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AcreTrader Review 2021: Best Farmland Investment?
FarmTogether Review 2021: Best Farmland Investment?
Investing in farmland used to be a luxury only available to high net worth investors.
However, with the rise of farmland crowdfunding platforms, this is no longer the case. Investors can now access this lucrative asset class with as little as a few hundred dollars and diversify across dozens of farms.
This is particularly attractive when looking at how farmland has performed relative to stocks over time. Historically, farmland has experienced about a third of the volatility of stocks while seeing slightly higher returns.
At the same time, Farmland typically works to hedge against inflation and returns do not correlate highly with stocks.
So for investors in search of an effective way to diversify, these farmland investing platforms can be a useful tool.
In this article, we'll be comparing two of the most popular farmland investing platforms: AcreTrader vs. FarmTogether.
Although both focus on allowing investors to invest in agriculture, the way they do so is quite different.
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Summary: AcreTrader vs. FarmTogether
- Both platforms allow investors to purchase shares of farmland that is then rented out to farmers.
- In addition to rental income, both sites allow investors the potential to receive a share of harvest profits every year.
- FarmTogether provides a secondary market for investors to sell their shares early.
- AcreTrader does not currently offer a secondary market but is planning on adding one later in 2021.
- FarmTogether offers a sole ownership option to high net worth investors who wish to purchase an entire deal themselves.
- The minimum investment for FarmTogether starts at $15,000
- On AcreTrader the minimum investment is typically anywhere from $10,000 – $25,000 but will vary for each deal.
- AcreTrader charges a flat 0.75% annual servicing fee on all deals.
- FarmTogether's fees will vary from deal-to-deal, but typically include a 1% upfront fee and a 1% management fee.
- Both platforms require investors to be accredited before investing in deals.
What Is AcreTrader?
Founded in 2018, AcreTrader is a platform for allowing investors to purchase shares of farmland in order to diversify their portfolios. The platform was built to make investing in agriculture more accessible to the everyday investor.
Through AcreTrader, investors purchase 1-4 acre shares in large plots of farmland. Since even a farm of 200+ acres can sell for under $1M, investors can often get into deals on the platform for anywhere from $15,000 – $20,000.
So far, over 54 projects have been listed on the platform demonstrating that the platform has gained significant traction. In March 2021, the company raised $12 million in Series A funding; in June 2021, AcreTrader announced reaching a milestone of $100 million in assets under management.
However, being a relatively new company, they are still very easy for prospective investors to get hold of. A direct phone number and live chat make it easy to get questions answered before committing to an investment.
At the moment, AcreTrader is only available for accredited investors. This means you'll need a $1 million net worth (excluding your residence) or a $200,000 income. In the future, AcreTrader has stated that they will offer investments to non-accredited investors as well so stay tuned.
You can read our full AcreTrader review for more info.
How Does AcreTrader Work?
The AcreTrader investing process is relatively straightforward, especially for investors on the platform. AcreTrader handles all of the legwork and investors get to sit back and choose the investments that are right for them.
As a company, AcreTrader reviews a lot of prospective deals to include on the platform. Of those deals, they end up including less than 1% on the site for investors. This means you know that the deals you see are the best of the best.
Next, AcreTrader divides the property up into 1/10 of an acre sections for investors to buy. Investors then choose how many sections to buy and receive distributions according to their ownership.
AcreTrader handles all of the administration and management from then on out so investors have a 100% passive investment.
Farm rent is charged once per year, so investors will receive their distributions each December. These typically range from a 3% – 5% return. In addition, some farms will also pay a share of crop profits after the harvest.
Each property will also have a terminal date when the property will be sold and investors will receive a larger payday. This will typically be 3-5 years from the purchase of the property.
However, if investors wish to sell out early, they are exploring a secondary market they would be able to sell to. This has yet to be finalized though. So for now, investors should be prepared to hold their investments for the full duration.
According to their website, AcreTrader aims for a 3% – 5% cash yield on investments and a 7% – 9% IRR.
The cash yield is derived from the rent that farmers pay to use the land as well as the potential for a share in the harvest profits. The remaining portion of the return comes from the eventual sale of the property.
Given the average return of approximately 12% for farmland, investors may question why AcreTrader projects a lower return.
There are two reasons AcreTrader states for these projections:
- Currently depressed commodity prices
- Baking conservative predictions into their estimates
As a result of these safer projections, investors may end up seeing higher returns on their investments. However, because the platform is still relatively new it will take some time before we know how accurate these projected IRRs are.
Unlike many other farmland investing platforms, AcreTrader doesn't make its money from the fee they charge investors. Instead, they act as a broker when buying farms and charge the seller a 5% fee. This is similar to the role a real estate agent plays when buying or selling a house.
As a result, the fee for investors is relatively low and serves more like a break-even for the platform.
Investors pay a 0.75% annual servicing fee on their investment which is automatically deducted from the income of the farm. This covers things like administration and management costs of the land.
Some deals will also include a one-time closing fee to cover legal fees and other closing costs. This will be stated clearly on each deal as AcreTrader values complete transparency.
- Low and transparent fee structure
- Track record of 50+ successfully funded deals
- Proactive and easy to reach customer support and management team.
- Intense due diligence process, meaning investors are presented with the best farms only
- Can invest using a self-directed IRA
- More variety in the deals available allowing investors to build a diversified portfolio
- Higher minimum investment of $10,000 – $25,000
- No secondary market to sell positions early
- Only available to accredited investors
- Relatively short track record to assess investment performance, though the company has made timely distributions to investors since inception
What Is FarmTogether?
Through the platform, investors can access institutional-grade farmland investments without the hassle of buying directly. From due diligence, to legal paperwork, to investing in deals, all of it can be done directly through the FarmTogether platform.
Minimum investments start off at $15,000 per deal making it one of the more accessible options for farmland investing.
Additionally, the company has taken a firm stand on sustainability practices. FarmTogether aims to develop carbon-negative practices for their farms to create a positive social impact. They have been selected to demo a number of new technologies across their farms that benefit both farmers and the profitability of the farms.
As a smaller team, they're also very easy to get ahold of through the direct phone number on their site.
Currently, the platform is only open to accredited investors or wealth managers. Wealth managers can use the platform to create a more diversified portfolio for their clients. So if you don't meet the qualifications to become accredited you could talk to your financial advisor about getting set up on FarmTogether.
Check out our full review of FarmTogether to learn more!
How Does FarmTogether Work?
The FarmTogether platform provides one of the best experiences for investors out there.
First, the FarmTogether team sifts through hundreds of potential deals and conducts extensive due diligence to determine which deals will be listed on the platform.
There are dozens of variables that determine whether a deal gets listed but a few key factors are:
- Industry analysis
- Soil tissue
- Geographic location
- Water rights
- On-farm equipment
- Potential for capital improvements
Once it passes through due diligence, the property is listed for investors. Each listing includes detailed financial projections, value drivers for the project, risk factors, and full documentation of the project.
One feature that sets FarmTogether apart from many of the other farmland investing platforms is their Investment Size Calculator. This tool allows investors to see projected returns for their investment broken down year by year.
By providing this tool, it's clear that FarmTogether values transparency and wants to make clear to investors what to expect. You can also use this tool to adjust the size of your investment to exactly what you would like it to be. Unlike other farmland investing platforms where you have to buy farmland in “chunks”, with FarmTogether you can buy exactly how much you want.
Investors will also be able to take advantage of a number of tax-advantaged strategies when investing on the platform. This includes the use of 1031 exchanges and the use of a self-directed IRA through FarmTogether's partner AltoIRA.
Returns on FarmTogether come in the form of income and appreciation.
Investors receive income as a share of the rent paid by farmers as well as a share of crop profits come harvest time.
Appreciation is received when the property is eventually sold at the end of the holding period. FarmTogether has all of its properties appraised on an annual basis so investors have an idea of the current value of their investment.
The FarmTogether platform advertises average cash yields of 3% – 9% and overall returns of 7% – 13%. Each listed deal on the platform will have a breakdown of the expected return and how returns will be generated.
The fee structure on FarmTogether will vary from deal to deal. Each project on the platform will clearly state the costs associated with the investment so investors can make an informed decision.
In general, most deals will include two fees: a 1% upfront fee to purchase the investment and a 1% annual management fee. The management fee will automatically be deducted from the farm income.
- Ability to invest in farmland in a 100% passive manner
- Skilled management team has extensive experience in agriculture
- Secondary market allows investors to exit positions early
- Investment supports a positive environmental impact
- Investment Size Calculator provides transparency for investors
- Ability to invest using a self-directed IRA
- Ability to take advantage of 1031 exchange
- Only open to accredited investors
- Fee structure varies across each deal
Final Thoughts: AcreTrader vs FarmTogether
For investors in search of a way to diversify some of their portfolio into farmland, platforms like AcreTrader and FarmTogether have changed the game.
By making this asset class more accessible, investors now have the opportunity to purchase farmland for as little as $10,000. However, both of these platforms do require investors to be accredited before investing.
For our top pick for a platform that doesn't require investors to be accredited, check out our Steward Farmland Review!
With AcreTrader, you'll likely have more investment opportunities to choose from. You'll also find a lower and more transparent fee structure on your investments. The company is also quickly growing to include more experts in farmland, operations, and real estate so all tasks can be done in-house.
An investment through FarmTogether will greet investors with a more user-friendly experience and a skilled management team. In addition, you'll be able to sleep easy knowing that you are supporting investments that are making the world a better place and you can more easily sell your position through the secondary market.
Both platforms will provide investors with potential tax advantages through potential pass-through deductions and the opportunity to invest through a self-directed IRA. Farmland is eligible for many of the traditional tax advantages available to real estate investors as well as some others that are specific to farmland. Through both platforms, you'll be able to access many of these incentives.
Regardless of which platform you choose, the most important factor is when you start. With a growing world population and a shrinking supply of farmland across the US, an investment in farmland has significant growth potential. The best time to plant a tree was 20 years ago and the second-best time is today. The same applies to planting an investment in farmland.