AcreTrader Review 2020
Getting into real estate investing can be tricky for the majority of investors out there, especially due to the high upfront capital involved. To invest in a duplex, for example, this often requires 20% down or more. If the property is $200,000 that means you need to pony up $40,000 not including closing costs!
Thankfully, the emergence of online real estate platforms and crowdfunding have made the process a bit easier for the average investor. It no longer requires tens of thousands of dollars to get started with real estate investing.
Today we review the AcreTrader platform to see what they bring to the table for crowdfunded real estate investing. This is a site that lets you invest in a lesser known asset which is farmland. The minimum investment of $5,000 to $10,000 is significantly lower than the costs associated with buying a rental.
- AcreTrader is a crowdfunded real estate investing platform for accredited investors who would like to invest in farmland.
- Investors using AcreTrader will be purchasing shares of farmland real estate which will then be leased out to individual farmers or farming companies.
- Investors may earn a return on their investment through dividends (rent payments) and/or capital appreciation (land appreciation).
- The minimum investment for AcreTrader ranges between $5,000 and $10,000.
- Some properties have a minimum of $50,000 to invest. We’ve seen on average $10,000 to $25,000.
- Though real estate is not the most liquid investment, AcreTrader offers the opportunity to sell your shares on a secondary market.
- Acretrader has done more than its fair share of due diligence in order to bring only the best investment opportunities to its platform.
- It also has a rating system for each investment so you can see all the risks involved.
|Limitations||Accredited Investors Only|
|Fees||0.75% Asset Management + Closing Fees|
|Time Horizon||5+ Years|
|Anticipated Returns||7% To 9%, Not Guaranteed|
|Returns||Through Asset Appreciation + Distributions (Rent From Farmers)|
|Liquidity||Low Liquidity, No Secondary Market|
What Is AcreTrader?
AcreTrader deals specifically with farmland as its real estate of choice, which is what makes the platform so unique. We have not come across another platform like this in our research! This is certainly not the first asset you think of when looking at real estate, but it should not be overlooked.
Investors have the opportunity to purchase plots of farmland and earn returns via rents from the land and appreciation in the land itself. The team handles all the paperwork, lease agreements and leg work for you.
Instead of having to buy farmland and work it to see profits, you can passively invest with AcreTrader. This is much easier than owning the farm yourself.
Carter Malloy founded this unique company back in 2018. While he had worked for some time in financial services, he got the idea for AcreTrader from growing up on his family’s farm.
This is a small company of around 10 people including their board of advisors and employees. However, they bring a wide array of experience to the table with expertise ranging from agriculture to financial services.
Since they have only been around since 2018, the operating history is very limited. Potential investors should keep this in mind!
How Does AcreTrader Work?
AcreTrader aims to earn returns for investors in two ways.
- Capital appreciation from the increase in the value of the land.
- Dividends via rent payments from the farmers.
AcreTrader investments are considered long term with a holding period of 5 years. Some farmland investments AcreTrader recommends holding for 10 or 20 years.
The company is highly selective about which assets of land they choose to be on their platform. Their website indicates that they only approve 5% of the opportunities that they research.
The minimum to invest with AcreTrader is $5,000. Some of their properties require that you invest in at least an acre or more, this can bring some properties minimum investments up to $50,000 in order to reap their benefits.
The holding period on their properties varies between 5 and 20 years. But you can sell your shares on the AcreTrader marketplace before your holding period expires.
However, in order to take advantage of anything on the AcreTrader platform, you must be an accredited investor. Though they do plan on adding the ability for the non-accredited to invest in the future.
Is AcreTrader Safe?
AcreTrader does seem to be a safe investment platform, however bear in mind the operating history is very limited. You can hold a bit of peace of mind by knowing that they hold an A- rating with the Better Business as of 2019.
Their founder and CEO is also the largest shareholder on the platform which gives him personal reasons to have the investor’s best interest at heart.
In addition to this while your funds are in escrow, they go through North Capital Private Securities Corporation who is a member of FINRA and SIPC.
The entity that holds the farmland shares is separate from AcreTrader as well, this means that should AcreTrader go out of business your money will be safe.
Of course with investments, there are no guarantees when it comes to safety and you may still operate at a loss. Even though their assets are low-risk, it does not mean that there is no risk involved.
Farmland is susceptible to unique risks such as natural disasters or poor weather which can have a dramatic impact on a farm’s profits.
If you have questions or concerns, we recommend reaching out to them directly! They are still a small company, so they will be very likely to get back to you with answers.
Investing In Farmland
Farmland is a strong asset class that has proven its' ability to deliver consistent returns over time.
Farming, in general, is considered less cyclical than other asset classes. Typically during a recession, farm production stays consistent as people still require food to live. This makes farmland less sensitive to economic cycles.
You can also add in the fact that farmland has been increasing in value in recent years because of the rising need for food and fiber across the globe. The United States has also made an effort in recent years to increase the amount of domestic farming.
One of the reasons AcreTrader stands out as a real estate investing platform is the ability to sell your investment on a secondary market. Though, there are no guarantees as to how much you will get for your investment.
This makes AcreTrader a slightly more liquid crowdfunded real estate investment than others. However just because there is a secondary market does not necessarily mean there will always be buyers. Especially during financially unstable times such as economic recessions.
As a general rule of thumb, you should not invest in crowdfunded real estate unless you have a time horizon of 5 years or more!
The marketplace also makes it much easier to make decisions regarding the properties you want to invest in. You can view all the details and fees associated with each parcel before you make your investment.
The company also goes one step farther to provide its users with a rating on each of their offerings in order to give them a better idea of what they are getting.
Their ratings range from A1 to D3 with A1 as the best and D3 being the worst. This rating involves a points system, the more points a property has the worse rating it is going to receive.
The rating system gives AcreTrader investors the ability to scrutinize each individual property and find the best investment.
There are several factors that determine the points allocation.
Here is what we have gathered from their site...
AcreTrader Point Rating Categories
History Of Flooding: Points will accrue if the property has experienced floods in the last 10 years that have damaged 10% or more of their crops.
Direct Operations Planned: This attribute determines if any of the investment capital is used for day to day tasks.
No Current Tenant: The property has a current vacancy.
No Direct Access To Maintained Roadway: Poor access to the farmland will make getting supplies and product delivery more difficult.
Water Access Problems: Issues with a consistent water supply could result in less crop yield for the farmland.
Nearest Crop Delivery Point Over 50 Miles: If the nearest crop delivery location is further than 50 miles away, it is considered a negative aspect of the property.
Improvements Planned During Holding Period: If there are planned improvements, this could result in a more profitable farm.
Debt Involved In Transaction: If debt is involved with a transaction, it is typically higher risk than a cash transaction depending on the circumstances.
High Loan To Value Of Debt: The loan to value ratio is the ratio of the amount of debt taken out for a transaction to the current market value of the property. A high LTV ratio is riskier for the lender.
Non-Farming Leases Or Income In Place: There may be other industries renting the land such as energy or crop storage.
Non-Farming Assets Valued As Part Of The Transaction: There may be other assets on the land that increase the value of the property.
Low Activity Land Sale Market: A point is given if there have not been land sales exceeding $100,000 within 100 miles of the property in the last 10 years.
Like most investment platforms, there are fees for investing.
Though it is free to sign up for AcreTrader and view their offerings, when you make an investment there will be fees attached.
There is a 0.75% asset management fee on the AcreTrader platform. This asset management fee is on an annual basis.
In addition, there is also a closing fee with each of the investments that you make, although it varies based on each deal. The average sits around 2% of your total investment amount for that property.
Since AcreTrader does offer services for farm owners as well it, is important to note that they do take a 5% fee when the underlying property is sold. This does not affect their investors as the owner of the property will be paying this fee.
Frequently Asked Questions
What Is An Accredited Investor?
AcreTrader only allows those with a net worth of $1 million+ or makes $200,000 per year ($300,000 if married) to participate in its crowdfunding platform. This is a regulation in place by the SEC related to investing in private placements or individual properties.
Individual Deals vs Portfolios
A lot of investors wonder about the risks associated with investing in these private placements. Individual deals expose investors to more risk, including with AcreTrader. By investing in a portfolio of deals, clients can diversify their risk across a wide array of properties. Investing in just one inherently comes with more risk.
What Is The Due Diligence Process Like?
AcreTrader takes a three-step approach to valuing the farms it invests in:
Primary Stage - “Sanity Check”
In the “Sanity Check” phase, AcreTrader looks at the prices associated with the farm, the potential problems with it, and the probability that the farm will pass the second and third stages of valuation.
Secondary Stage - “Documentation and Verification”
This stage is used in verifying the initial data associated with the farm while also doing extensive research on it. In this step, AcreTrader uses software analysis, mapping verifications, financial modeling, and AT scores to properly assess the farm on a future cash flow standpoint.
Final Stage - “Ground Check”
This stage mainly focuses on the “context” of the property. Looking at external factors such as the area that the land is located in and the people who live there are the main variables in this step of valuation. AcreTrader breaks this stage down into 6 main parts: area diligence, manager calls, tenant calls, comparable sales, government database data, and on-ground visit.
How Are Investments Sourced?
AcreTrader operates on a crowdfunding system where it pools a large sum of money from its high volume of clients to finance large investments. They are also compensated by farmers when they list their land on the site.
What Are The Anticipated Returns?
Over the past 20 years, US farmlands have posted an 11.5% average annual return. This would make an investment of $10,000 in 1999 worth $131,400 today.
AcreTrader’s return goal is set for 7% to 9% annually.
How Do You Sell Your Investment?
AcreTrader acts as a real estate platform for buying farmland. These investments are not liquid and since they are private transactions, it may be hard for clients to find a buyer when they want to sell.
You can sell your investment through the AcreTrader marketplace where they will attempt to find a buyer for the sell transaction. AcretTrader urges its investors to think long-term, however, and over a multi-year time horizon. This is not a short term or highly liquid investment.
What Customer Support Is Offered?
AcreTrader has a FAQ section on its website and also a comprehensive learning center. They also have a telephone line and email on their “contact us” page.
Why Invest In Farmland?
Farmland provides investors a tangible asset linked to their cash. Tangible investments such as this help to protect capital as it acts as a hedge against inflation.
What Is The Track Record Like?
AcreTrader has a team of management with decades of experience in the financial services and agricultural industries. The team has shown a combined track record of billions of dollars in revenue generated from investments.
How Are Taxes Handled?
Every year, cash distributions are paid out in December and tax documentation is provided by February of the following year.
How Does AcreTrader Make Money?
AcreTraer makes money by charging management fees on all of its investments. There is typically a fixed fee of 0.75% for management and also a closing fee associated with every selling transaction. They also earn money from farmers and landowners when they list their properties on the platform.
- Invest in farmland across the United States
- Good customer service
- High level of research
- Ability to sell your shares on a secondary market
- Only available to accredited investors
- Very new company with a limited history
- Higher minimum investment at $5,000
AcreTrader has built its system with the goal of making it easier to invest in farmland. Their platform is very easy to use and comes with a lot of great features for its members. The research tools make it very easy for accredited investors to perform due diligence on potential investments.
You can also rest easy knowing that AcreTrader turns down the majority of submissions for farmland for sale.
However, AcreTrader does fall short in a couple of regards.
Being available to accredited investors it severely restricts the number of people who will be able to take advantage of its services.
It is also a very new company, and while they have seen a lot of success, it is too early to tell whether or not it will persist.
AcreTrader does mention that they intend to offer their services to non-accredited investors in the future with access to Regulation A+ investments. However, that is not yet available today.
All in all, AcreTrader is a good system that still has a few hoops it will have to jump through in order to become truly great. If you are an accredited investor and would like to invest in farmland, then AcreTrade may be a great platform for you.