- AcreTrader charges a flat fee of 0.75% per year
- AcreTrader works by letting you buy income-producing shares of a working farm.
- You must be an accredited investor to use AcreTrader, so it’s not available to the average Joe.
- Shares last for 10-15 years, and right now, there’s not really a way to liquidate your money before that time.
- There’s a lot to like about farmland investing and there hasn’t really been a good way for non-experts to invest in it until now.
Investing in real estate has always been a strong way to grow your wealth if you know what you’re doing. There are also a lot of ways to toss your hat in the ring with real estate investing, and one of them has remained mysterious and alluring to many people: farmland investing.
It’s a great way to diversify your portfolio with an investment that’s a lot different from anything else you might have, and that has a lot of desirable qualities. But there’s one problem: evaluating good farmland is a rare skill most of us don’t have, and it takes a huge amount of money.
Until recently, that is: a new company called AcreTrader offers a platform where you can invest in farmland real estate with absolutely no knowledge and at a fraction of its traditional price. AcreTrader offers a uniquely new way to invest, but it’s not for everyone. We’ll help you figure out if it’s worth looking into further in this review.
About The Company
AcreTrader is a relatively new company, having been founded by a small team of agriculturally- and financially-inclined investment professionals in 2018. AcreTrader is modeled a bit after other popular fintech investing apps in that it lets you choose your investment in bite-sized chunks. Except in this case, those investments are actual whole farms that the AcreTrader team individually vets and chooses.
Each individual piece of farmland is put in its own LLC so that it’s separate from AcreTrader. Thus, if AcreTrader ever goes under, your investments will still keep chugging along. AcreTrader then offers shares of those pieces of farmland, with each share being 1/10 of an acre (i.e., if you bought 10 shares, you’d own one whole acre).
AcreTrader also operates its own real estate brokerage to purchase the properties. The AcreTrader team also acts as a property manager by working with the farmers who it rents the land out to, and handling all of the business details and payments.
It then passes the money back to you in the form of one cash payment every December. Farms are also sold after five to 10 years, and at this point, you’ll receive your initial investment back at a (hopefully) appreciated rate. Thus, you’ll earn money in two ways: through annual payments, and from appreciation on the property at the end of the contract.
How AcreTrader Works
Once you’ve created an account and linked your bank, you’re free to start buying shares of farmland. If you’re used to the oodles of investment options available with other investment platforms, though, you might be a bit disappointed by the offerings.
There’s typically only one farm you can invest in at any one time, with a new one becoming available every 1-2 weeks. Since AcreTrader manages everything in house, it takes time, after all. In fact, AcreTrader has only offered 39 properties for investing since it began.
Each listing will tell you a brief description of the farm including what’s grown on it and where it is, along with what the gross cash yield and net annual return is expected to be. There’s also an investment minimum with each property, which as of this writing ranges from $15,200 to $36,375 for recent properties. That’s a lot of money, but it’s a lot less than the hundreds of thousands or millions of dollars it typically takes to buy a whole farm.
The listing also tells you the anticipated ownership duration. AcreTrader doesn’t plan on keeping the properties indefinitely; it will sell them at some point in the future (usually within five to 20 years), depending on market conditions.
This means you need to be in it for the long haul, because while AcreTrader is working on a marketplace where you can buy and sell your shares, there’s no easy way to liquidate your investment right now. In other words, don’t bet the farm on it. Make sure you’re still diversified, and that you have plenty of money left in your emergency savings first.
AcreTrader is a lot different than any other investing platform you’ve probably seen, and here’s why:
- You can invest in farmland: Investing platforms let you invest in a lot of things: stocks, bonds, index funds, mutual funds, rental real estate, precious metals, and more. But until now, you really couldn’t invest in farmland very easily outside of a mutual fund without becoming a dedicated agricultural investor.
- You can choose the individual farms: AcreTrader adds a bit of novelty in by letting you choose the individual properties you want to invest in. So if you’ve got a hankering for corn, apples, soybeans, or something else, this could be a fun way to invest.
- You’re in it for the long haul: Shares of farms can’t be sold through AcreTrader currently, unlike with a lot of other investing choices you might have. This is not a liquid investment, and you’ll need to take that into account.
Who AcreTrader Is Best For?
Anyone can create an account on AcreTrader, but in order to actually invest through it, you’ll need to be an accredited investor. That means you’ll need a net worth of at least $1 million (not counting your primary home) or an annual income of $200,000 or more ($300,000 if you’re married). AcreTrader says it’s working on expanding who can invest, but for now, only high-profile investors can use the platform.
Since you can’t really sell your shares until AcreTrader decides it’s the right time, it’s also better for people who are looking for a long-term investment and who don’t mind handing over control of the sale date to someone else.
Finally, AcreTrader might be a good choice for you if you’re looking to diversify your portfolio into a unique type of investment that offers better-than-average returns when compared to bonds, but without a lot of volatility: more on that below.
AcreTrader vs. Other Real Estate Investing Competitors
AcreTrader is only one of a few new companies that have started up recently in the crowdsourced farmland investing space. Here are a couple of its direct competitors, along with how it compares:
|Accredited investors only?||Yes||Yes||Yes|
|Investment Minimums||$10,000 – $25,000||$10,000||$10,000 – $100,000|
|Investment Type||Farmland real estate||Farmland real estate||Farmland real estate|
|Fees||0.75%||Varies by deal, but one recent deal was listed at 2.00% of the total deal amount, plus an annual management fee of 1.50%||Varies by deal, but one recent deal listed an “annual sponsor fee” of 1.50%|
|Expected Returns||NAR of 5% – 12.2%||IRR of 7.1% – 12.1%||Also varies, but one recent project calculated an expected annual average ROI of 13.33%|
What To Know About Investing in Farmland
Investing in farmland real estate is not the same thing as your traditional residential real estate deals that you might be more familiar with. After all, the global population is only going up while the amount of available farmland is currently going down, and this gives farmland a unique set of characteristics compared with other types of real estate.
As an asset class, it’s about as volatile as bonds, while also outperforming them. It’s even outperformed the S&P 500 at key times, such as when the stock market as a whole is going down. In fact, farmland has only had one quarter of negative returns in the past 22 years, and even that was just a -0.01% drop.
The Bottom Line
AcreTrader offers a relatively new way to invest in farmland real estate, and there are a lot of advantages to adding it to your investing mix. But it’s definitely not right for everyone. Right now, only accredited investors are eligible, and even then, your investment is basically as illiquid as you can get for the time being. Since it’s such a new company, it also doesn’t have a proven track record by which to judge it.
That said, AcreTrader offers a lot of promise for making farmland real estate investing more attainable for the average person. It’s just not quite there yet.
Yes, AcreTrader can be a good investment if you’re an accredited investor with a diversified portfolio and you don’t mind locking your money up for a decade or two.
Yes, farmland can be a good investment if you’re looking to diversify your portfolio and you have a bundle of cash to invest.
An acre of farmland in Illinois generally costs between $6,280 and $10,350, depending on how good the soil is and where the farm is located.