that you can sell your shares on AcreTrader and exit your investment earlier if you want to. In this section of the AcreTrader review, I will explain how to sell your shares on AcreTrader and what are the options.
The most obvious way to sell your shares on AcreTrader is to use the secondary market that AcreTrader plans to launch soon. The secondary market is a platform that will allow investors to buy and sell shares of existing farmland properties on AcreTrader.
The secondary market will provide more liquidity and flexibility for investors who want to sell their shares before the end of the holding period. It will also provide more opportunities and choices for investors who want to buy shares of different properties or diversify their portfolio.
However, there are some drawbacks and limitations of using the secondary market. For one thing, there is no guarantee that there will be enough demand or supply for your shares or that you will be able to sell them at a fair price. The secondary market will be subject to market forces and conditions that can affect the value and availability of your shares.
For another thing, there may be some fees and taxes involved in selling your shares on the secondary market. You may have to pay a transaction fee to AcreTrader or a broker who facilitates the sale. You may also have to pay capital gains tax on any profit that you make from selling your shares.
Therefore, you should be careful and cautious when using the secondary market and do your own research and due diligence before selling your shares.
If you don’t want to use the secondary market or if it is not available yet, there are some alternative ways that you can sell your shares on AcreTrader. These include:
- Finding a buyer directly: You can try to find a buyer for your shares directly by using your own network or contacts. You can also use online platforms or forums where investors look for farmland opportunities. However, this may be difficult and time-consuming as you have to find a qualified and interested buyer who meets the accreditation criteria and agrees with your price and terms.
- Using a broker: You can also use a broker who specializes in farmland transactions to help you find a buyer for your shares. A broker can use their expertise and connections to market your shares and negotiate the best deal for you. However, this may also be costly and risky as you have to pay a commission fee to the broker and trust them with your money and documents.
- Donating or gifting your shares: Another option that you can consider is donating or gifting your shares to a charity or a family member. This can be a way to support a cause that you care about or transfer wealth to your heirs. However, this may also have some tax implications and legal complications that you should consult with a professional advisor before doing so.
How Does AcreTrader Compare to Other Farmland Investing Platforms?
AcreTrader is not the only platform that offers farmland investing opportunities. There are other platforms that have similar business models or different approaches to this asset class. Some of the most popular ones are:
- FarmTogether: FarmTogether is an online marketplace that allows accredited investors to buy shares of U.S. farmland and earn rental income from farmers. Unlike AcreTrader, which has a lower minimum investment and a shorter investment horizon, FarmTogether requires at least $10,000 to $50,000 per share and has a typical duration of 10 years or more. FarmTogether also has different fees than AcreTrader, such as a 0.75% annual administration fee and a 1% acquisition fee. These are some of the factors to consider when comparing acretrader vs farmtogether.
- Harvest Returns: Harvest Returns is a platform that focuses on sustainable and regenerative agriculture projects around the world. Harvest Returns allows both accredited and non-accredited investors to invest in equity or debt offerings with minimums as low as $5,000. Harvest Returns charges a 2% placement fee and a 1% annual servicing fee for equity offerings and a 1% origination fee for debt offerings.
- FarmFundr: FarmFundr is a platform that offers direct ownership of U.S. farmland through LLCs. FarmFundr allows both accredited and non-accredited investors to invest in individual farms with minimums as low as $10,000. FarmFundr charges a 3% acquisition fee and a 1% annual management fee.
Here is a table that summarizes some of the key differences between these platforms:
|Platform||Minimum Investment||Fees||Investment Horizon||Accreditation|
|AcreTrader||Varies; typically $7,000 – $25,000||0.75% annual administration fee||At least 3 years||Required|
|FarmTogether||Varies; typically $10,000 – $50,000||0.75% annual administration fee + 1% acquisition fee||At least 10 years||Required|
|Harvest Returns||Varies; as low as $5,000||2% placement fee + 1% annual servicing fee for equity; 1% origination fee for debt||Varies; typically 5-10 years||Not required|
|FarmFundr||Varies; as low as $10,000||3% acquisition fee + 1% annual management fee||Varies; typically 5-10 years||Not required|
Each platform has its own advantages and disadvantages depending on your investment goals, preferences, and budget.
What Are The Pros And Cons Of Investing In AcreTrader?
Investing in AcreTrader has its pros and cons. It can offer a unique opportunity to diversify your portfolio, generate passive income, benefit from capital appreciation, and hedge against inflation. But it also involves some risks such as illiquidity, market risk, operational risk, and regulatory risk.
In this section of the AcreTrader review, we look at the main advantages and disadvantages of investing in AcreTrader.
Pros of investing in AcreTrader
Investing in farmland with AcreTrader has several benefits that make it an attractive alternative asset class for investors who want to diversify their portfolio and generate passive income. Here are some of the pros of investing in AcreTrader::
- Diverse Asset Class: Historically, farmland has exhibited limited correlation with various asset classes, including stocks, bonds, and gold. This implies that fluctuations in the stock market or other economic factors do not significantly impact farmland prices. Moreover, in comparison to commercial or residential properties, farmland experiences relatively low price volatility.
- Lucrative Returns: Over extended periods, farmland has consistently generated substantial returns. Data from the NCREIF Farmland Index reveals an average annual return of 11% over a 50-year span. These returns stem from two primary sources: rental income and capital appreciation. Rental income is obtained by leasing the land to farmers, who pay fixed or variable rent based on market conditions and the type of crops. Capital appreciation arises from the increase in land value over time, influenced by factors such as population growth, food demand, and land scarcity.
- Inflation Protection: Farmland serves as an effective hedge against inflation since its value tends to rise with increasing inflation. This is attributed to the fact that farmland produces tangible assets in the form of crops, which possess inherent value and are essential for human consumption. As inflation escalates, driving up the cost of living and diminishing the purchasing power of currency, farmland prices also surge to reflect the heightened worth of crops and land.
- Tax Advantages: Investors who retain their ownership of farmland for over one year can enjoy certain tax benefits. These advantages encompass lower capital gains tax rates, ranging from 15% to 20% based on their income bracket, as opposed to ordinary income tax rates that can reach up to 37%. Additionally, depreciation deductions are available to offset a portion of the rental income earned from the farmland.
Source: NCREIF Farmland Index data from 1970 to 2020.
Cons of investing in AcreTrader
Investing in farmland with AcreTrader also involves some risks that investors should be aware of before making any investment decisions. Here are some of the possible cons of investing in AcreTrader:
- Illiquidity: Farmland represents an asset with limited liquidity, making it challenging to convert into cash without experiencing some loss in value or incurring associated costs. Consequently, investors must be prepared to retain their shares for extended periods, typically ranging from 5 to 10 years, without the expectation of quick or easy access to their funds. Although AcreTrader has plans to introduce a secondary market, enabling investors to sell their shares prior to the completion of the holding period, there is no guarantee that sufficient demand or supply for these shares will exist, nor that they can be sold at a fair price.
- Market risk: The value of farmland is susceptible to market forces that can positively or negatively impact its worth, influenced by factors like crop and land supply and demand, interest rates, commodity prices, trade policies, and environmental regulations. These variables can undergo unpredictable changes, leading to fluctuations in farmland prices that may not accurately reflect its intrinsic value or long-term potential.
- Operational risk: Farmland operations are exposed to operational risks capable of affecting performance and profitability, including adverse weather conditions, pest infestations, crop failures, soil degradation, water shortages, and more. If not adequately managed or mitigated, these risks can diminish or eliminate rental income from farmers and degrade the value of the land over time.
- Regulatory risk: Investing in farmland carries regulatory risks that can impact the legal and financial viability of such investments, including zoning laws, environmental regulations, tax laws, and other relevant factors. These risks are subject to change and can influence the legal status, ownership rights, tax obligations, and environmental impact of the farmland properties. Investors should familiarize themselves with the applicable local, state, and federal laws and regulations governing their farmland investments and seek guidance from professional advisors as necessary.
As you can see, investing in AcreTrader has its pros and cons. It can offer a unique opportunity to diversify your portfolio, generate passive income, benefit from capital appreciation, and hedge against inflation. But it also involves some risks such as illiquidity, market risk, operational risk, and regulatory risk.
Is AcreTrader A Good Investment Option For You?
While reading this AcreTrader review, you may be wondering if AcreTrader is a good investment option for you. The answer to this question depends on your personal goals, preferences, and circumstances. There is no one-size-fits-all answer that applies to everyone.
Who should invest in AcreTrader?
Investing in AcreTrader may be suitable for you if you:
- Are an accredited investor who meets the income or net worth criteria set by the SEC.
- Have a long-term investment horizon and can hold your shares for 5 to 10 years or longer.
- Have a high risk tolerance and can handle the market risk, operational risk, and regulatory risk of farmland investing.
- Have a large capital base and can afford the minimum investment amount of $7,000 to $25,000 per property.
- Want to diversify your portfolio with a different asset class that has low correlation with other asset classes.
- Want to generate passive income from rental payments paid by farmers who lease the land from AcreTrader.
- Want to benefit from capital appreciation from the increase in land value over time due to factors such as population growth, demand for food, scarcity of land, etc.
- Want to hedge against inflation by investing in real assets (crops) that have intrinsic value and are essential for human consumption.
Who should not invest in AcreTrader?
Investing in AcreTrader may not be suitable for you if you:
- Are not an accredited investor who meets the income or net worth criteria set by the SEC.
- Have a short-term investment horizon and need liquidity or access to your money quickly or easily for any reason.
- Have a low risk tolerance and cannot handle the market risk, operational risk, and regulatory risk of farmland investing.
- Have a small capital base and cannot afford the minimum investment amount of $7,000 to $25,000 per property.
- Do not want to diversify your portfolio with a different asset class that has low correlation with other asset classes.
- Do not want to generate passive income from rental payments paid by farmers who lease the land from AcreTrader.
- Do not want to benefit from capital appreciation from the increase in land value over time due to factors such as population growth, demand for food, scarcity of land, etc.
- Do not want to hedge against inflation by investing in real assets (crops) that have intrinsic value and are essential for human consumption.
Tips and best practices for investing in AcreTrader
If you decide to invest in AcreTrader, here are some tips and best practices that can help you optimize your investment experience and results:
- Do your own research and due diligence before investing in any farmland property on AcreTrader. Read the offering documents carefully and understand the risks and returns of each property. Compare the properties based on factors such as location, crop type, investment type, minimum investment, expected returns, etc. Ask questions and seek clarifications from AcreTrader’s team if needed.
- Diversify your portfolio across different properties, regions, and crop types. This can reduce your exposure to specific risks and increase your chances of success. AcreTrader recommends that you invest in at least 3 to 5 properties to achieve adequate diversification. You can also diversify your portfolio across different asset classes such as stocks, bonds, gold, etc. to further reduce your overall risk and volatility.
- Monitor your portfolio performance and valuation regularly. AcreTrader provides online dashboards and updates that show your portfolio performance and returns. You can also use data and analytics tools such as Farm Value Tool or Learning Center to track factors such as crop yields, market prices, land appreciation, etc. You can also contact AcreTrader’s team if you have any questions or concerns about your portfolio.
- Be patient and disciplined. Investing in farmland with AcreTrader is a long-term and committed investment that requires patience and discipline. You should not expect to see quick or easy returns from your investment. You should also not panic or sell your shares prematurely if you see any fluctuations or challenges in the farmland market. You should stick to your investment plan and goals and trust AcreTrader’s expertise and experience to manage and optimize your investment.
- Take advantage of the secondary market when it launches. The secondary market will provide more liquidity and flexibility for investors who want to sell their shares before the end of the holding period. It will also provide more opportunities and choices for investors who want to buy shares of different properties or diversify their portfolio. However, you should be careful and cautious when using the secondary market and do your own research and due diligence before buying or selling any shares.
AcreTrader can be a great way to diversify your portfolio, generate passive income, benefit from capital appreciation, and hedge against inflation. However, it also comes with some risks such as illiquidity, market risk, operational risk, and regulatory risk. Therefore, you should do your own research and due diligence before investing in any farmland property on AcreTrader.
I hope you found this AcreTrader review for 2023 helpful and informative. If you are interested in investing in farmland online with AcreTrader, you can visit their website and sign up for an account. You can also read their blog and learn more about farmland investing.
Thank you for reading this AcreTrader review and happy investing!
Here are some of the frequently asked questions (FAQ) about AcreTrader and investing in farmland online:
How much money can I make with AcreTrader?
The amount of money you can make with AcreTrader depends on the performance and valuation of the farmland properties you invest in. You can earn income from rent and capital gains from land appreciation. Historically, farmland has an average annual return of 11% over a 50-year period.*
How safe is my investment with AcreTrader?
Your investment with AcreTrader is not guaranteed or insured by any government agency or entity. You may lose some or all of your investment if the farmland properties perform poorly or lose value due to various factors such as market risk, operational risk, regulatory risk, etc.
How do I pay taxes on my investment with AcreTrader?
You will receive a Form K-1 from AcreTrader at the end of each tax year that will report your share of income and expenses from the farmland properties you invest in. You will have to report this information on your tax return and pay any taxes due. You may also have to pay capital gains tax when you sell your shares or when AcreTrader sells the property at the end of the holding period.
Can I visit the farmland properties I invest in?
Yes, you can visit the farmland properties you invest in with AcreTrader. However, you will have to coordinate with AcreTrader’s team and follow their guidelines and policies for visiting the properties. You will also have to respect the privacy and rights of the farmers who lease the land from AcreTrader.
What are the fees for using AcreTrader?
AcreTrader charges a one-time fee of 0.75% to 2.5% of the purchase price when you invest in a farmland property on their platform. This fee covers the costs of due diligence, legal work, entity formation, etc. AcreTrader also charges an annual management fee of 0.5% to 1% of the property value that covers the costs of administration and property management.
How do I contact AcreTrader’s customer service?
You can contact AcreTrader’s customer service by phone at (844) 732-7656 or by email at [email protected]. You can also use their online chat feature on their website or submit a request form on their contact page.
What are some alternatives to AcreTrader?
Some alternatives to AcreTrader are FarmTogether, Harvest Returns, FarmFundr, etc. These are also platforms that let you invest in farmland online with different features and offerings. You should compare these platforms and choose the one that best suits your goals and preferences.
Is AcreTrader legit?
Yes, AcreTrader is legit. It was founded in 2018 and is registered with the SEC as an exempt reporting adviser. It has also been featured on reputable media outlets such as Forbes, Business Insider, CNBC, etc. It has also received positive reviews and testimonials from existing investors who have invested in farmland online with AcreTrader.
How long do I have to hold my investment?
You have to hold your investment for at least three years with AcreTrader. This is because most lease contracts have a duration of three years or more. After that period, you can sell your shares through AcreTrader’s secondary market or wait for AcreTrader to sell the farm and distribute the proceeds.
How do I receive my dividends and capital gains?
You will receive your dividends from rent payments on a quarterly or annual basis depending on the farm. You will receive your capital gains from land appreciation when you sell your shares or when AcreTrader sells the farm1. Both dividends and capital gains will be deposited into your bank account or wire transfer information.