AcreTrader is a new investment platform that enables you to purchase farmland in the form of shares. In this AcreTrader review for 2022, we’ll take a closer look at this unusual project and see what they have to offer.
What is AcreTrader?
AcreTrader is a farmland-focused crowdfunded real estate investment platform. While it is only available to accredited investors (those with a net worth of at least $1 million and/or a yearly income of at least $200,000), many of the projects on its platform have lower investment minimums than those on other commercial real estate (CRE) investing platforms.
Furthermore, the asset class it focuses on makes it quite intriguing. Farmland has outperformed every other major asset class since 1990, according to AcreTrader, and has never had a negative year.
That isn’t to suggest that individual trades don’t lose money; low-risk doesn’t always imply no danger. However, it remains an interesting asset class, and AcreTrader is one of the first platforms to make it available to ordinary investors.
AcreTrader conducts thorough due diligence, which includes in-person interviews with sponsors and operators, as well as in-person inspections to the properties, as well as the projected financial analysis and comparisons to comparable farm transactions in the region.
AcreTrader earns money in a somewhat different method than many other real estate investment sites, in addition to focusing on farms. While it does charge asset management costs, which range from 0.75 percent to 1 percent per year, it also functions as a real estate broker, earning a commission when each property is purchased and later sold. Real estate listing fees and commissions are a typical and usual expenditure in any property transaction, and AcreTrader claims it can benefit from this charge while keeping other expenses low for investors by serving as a real estate broker.
Why Investing in Farmland is a Big Deal?
When there are so many different sorts of real estate investments, it may seem unusual to invest in farms (plus plenty of crowdfunding companies that can help).
According to AcreTrader’s analysis, farmland has been one of the highest performing investment vehicles since 1990. According to their data, farmland has outperformed the S&P 500 index, with only general real estate investment trusts (REITs) outperforming farmland.
Consider this: people will want food for as long as the planet exists, producing a demand for acreage to cultivate crops. Furthermore, since the population is likely to continue to rise, the demand to boost food yields will grow as well, making farmland even more valuable over time.
Farmland is not susceptible to the vagaries of the stock market since it is considered a hard investment. It’s also a very stable investment due to its historically low volatility. Furthermore, farming offers food, which is a valuable commodity. That is to say, there will be a need for food.
That isn’t to imply you should invest all of your money on farms. Because land is required for so many industries, you might think of it as part of a well-diversified portfolio. AcreTrader offers a free whitepaper on farmland investment if you want to learn more.
You may obtain it for free if you supply some personal information such as your name and email address.
How Does AcreTrader Work?
AcreTrader functions similarly to other online real estate investing platforms at its core. The platform is managed by a team of highly skilled specialists who provide an income-generating portfolio of investment opportunities. The distinction is that AcreTrader’s listings are entirely farmland, not apartment complexes or other income-generating properties.
The creator of AcreTrader established a management company that purchases individual farms, but only after a rigorous due diligence procedure that admits fewer than 1% of applicants. Then AcreTrader provides investors the opportunity to purchase shares in the offering that equal 1/10th of an acre, so that investors who purchase 10 shares own a whole acre of the farm.
The farm is overseen by AcreTrader’s staff, who look after it from top to bottom. Its administration entails everything from paying insurance fees to maintaining relationships with farmers to monitoring soil sustainability. The property is then leased out to individual farmers (or bigger agricultural organizations) who pay cash up advance for the lease.
Because of the up-front leasing structure, payouts are not reliant on external variables like crop output or favorable weather conditions. Every December, AcreTrader collects a flat rent from the farms and distributes shareholder profits.
How the AcreTrader Rating Works
The amount of points assigned to each property determines its ranking, which ranges from A1 to D3. The A1 properties have less points than the D3 characteristics.
Here are some examples of where properties may get points:
Known Past Flooding Issues – Has the farm lost 10% or more of its crop in the previous 10 years owing to standing water caused by an unresolved drainage issue?
Existing Water Access Issues — Does the farm lack access to water for agricultural purposes?
Planned Direct Operations — Are any investment monies being used to support working capital for day-to-day operations?
No Current Tenant — Does the land now have no tenant cultivating it?
No Direct Access to Government-Maintained Roadway — Is there no direct access to a road that is maintained by the local or national government?
Is the closest drop-off site for commodity deliveries more than 50 miles distant, as assessed by direct radius?
Improvements to be made During the Holding Period – Will more than 10% of the total offering value be used to enhance the asset?
Debt Involved in the Transaction — Will the subject offering be subject to any debt?
High Debt-to-Value Ratio – Will any debt put on the subject property surpass a loan-to-value ratio of 55 percent?
Non-Farming Leases or Existing Income – Are there any non-farming leases in existence, such as hunting, energy, or other non-farming leases?
Non-farming assets are valued as part of the deal – Are non-core assets like grain storage, a residence, a store, and so on included into the farm’s valuation?
Land Sale Market with Low Activity — In the previous year, were there fewer than 10 land transactions above $100,000 in a 100-mile radius?
The almond farm received 5 total points, earning it a B2 grade. Cottage Grove Row Crop Farm in Will, Illinois received just one point and received an A1.
AcreTrader is picky when it comes to approving farm applications to list as an option on the marketplace. In fact, AcreTrader’s due diligence is so thorough that only around 1% of farms who apply are authorized. As a consequence, new products are usually financed within hours or days, implying that possibilities aren’t constantly accessible. The platform, on the other hand, introduces a new service every week.
Its next offering is a soybean and cornfield farm in Illinois with a buy-in of $11,990 and a projected net yearly return of 7.6%. That’s not too dissimilar to the net return on a well-managed apartment complex or a high-performing REIT. More options would be preferable, but the existing offering is absolutely worth investigating more.
How to Sign Up with AcreTrader
To be clear, to invest with AcreTrader, you must be an accredited investor. You must also be a United States citizen or legal resident. You must submit your complete name, email address, and establish a password in order to register. You may also use your Facebook, LinkedIn, or Google accounts to register.
Personal information, such as bank account numbers for financing reasons and accreditation papers, is the next step. AcreTrader does not save your bank information; instead, they utilize Plaid, a third-party service. Plaid also offers comparable services to investors on other platforms. Your accreditation papers, which are kept by another third-party firm, North Capital Investment Technology, are in a similar scenario. All required paperwork is electronically signed and transmitted through the internet. ACH transfers from a connected bank account will be used to finance your investment account.
Your contribution does not become official until the fundraising objective for a specific investment is attained, similar to other crowdfunding sites. A property will be available for 30 to 90 days. It will be deleted if it is not completely subscribed, and all monies you have contributed will be reimbursed. (North Capital is holding the funds in escrow until the transaction is completed.)
The ability to readily see and investigate possible investment possibilities is one of the reasons AcreTrader stands out as a real estate investing platform. Their crowdfunding page makes it simple to filter through offers and determine if they are suitable for you.
As a general guideline, you should only invest in crowdfunded real estate if you have a 5-year or longer time horizon! So, just though investing is simple, it doesn’t mean you should rush into it.
It is also a lot simpler to make selections about the properties you wish to invest in thanks to the marketplace. Before you invest, you may examine all of the facts and expenses related to each parcel.
AcreTrader Pros and Cons
Now that you know a little more about AcreTrader, consider the following advantages and disadvantages when choosing whether or not this investing platform is right for you.
AcreTrader Review: Pros
SDIRA availability: If you choose, AcreTrader can let you invest in a self-directed IRA. If you’re interested, get in touch with the customer care staff first.
Secondary market: AcreTrader investments will soon have a secondary market, allowing you to sell them if you don’t want to keep them for the whole period.
Profits not dependent on crops: Land appreciation and yearly rent payments will earn you money, not how well a farmer performs.
Totally passive investment: After you’ve invested your money, all you have to do now is sit back and relax!
Handpicked investments: All properties are thoroughly vetted by AcreTrader. Only around 5% of the properties considered by the firm are picked.
Portfolio diversification: Farmland (and real estate in general) are excellent investments for diversifying your portfolio.
Promotes sustainable practices: AcreTrader is working hard to encourage sustainable agriculture practices and land conservation, so you can rest easy.
AcreTrader Review: Cons
Relatively high minimums: On AcreTrader, the lowest minimum for a share is now north of $4,000. You’ll need $50,000 to invest in the almond plantation. This, however, is consistent with other real estate crowdfunding platforms.
You must be an accredited investor: You must verify that you are an accredited investor in order to take advantage of an AcreTrader offering. However, the organization wants to make a particular product (such as a REIT) accessible to everybody at some point in the future.
AcreTrader Best Competitor and Alternative
AcreTrader vs FarmTogether
Because of the scarcity of land, farmland investments are expected to expand. Using a site like FarmTogether or Acretrader to get into the market for $10,000 to $15,000 is a terrific way to get started.
Acretrader features clear and reasonable costs, so you know exactly how much your investment will cost you in fees. It also charges the seller a 5% commission like a brokerage business, which means you save money.
FarmTogether is socially responsible, employs a diverse workforce, and is dedicated to ensuring that the farms it maintains are ecologically conscientious. You’ll be able to put your money into something that helps to make the world a better place.
Both systems offer a lot of functionality and a solid user interface. You’ll be investing in an alternative investment that is less associated with the returns of traditional stocks and bonds, regardless of which option you pick.
There are costs for investing, as with most financial sites.
Although it is free to join up with AcreTrader and explore their options, there are costs associated with making an investment.
On the AcreTrader platform, there is a 0.75 percent asset management charge. This asset management charge is paid once a year. This is relatively affordable when compared to other crowdsourcing sites.
In addition, each of the investments you make comes with a closing charge, which varies depending on the agreement. The average is roughly 2% of the entire amount you invested in the property.
Because AcreTrader also provides services to farm owners, it’s worth noting that they charge a 5% commission when the underlying land is sold. They do this by functioning as the transaction’s real estate brokerage and sharing in the standard real estate commission. This has no impact on their investors since the charge will be paid by the property owner.
AcreTrader generates the bulk of its money from the 5% fee it charges farm owners, and the yearly maintenance cost is almost break-even for them.
AcreTrader does not charge a performance or incentive fee, unlike many other platforms. This implies that all of the upside belongs to the investors, and there is no limit to the amount of money they may make.
Is AcreTrader Trustworthy?
The Better Business Bureau has given AcreTrader an A+ rating. The BBB assigns ratings to businesses based on how successfully they connect with their consumers. AcreTrader’s rating is the highest a firm may earn, ranging from A+ to F.
Time in operation, kind of company, customer complaint history, licensing and government actions, and advertising concerns are among variables considered by the bureau. However, a company’s rating does not guarantee that it will be dependable or perform effectively.
There are no notable litigation or public controversies in AcreTrader’s record. According to the Better Business Bureau, the firm has had no complaints.
AcreTrader Mobile Accessibility
Investors are increasingly searching for mobile solutions that allow them to monitor their portfolios and trade while on the road. Unfortunately, AcreTrader does not have a dedicated app for smartphones or tablets.
The AcreTrader platform, on the other hand, is entirely geared for mobile, thus an app isn’t required. All of the same access options and functionality are available on the mobile website as they are on the desktop version.
Despite the fact that some investors prefer the AcreTrader app, the current mobile experience is flawless.
Who Should Join AcreTrader?
Accredited investors with a working knowledge of agricultural investment are perfect AcreTrader prospects. It’s quite simple to purchase shares, and AcreTrader does extensive preliminary research to assist you avoid investment frauds.
AcreTrader Management is also in charge of the farm’s daily operations and contact with the tenant. Following your first due diligence, the farming specialists take care of the rest, allowing you to generate passive income with ease.
Using a crowdfunding site to get your feet wet in the potentially profitable world of real estate investment may be a terrific way to get started. It’s a genuinely passive source of money. You don’t have to do anything once you’ve invested your money. Without plowing a field or studying an almanac, AcreTrader allows you to possibly earn from farmland.
Frequently Asked Questions (FAQ) About AcreTrader
Do You Have To Be an Accredited Investor for AcreTrader?
AcreTrader is only available to authorized investors as of this writing. This implies that before you may invest with AcreTrader, you must first receive accredited investor status from the Securities and Exchange Commission (SEC).
You must fulfill certain requirements to become an accredited investor, such as earning more than $200,000 per year or having a net worth of at least $1 million (not including your primary residence).
Investor accreditation is exceedingly tough to get for all but the wealthiest people.
Does AcreTrader Offer Support for Newbies?
Yes, the AcreTrader University has many materials for younger investors to learn about agricultural land investment.
How Does AcreTrader Make Money?
In addition to other administrative and closing expenses at the time of the first investment, there is a 0.75 percent yearly charge (depending on the value of the property). According to AcreTrader, their principal income fee is charged to the land seller (which in the case of investors, presumably is the entity that owns the land when the terminal date arrives). Investors should read the fine print of an offering to ensure that they are aware of any costs.
What Is the Minimum Investment Required For AcreTrader?
The minimum investment varies, but it’s usually between $10,000 and $25,000 in most cases.
How Long Has Acretrader Been Around and Who Owns It?
AcreTrader is based in Fayetteville, Arkansas, and was founded in May 2018. The company’s CEO and creator is Carter Malloy, a former investing expert.