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Not long ago, I heard about a company called AcreTrader.
This is a real estate crowdfunding platform that invests in farmland throughout the United States and gives accredited investors the opportunity to diversify their money into assets outside of the stock market.
Even in the real estate world, farmland is a very different type of real estate asset. It doesn’t follow the same trends as the rest of the real estate market as a whole (e.g. – single-family houses, apartments, and other commercial buildings). In many ways, farmland operates in a world of its own, and values rise and fall based on the global supply and demand of farmland and food commodities (with a limited amount of farmland available and a growing number of mouths to feed worldwide).
Investing in farmland is a way to diversify, not just into real estate, but into a real estate class that isn’t controlled by the same type of volatility that affects most of the conventional real estate investments that people think of.
How AcreTrader Works
Similar to most crowdfunding platforms, AcreTrader offers a way for an individual accredited investor to invest in smaller chunks of a much larger property.
If you’ve ever wanted to own farmland, but you don’t have the capital, industry knowledge and risk tolerance to take down and ENTIRE 40+ acre parcel of farmland on your own, AcreTrader allows you to be one of several different investors that participates in the ownership of a property, with as little as $5,000.
REtipster provides real estate guidance — not tax or investment advice.
This article should not be interpreted as financial advice. Always seek the help of a licensed financial professional before taking action.
As the video above explains, each farmland parcel is placed in its own legal entity and divided into shares that are sold through AcreTrader’s secure investor portal. Investors can buy shares and let AcreTrader handle the rest.
The Competitive Advantage of AcreTrader
As someone who spent many months trying to evaluate farmland as a legitimate investment option to pivot to, I can tell you that farmland investments come with a lot of challenges.
I found that it’s significantly more difficult to find great deals on farmland compared to vacant, residential lots. Most farmland owners are farming it themselves and/or making a decent stream of income from it, so they have no real motivation to sell their property for a “dirt cheap” price.
There is also A LOT of due diligence required when buying a parcel of farmland. Everything from crop yield to flood zones to soil types to weather patterns (just to name a few things), there are all kinds of things that need to align in order to make a piece of farmland “good” for farming and sufficient to charge enough annual rent.
All this to say – the job of finding good deals and managing relationships with farms is made much, MUCH easier with an outfit like AcreTrader handling all of these tasks for you. Not to mention, you have the benefit of spreading out smaller investment amounts among several different farm projects, so you don’t have to put all of your eggs in one basket, so to speak.
What Kind of Returns to Expect?
Obviously, the return on any investment comes with no guarantees.
Anything you put your money into should only be done with the understanding that there is some element of risk and uncertainty involved.
That being said, AcreTrader offers plenty of data on their properties that you can take a closer look at before you decide to invest.
Some of the more notable things are:
- Detailed Executive Summary, including plenty of maps, background information on the management team,
- Comprehensive historical and project financials, including the past plantings and performance of the subject property.
- Subscription Agreement: What you’ll be agreeing to as a shareholder in this investment.
- Well Test and Water Right Information
- LLC Operating Agreement and Articles of Organization
If you’re an accountant or banker by trade (as I used to be), I think you’ll find more than enough reading material here to help you assess your level of comfort with each investment opportunity, and whether it’s a “go” or “no-go” for you personally.
Why Invest With AcreTrader?
Most investors who choose to park their money with AcreTrader, do it for two key reasons.
- Cashflow: Getting annual payments, generated from the cash rent paid by the farmer.
- Appreciation: The increase in property value when the property is sold, 3 – 10 years after the original investment.
Comparatively speaking, farmland has lower volatility than most major asset classes.
While nobody has a crystal ball to predict the future, but it would be hard to fault an astute investor for parking at least some of their cash in this type of real estate asset.
Compared to Gold, the S&P 500, commercial real estate and AAA bonds, farmland has out-performed all of them over the last 15 – 20 years.
And of course, the fact that farmland is a tangible, “real” asset (you can actually see and touch it) and is legitimately useful, some investors find an added sense of comfort with these attributes as well.
Is AcreTrader Right For You?
The goal of this article isn’t to convince you that AcreTrader is where you should put your money.
The purpose of this review is to simply make you aware of this investment option in the market.
Farmland brings a lot of unique value to the table, and if you’ve ever been interested in farmland investing, but perhaps (like me), you just didn’t have all the resources at your disposal to handle things like:
- Finding the deals
- Doing all the due diligence
- Negotiating with the seller
- Managing relationships with local farmers
- Finding the right exit strategy
- And everything in between
…AcreTrader could be your ticket to a new world of opportunity in the real estate business.
Have you had any experience working with AcreTrader or any other crowdfunding platform? Let us know about your experience in the comments below!
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