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For the everyday investor looking to get started with farmland investing, there has never been a better time.
The rise of farmland crowdfunding platforms has made it possible to access this asset class for as little as $100! Whereas in the past, investors typically had to pony up hundreds of thousands to invest in farmland directly.
Institutional investors like university endowments and pension plans have long known about the benefits of investing in agriculture. These investors have historically kept around 10% of their portfolio in natural resources. And for good reason!
At the same time, farmland experienced nearly a third of the volatility of the stock market. This has made farmland a desirable investment for many people looking to add diversification to their portfolios.
In this article, we are going to outline 6 of the top farmland investing platforms for beginners.
Accredited vs Non-Accredited Investors
There is one hurdle for many investors looking to invest through these platforms, this is becoming an accredited investor. In order to become an accredited investor, you'll have to meet certain income or net worth thresholds.
The reason that some of the platforms are limited to accredited investors is because they offer private placements. These types of investments are considered to have a higher level of risk and so the SEC wants to protect smaller investors.
The two main routes to becoming an accredited investor are having a $1,000,000 net worth or having an income of $200,000 or more ($300,000 if married). To meet the net worth requirement, you cannot include your primary residence in the calculation.
Fortunately, while many of these platforms require investors to be accredited, there are a number that do not. So whether you are an accredited investor or not, there will be something for you.
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#1 Pick For Accredited Investors: AcreTrader
AcreTrader is one of the most well-established farmland crowdfunding platforms out there.
Their low fees/minimums, high level of transparency and competitive returns set them apart from many of the other platforms. The are listing new deals every single week with minimums around $10,000. You can pick and choose what specific farms you want to invest in.
#1 Pick For Beginners: Steward
The minimum to get started as a lender on Steward is only $100.
What's more, is that you do not have to be accredited to participate in the lending platform. Steward is different from most of the other farmland crowdfunding platforms out there because they specialize in debt deals rather than equity.
Instead of buying shares of farmland, you are lending money that helps to support farmers and regenerative agriculture. Fixed repayment terms are set.
AcreTrader is one of the newer farmland investing platforms to hit the scene. Founded in 2018, the crowdfunding platform allows investors to pool their money together to purchase larger deals.
Since their launch, they have gone on to see significant traction. Over the last 3 years, Acretrader has raised over $20 million in funding to expand their platform.
You can invest in a variety of deals on the platform ranging across the United States. Most deals involve farmers selling their farm to investors, investors holding the property for a number of years, and selling it. While the property is held, it is rented out to another farmer to generate income for investors.
Returns on the platform vary based on each individual project. Investors are able to see an estimated cash yield and overall return for each deal and decide whether or not to invest.
Most projects on the platform have a cash yield of 3% – 7% and an overall return of 8% – 12%.
To get started on the AcreTrader, investors must invest at least $10,000 to $25,000. However, some projects on the platform will require a $15,000 – $25,000 minimum investment.
Investors should keep in mind that there is no secondary market on AcreTrader. As a result, you will not be able to sell out of your investments early and should be prepared to hold them through to completion. This will generally be a 3-5 year time frame.
Currently, the platform is only open to accredited investors.
There is a standard 0.75% annual servicing fee that will apply to all deals on the platform. Additionally, some deals will include a closing fee (paid by the investor) or a broker's fee (paid by the farmer).
Check out our full review of AcreTrader here.
FarmTogether is a farmland crowdfunding platform that launched in 2017. The objective of the company is to buy profitable farms throughout California and the Pacific Northwest and sell shares of these farms to investors.
Because the farms are already operational and profitable, investors are able to start generating cashflow immediately from their investment.
Each deal will have a time horizon listed at which point FarmTogether plans to sell the deal. This is when investors will receive the majority of their gains.
FarmTogether does offer a secondary market. This means that you may be able to sell your investment before the end of its time horizon.
However, in general, most farmland investing should be approached from a long-term perspective. In most cases, the majority of the gains will come from the eventual sale of the project which you will miss out on if you sell early.
Only accredited investors will be able to invest on the platform and minimum investment sizes start at $10,000.
In general, cash yields on the platform average 3% – 9%, and total returns average 7% – 13%. This is on-par for farmland as an asset class as a whole.
A useful tool that the FarmTogether platform offers is the Investment Size Calculator. On each specific deal, you can use this calculator to project your future cash flows for each year depending on how much you decide to invest. This tool does a lot to provide transparency for investors before committing to a deal.
For more information, see our in-depth review of FarmTogether.
Steward is a unique platform from the others because they exclusively offer debt or lending. The platform launched in 2016 and was designed to provide small independent farmers, ranches and fisheries with access to capital.
Historically, it has been difficult for these farmers to get bank loans, so as lender you'll be able to address this issue and help them in the process.
Another key benefit to Steward is the low minimum of just $100!
An advantage of participating in debt-based deals is that they tend to be more predictable than equity deals. That's because there is a set interest rate and payment schedule for each loan made on the platform. You know when you'll be getting paid back and how much ahead of time.
In general, this comes with slightly lower returns, as most deals on the platform have an interest rate of 5% to 10%.
Also, individual lenders do not pay anything to use Steward. Farmers pay a small fee to list their projects on the site.
Non-accredited individuals have access to all of the deals on the Steward platform, making them one of the best for beginners.
Check out our full review of Steward here.
Founded in 2015, FarmFundr allows investors to buy shares in entire farms, not just the land they sit on. As a result, investors receive a share of the profits generated when the harvest is sold.
Most farmland investments will pay investors periodically through rent payments from farmers, however, with FarmFundr the land is not being rented out. Instead, FarmFundr finds operators to manage the land and pays them directly.
By participating in the harvest, investors are taking on more risk and have the potential for greater upside. For example, on one of the deals on the platform, the harvest produced 8.8% more crop than expected and the selling price was 6% higher than expected. Because they owned the farm itself, investors were able to participate in these gains.
Only accredited investors can invest with FarmFundr and minimum investments start at $10,000 per deal.
One thing that you'll need to look out for if you plan on investing on the platform are the fees. Each deal will have a different fee structure that may include an upfront fee, an ongoing management fee, an incentive fee, or FarmFundr taking a portion of the equity stake in the deal.
Check out our FarmFundr review for more information.
5. Farmland LP
As the oldest crowdfunding site features, Farmland LP was founded back in 2009. The mission of the company is to move sustainable farming forward on a national scale by converting conventional commercial farmland into organic farmland.
Through their investments, Farmland LP is able to create significant value-adds through making improvements to the land. As a result of these improvements, Farmland LP can generate 4x as much profit-per-acre as conventional farmers.
Part of this is due to the supply and demand imbalance in the market for organic foods. Over 4% of all food consumption is organic, but less than 1% of farmland is organic. One of the reasons organic produce tends to be more expensive at the store is because there's just not enough of it.
By capitalizing on this trend, Farmland LP has consistently been able to deliver results that have beat expectations year-over-year.
Farmland LP only offers 2 investment options: a limited partnership, and a REIT. The limited partnership raised over $80 million and is currently not taking on any new investors. The REIT is taking on new investors and requires a hefty $50,000 minimum investment and is only open to accredited investors.
Here's our full review of Farmland LP.
6. Harvest Returns
Since 2016, Harvest Returns has been providing a way for farmers to raise funds and investors to generate returns. To date, the platform has raised over $11 million and funded 23+ different farms.
What sets Harvest Returns apart from many of the other platforms is the partnerships they have with farmers. Instead of establishing a transactional relationship, Harvest Returns works with farmers to ensure that they are able to get what they need from the platform.
Deals on the platform can be structured as debt or equity depending on what the farmer's goals are. Debt-based deals will generally have less risk and lower returns, whereas equity-based deals will tend to be more volatile with higher upside potential.
Fortunately, Harvest Returns allows a number of non-accredited investors to invest in many of the deals on their site. Due to the legal structure of many of the deals, as many as 35 non-accredited investors can participate.
With minimum investments as low as $10,000, this platform is more accessible to smaller investors.
Investors also have the option to invest on the platform using retirement funds. This is due to the partnerships Harvest Returns has developed with 9 different self-directed IRA providers. By rolling a retirement account to one of their partners, you'll be able to invest on a tax-advantaged basis.
Read our review of Harvest Returns for more info.