AcreTrader is a proud new sponsor of Financial Samurai. In my quest to continuously learn about new alternative assets and new promising investment platforms, I've invited AcreTrader to write a guest post about farmland investing. During times of uncertainty and stock market volatility, it's nice to invest in real assets.
Mark Twain once said, “Buy land. They’re not making it anymore.”
Many investors view land as one of the oldest and most stable asset classes out there. Land is capable of generating great long-term returns with an added benefit of capital preservation during times of economic distress.
Now, online investing platform AcreTrader makes it easier than ever for investors to get involved.
Why Farmland Investing Matters
Farmland has been one of the most stable and best-performing long-term investments. According to NCREIF, farmland has generated consistent annual returns of 11%-12% over the last 25+ years for investors. Farmland has outperformed most other major asset classes and forms of real estate.
Secondly, farmland has offered markedly lower price swings compared with other popular asset classes, including gold, real estate, and stocks. As a real, uncorrelated asset, farmland typically stands unaffected by changes in the stock market. This has been demonstrated by an analysis by TIAA Nuveen, one of the largest money management firms in the world.
Finally, basic supply and demand trends would suggest additional value appreciation is in store for farmland. Alongside consistently growing demand for food via. population growth, there is a shrinking farmland supply. The U.S. loses 3 acres of farmland per minute.
Farmland has historically been a good investment in part because the world’s population continues to grow. With more growth there is less and less farmland per person. That trend shows no sign of stopping.
Farmland Income And Appreciation
During times of economic turmoil, Farmland has proven to be a defensive asset class that has offered strong returns and a means for capital preservation. As an investor, it can offer both passive income and lower portfolio volatility.
Similar to other forms of real estate, farmland can generate two different forms of financial benefits:
1) Appreciation in the underlying value of the farmland
2) Annual farmland rents
For investors, this functions very much like an annual dividend or a coupon paid on a bond. The main difference is the appreciation potential.
You might be wondering: why haven’t I heard much about farmland investment until now?
In the past, buying and maintaining farmland directly has required large amounts of capital. You would need deep knowledge of agriculture and the ability to manage a farm.
The few available investment options have typically charged high fees, provided limited liquidity, and offered no choice over portfolio composition. There just hasn’t been an easy, affordable way for most investors to participate.
What is AcreTrader?
This is where AcreTrader comes in. AcreTrader is an online platform that enables investors to buy shares of U.S. farmland directly and earn passive income.
The online marketplace employs some aspects of crowdfunding to offer investors an easy, straightforward investment option that bypasses many of those aforementioned challenges.
Additionally, AcreTrader offers some of the lowest fee structures of any real estate crowdfunding platform out there.
The most salient point of difference with AcreTrader, though, is the people behind it.
Who is AcreTrader?
AcreTrader is built, operated, and advised by a team of investment and agriculture professionals. Our backgrounds are in farm management and operations. We also have decades of experience in financial services, representing billions of dollars in revenues and investments.
Born and raised in farming families, we know farmland as well as we know finance.
For example, our COO, Garrott McClintock grew up working on a family farm in the Mississippi Delta. Prior to working with AcreTrader, he also co-managed agricultural businesses involving over $200 million worth of land and over $40 million in annual revenues.
Farming Is In Our DNA
Founder and CEO Carter Malloy spent over a decade working as a Managing Director for an investment bank. He also worked as an investment professional at a successful equity fund. Prior to a career as an investment professional, he grew up in a farming family. He’s been investing in farmland throughout his career.
Carter is currently based in Fayetteville, Arkansas. Farming is Arkansas' largest industry, adding around $16 billion to the state's economy annually. Arkansas is a major exporter of rice, soybeans, cotton, poultry and feed grains. There are 49,346 farms statewide and 97 percent of Arkansas' farms are family-owned.
In addition to its management team, AcreTrader employs an exceptional farmland diligence team. Our advisors include the Chairman of the London Stock Exchange, the former CFO of Amazon, and the head of the worlds largest agricultural research laboratory.
Unparalleled Due Diligence
Our team’s experience means that investors can rely on us through every step of the investing process – from the learning phase to farm management. However, where our team’s expertise really shines is in our underwriting process.
AcreTrader is extremely selective about the farms we choose to offer for investment. We employ a comprehensive due diligence process and ultimately accepting less than 1% of the parcels we review.
AcreTrader evaluates farms using a rigorous 96-point checklist that takes into account land quality, farm performance, local markets, and more. Investors can be confident that the farms listed on the platform have been identified using exceptional software, tools, and in-depth valuation techniques.
AcreTrader Learning Center
Our learning center is constantly updated with articles and videos from the team on farmland, investing, and the agriculture space in general.
Take a look at pillar pieces like Historical Farmland Returns and How to Invest in Farmland. We also regularly hosts webinars, both to educate investors about farmland investing and to introduce investors to new offerings.
In addition to these extensive educational materials, our investor relations team is readily available for real-time consultation by phone or online chat when you have questions.
AcreTrader’s Online Platform
Alongside our extensive educational materials, AcreTrader’s full-service online platform makes it easy for investors to select and purchase shares as well as to track current investments.
While investments are currently open to only accredited investors, anyone can create an account and browse listings. We offer a variety of farm types, from midwest row crop farms to California almond orchards and Georgia peanut farms.
Individual offering pages let investors review maps, photos, and documentation. Investors also get an overview of the projected financials to get a full understanding of the farm before investing.
Each farm carries a minimum investment, typically starting in the range of $10K-$30K dependent on the offering.
Farmland Passive Income
The process to purchase shares online is simple and easy to navigate. Once a parcel is fully funded, AcreTrader handles all of the management and administration to make it a truly passive investment.
You can expect bi-annual updates with information from your farm alongside annual distributions and timely tax documents.
AcreTrader is committed to improving our farmers’ lives and ease of doing business in every way possible, while ensuring that the property is well maintained and that best practices and sustainability remain priorities.
AcreTrader Fee Structure
Investor fees are some of the lowest that you will find when it comes to both farmland investing and real estate syndications. AcreTrader receives a 0.75%-1.0% annual management fee to handle all of the management and administration of the farm.
AcreTrader also has a real estate brokerage that often represents the farms in its transactions. This allows AcreTrader to take part in real estate commissions that are usually generated by the transaction anyway and pass more of the profit back to the investor by not charging a “carry” or “promote” in the deal.
Portfolio Diversification and Long-Term Stability
In addition to attractive passive income potential, AcreTrader provides an opportunity to get away from the mainstream financial system while diversifying your portfolio.
Of course, farmland is not without its risks. No investment is risk-free except for cash and FDIC-insured bonds.
However, AcreTrader helps mitigate risk by being fundamentally involved in the everyday management of investments. It also helps investors create diverse portfolios of farmland not limited to a single crop or region.
Finally, AcreTrader is always seeking to create more investment opportunities through partnerships and sponsored offerings.
With a large federal deficit and potential for significant inflation in the coming years, owning a real asset that produces a commodity is an attractive value proposition.
Explore AcreTrader Today
In short, AcreTrader offers direct access to a real, uncorrelated asset class with a history of consistently strong returns. That, coupled with our highly qualified team and best-in-class underwriting practices makes them an intriguing investing partner.
Take a look at our offerings today. It's free to sign up and explore.
Hello AcreTrader,
With farmland acreage shrinking so fast, is the general sentiment among experts that farmland values should increase faster than inflation in the next few years?
Hi Kenny, thanks for the question. TIAA / Nuveen have some interesting research published on this topic suggesting that rates and inflation could indeed be bullish for farmland. Farmland values have historically had some good correlation to inflation rates, but unlike gold, it typically also provides is owner with income as well. You can see some of this info in our learning center, and there is also a good Forbes article that our CEO wrote last year you can find by searching “Forbes farmland gold.”
I own farm land. It isn’t a lot of it, but enough to know there’s not a lot of money there. Farmers they around massive businesses with economies of scale cannot compete.
Land in these rural areas basically holds its value and keeps up with inflation. It’s illiquid and has to be maintained. Not a great place to stash your cash. Think of the opportunity cost.
Hi Dollartrak, in we are typically purchasing tracts that are 100 or hundreds of acres, and those farms are operated by professional farmers. Thus the return profile is quite different than smaller non-scale operations. You can see the “Why Farmland?” section of our website that demonstrates the attractive historical financial performance of farmland and how it has far outpaced inflation as well as many other common asset types.
What is different about Acretrader as compared to Farmtogether?
Great question. We have a good relationship with their team, and in general we’re both participating in a $3 trillion market so the more voices educating investors about farmland, the better. As a company, we are proud of the farm management background of the AcreTrader team and the way that is reflected in our underwriting process. As a general statement, we come from farming families and live “out here” in the middle of the country. We would encourage your call any time to discuss our company and our offerings, and we would also suggest doing the same diligence on other alternatives as there are many great solutions.
Interesting. Is AcreTrader cash positive? I have been interested in crowdsource real estate, but worry whether these platforms actually make money. I have heard that most don’t? What happens to the individual’s investments if the plaform folds?
Thanks.
Great question, Jay.
AcreTrader recently raised a large round of capital and continues to grow rapidly. The company will become more profitable as the number of farms under management continues to grow. I’m not able to include a link here, but a simple Google search for “AcreTrader RZC” and you can see the details of the firm’s capital raise.
We’re a well funded company, but if we were to have business problems, the investors should be relatively unaffected. Each farmland entity (typically an LLC) is purposefully bankruptcy remote, so that you will retain your legal ownership regardless of any potential business issues with AcreTrader, Inc. In the unlikely event of our insolvency, the entity has instructions in the Operating Agreement to assign reputable external management and counsel administration, and ultimate liquidation per the existing lifetime schedule of the farmland in question.
Thank you,
Michael
Thank you for this detailed review. Will this be offered to non-accredited investors in the future?
Hi there, and thank you for your interest! We hope to have an option for all investors in the future. We do not have a timeline or structure set for this yet, but if you want to open an account (takes just a minute) and indicate that you are not yet accredited, we will notify you with any updates in this regard.
Thanks!
Michael
I second that for non-accredited!
Does the company operate on any philosophy of environmental responsibility when operating or leasing the land?
Thank you.
Yes – we work with farmers to improve the sustainability and soil quality on the farm as well as the overall performance of their operation.
This is both an environmental and economic imperative. If the land is taken care of throughout the life of the investment, it will also be more valuable in the eventual sale of the farm.
While only 1% of U.S. farmland is currently certified organic (not possible to only offer that type of farm), we have even worked with a farmer in Arkansas to convert a conventional farm to organic production. There was an article published about the partnership in Successful Farming, and we will continue to pursue this type of win-win opportunity.
Thank you,
Michael
Hi Acretrader,
This all sounds great! Could someone from overseas invest with you though? I am assuming not, but just double checking.
Hi Jack – Currently the offerings are not available to international investors. If an investor is a U.S. Citizen or legal U.S. resident at the time of the offering they are able to participate. Hope this helps!
-Michael
Interesting stat on the loss of 3 acres of farmland in the US every minute. I had no idea. I’ve been to several fruit farms in California and love the ample fresh produce out here. I definitely appreciate what farms produce and am glad I can enjoy the produce without the hard work that goes behind it. Glad to see this investment opportunity.
What made you decide on the 10-30k minimums versus lower?
Thanks Untemplater, there are regulatory and compliance costs associated with investors from various states in each deal, so these minimums help generally keep the costs lower in order for us to adhere to a goal of low fees for all investors.
Hi Guys – What is the average investment duration period? Also, when choosing an investment, what are a couple key variables to look out for? I know you guys have carefully vetted all your deals and all seem good to you guys, but what should individual investors look for?
Any plans for a fund?
Hi Jenny, great questions! Investment period durations range from 3-10 years typically.
We focus on water, soils, and financial profile as a general statement, though our diligence team spends an exceptional amount of time underwriting each property. You can see more about this process from a recent webinar called Farming 101 on our Go To Stage channel by typing in the url for Go To Stage and adding /channel/acretrader.
What investors should look for are areas with solid farming communities, areas with very long-term sustainable water supplies, regular land shapes (eg squares and rectangles), etc. It’s a very long list given there are many variables at play with each investment, similar as it would be to investing in commercial real estate.
We always welcome your call to discuss our investment approach, our differentiated diligence process, and any individual farms on our site.
Thanks for the review! I’m curious to know the following:
* What type of crops are the most reliable?
* Are there types of crops that are a play on the vegetable meat craze by Impossible Foods and Beyond Meat?
* Trump has talked a lot about farmer subsidies and assistance since he was in office. What has he actually done? Were they beneficial?
* If Biden wins, what do you think are his policies for farmers and farmland?
Hi Andy, thanks for your questions!
As a general statement, corn and soybeans tend to be two of the most common crops in the U.S., though our country’s soils grow a myriad of great products! Legumes in general play an important part in new meat substitutes. And regarding government programs, these generally receive wide bipartisan support (farm programs have existed under many shades of red and blue in D.C.), as our country’s farmers play an incredibly important role in producing the food that we eat.