AcreTrader ReviewOther Passive Income Ideas
- Basics: AcreTrader is a real estate investment platform that connects investors to farmland through private placements.
- Pros: AcreTrader properties come with regular cash flow and the potential for appreciation. Investors can buy farmland without having to buy a property of their own.
- Cons: AcreTrader charges a 2% fee upfront plus an extra 0.75% per year, and the investments come with relatively modest target returns (typically under 10%).
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What Is AcreTrader?
AcreTrader is a real estate investing platform that offers a unique focus on farmland.
Investors can purchase shares in private farmland placements with a minimum investment of $15,000 to $25,000.
Properties generally come with a regular cash yield, and investors will also get a cut of any profits when the asset is liquidated.
AcreTrader At a Glance
|Minimum Investment||Varies, typically $15,000 to $25,000|
|Annual Fees||2% fee upfront plus 0.75% per year|
|Lock-Up Period||Typically five to 20 years|
|Project Types||Mostly property management, some renovations|
|Regions Invested In||Mostly US|
|Tax Structure||Usually LLC|
|Tax Document Provided||Schedule K-1|
How Does AcreTrader Work?
AcreTrader gives users access to private farmland investment opportunities.
Instead of buying an entire property themselves, investors can purchase a proportional share with a minimum contribution that typically ranges from about $15,000 to $20,000.
Investments are generally expected to last about five or ten years, but the timeline is different for each property and can change after the acquisition depending on market conditions.
If you invest with AcreTrader, you’ll receive a regular dividend as well as a share of any profits from the eventual sale of the property.
AcreTrader connects investors to farmland, offering farms in different locations and with different sets of crops.
Each listing comes with information about the property’s agricultural and financial situation.
After clicking on a property, you can see the types of crops it grows, the total acreage, the climate of the region, the sponsor’s track record, and more.
While AcreTrader can’t guarantee that any property will achieve the listed projections, I felt good about the degree of detail that the platform provides to investors.
AcreTrader has been involved with properties in locations around the world.
Most of the properties I saw were in the central and western US, but there were also some in other states and even two in Australia.
AcreTrader only aims to list one or two new properties per week, so you might have to wait a few weeks to find a property that stands out to you.
AcreTrader generally offers established farmland that has already seen successful harvests.
Some projects involve significant improvements intended to add value and increase the potential gain for investors.
However, most developments seem to be limited to basic maintenance and renovations, which could reduce the possible upside while also reducing risk.
Many offerings include a moderate allocation for maintenance and/or renovations. You can see that information by clicking on a particular listing.
Finger Lakes Organic Farm, for example, comes with an allocation of $150,000 for capital improvement.
These allocations are distributed equally throughout each investment. The overall price of Finger Lakes Organic Farm is about $2.9 million, which means that about 5% of each contribution will be left for the required developments.
Projects that involve more substantial development will generally offer more upside since the changes could lead to extra appreciation. At the same time, you’ll also be betting on the sponsor to leverage the developments into greater cash yields or a higher resale price at the end of the term.
AcreTrader’s website states that its typical IRR goals are 7% to 9%. However, each AcreTrader listing comes with its own terms and projections.
The Mullen Farm offering below, for example, was expected to produce a gross cash yield of 4.4% per year, or a net cash yield (including expenses) of 2.2% per year.
Combined with AcreTrader’s expected appreciation of the land, that leads to a net annual return of 8.1%.
Most of the other listings I saw included a projected net annual return of between roughly 7% and 9%, with some closer to 15%.
While these figures are based on historical trends, farmland is subject to a variety of risks. There is no guarantee that any particular property will generate the estimated return or even allow investors to recoup their funds.
More importantly, you might be wondering whether AcreTrader is worth it with a target return under 10%.
Personally, I wouldn’t feel confident evaluating the risks of a specific plot of farmland, which made me hesitate to buy in for such a low return.
Unless you have experience with farmland, you may have the same difficulty when browsing through AcreTrader’s listings.
The minimum investment for AcreTrader properties is usually around $15,000 to $25,000.
Shares are equivalent to a stake of 1/10 of an acre, but the minimum investment tends to cover at least a full acre.
Buffalo Lake Farm contains 386 acres and has a total price of $4,064,580, which works out to a per-acre rate of $10,530.
The minimum investment is $21,060, equivalent to the price of two acres or 20 shares.
On the other hand, Odell Farm has a minimum investment of $20,075, or 2.5 acres (25 shares).
According to the AcreTrader website, minimums reflect an investment of about 1-4 acres.
Keep in mind that the size of your investment doesn’t actually correspond to any physical land.
It’s not as though you would own five acres on one side of the farm and another investor would own another five acres somewhere else. The “acres” terminology is only intended to represent the proportional share of each investor’s holdings.
Investment Duration and Lock-Up Period
It’s important to understand that AcreTrader is designed to be a long-term investment.
When I created my account, the only current offering came with an expected ownership duration of five to ten years. That matches up with the listed range of five to 20 years.
As a 506(c) offering, AcreTrader gives investors what are known as restricted securities. Restricted securities are usually legal to sell after a holding period of six months or one year.
That said, just because you can legally sell your shares doesn’t mean that it will be practical to do so.
If you want to liquidate your investment, you’ll have to do the legwork to find another investor who is interested in buying you out.
The AcreTrader FAQ section notes that the team is exploring the possibility of a secondary marketplace, which would enable investors to trade assets after the one-year lockup period.
However, there is no guarantee that this marketplace will ever be set up, or that it will lead to any demand for AcreTrader assets.
Again, this led me to question whether AcreTrader’s offerings were worth the limitations.
If I’m going to put my hard-earned cash into a single investment for years at a time, I want to know that I’m getting something special in exchange for that commission.
With relatively unimpressive targets, a large minimum investment, and a significant degree of risk that I may not be able to fully evaluate, I had mixed feelings about AcreTrader’s overall value proposition.
Vetting and Review Process
AcreTrader describes its three-step property evaluation process in a detailed blog post.
First, their team takes a basic look at a potential property in order to determine whether it’s worth more attention.
At this stage, they focus on criteria that are easy to evaluate. For example, they consider a property’s purchase price as well as its monthly rent. They also look for obvious issues with the property itself such as a poor location or a small percentage of arable land.
The second stage focuses on collecting official documentation to verify the initial analysis. The AcreTrader team will also create more detailed maps of the property to understand its physical characteristics.
Finally, the third stage or “ground check” is all about evaluating other factors that could influence the property’s potential.
AcreTrader contacts the current tenants along with local managers who can provide deeper insight into the location. Someone from the AcreTrader team also performs an onsite inspection to make sure there aren’t any problems that went unnoticed in the first two stages.
While you can trust AcreTrader to provide an accurate assessment of each property, this doesn’t necessarily mean that a property will achieve the forecasted results.
You should always look into the information provided with each listing to make your own evaluation of the upside and risk.
When you invest with AcreTrader, you’re joining an LLC that owns a particular farm.
You’ll receive a Schedule K-1 form in the first few months of each year reflecting any income from your AcreTrader properties.
In general, LLCs are treated as pass-throughs, which means that returns are taxed as the income of the individual investors rather than the income of the LLC itself.
Of course, you should contact AcreTrader directly or consult a tax professional if you have any questions about potential tax obligations.
Unlike some other digital real estate platforms, AcreTrader is currently only open to accredited investors.
If you’re investing as an individual, you must meet at least one of these criteria to become an accredited investor:
- Have an annual income above $200,000 ($300,000 including spouse or spousal equivalent) in each of the last two years, with the expectation of the same for the current year
- Have a net worth above $1 million, whether alone or including a spouse or spousal equivalent, excluding the value of your primary residence
- Hold in good standing a Series 7, 65, or 82 license
If you’re investing through an entity, you may also be eligible if that entity meets one of these two descriptions:
- A trust with total assets or investments over $5 million that was not created specifically for investment in AcreTrader, and which is directed by a sophisticated person
- An entity all of whose owners are accredited investors
AcreTrader states that it expects offerings for non-accredited investors in the future, but there aren’t any more details at this point.
Investors who want to get involved in the real estate market but who do not meet the criteria for accreditation may be interested in another public platform such as HappyNest or DiversyFund.
AcreTrader offers email and phone support. You could also try to get in touch with them on Twitter, Facebook, Instagram, or LinkedIn, but AcreTrader doesn’t seem to engage directly with its social media audience.
I sent an email with a straightforward question late on a Thursday night and got a response around 10 AM the following morning.
I wasn’t able to find any clearly listed support hours. That said, the company is based in Arkansas, so I would expect a quick response anytime during normal business hours in Central time, which is one hour earlier than Eastern time and two hours later than Pacific.
You don’t have to pay to create an AcreTrader account or view listings, but there are some costs associated with each investment.
First, closing fees typically work out to 2% of the total value of each offering. If you put $20,000 into a property, for example, you should expect to pay $400 upfront.
Furthermore, investors also pay an annual servicing fee equivalent to 0.75% of the value of the land.
Including both the initial 2% fee and the recurring annual charge of 0.75%, a $20,000 investment would lose more than $1,800 in fees over a period of ten years.
On one hand, that’s undeniably a lot of money. On the other, it’s a fairly competitive fee structure for a crowdfunded real estate investment.
Example AcreTrader Investment
AcreTrader is one of the only farmland-specific real estate platforms I’ve seen, but the investing format reminded me of my experience with CrowdStreet.
Like CrowdStreet, AcreTrader connects members to individual projects and is limited to accredited investors.
Both providers also list investments from third-party sponsors.
Is AcreTrader Legit?
AcreTrader is a legit real estate investing platform with BBB accreditation and an A+ rating.
AcreTrader’s real estate offerings are made under SEC Regulation D.
Regulation D allows AcreTrader to provide real estate investments while being exempt from SEC registration. However, Regulation D offerings are still subject to certain basic rules including antifraud and civil liability provisions.
Crucially, Regulation D exemptions come with restrictions on selling to non-accredited investors, which is one reason why AcreTrader is only open to accredited investors.
If AcreTrader wanted to accept purchases from non-accredited investors, it would have to stop marketing its offerings to the general public and provide more detailed information including financial statements.
Regulation D is commonly used by real estate investment platforms that want to offer private placements without going through SEC registration.
With that being said, this also doesn’t mean that AcreTrader is perfect or that you can disregard the risks of investing in real estate. You should always come to your own judgment about each offering, but you can at least trust that you are receiving accurate information.
Like any other real estate asset, the farmland offered on AcreTrader is subject to both natural and market forces that are inherently unpredictable.
Furthermore, investing in individual properties gives you more exposure to random risks.
For example, you could lose most or all of your investment simply due to a fire or other disaster that happens to impact your property.
|bleaaaaaaaaaah (Reddit)||bleaaaaaaaaaah was happy with AcreTrader’s ease of use and proactive communication. On the other hand, they had some concerns with the investments themselves. They were concerned about investing so much into an individual property, especially given the long-term commitment.||bleaaaaaaaaaah offered a relatively balanced picture of AcreTrader. One concern was their note that AcreTrader was planning to introduce a secondary market —I signed up nine months later and found that there still hasn’t been any update on this new feature.|
AcreTrader Pros and Cons
If you’re interested in investing in farmland, AcreTrader will make it easier to get into the market by vetting properties and managing them after the acquisition.
- Exposure to Farmland: AcreTrader is one of the only platforms connecting retail investors to opportunities in commercial farmland. You’ll be able to invest in farmland without having to buy a property yourself.
- Cash Rent: Along with gains from appreciation, AcreTrader also gives investors dividends through cash rent. Cash yield is projected at 3% to 5% for most properties.
- Flexibility: Rather than combining multiple properties into a single fund, AcreTrader gives investors the chance to research specific offerings and invest in projects that match their time horizon and risk tolerance.
- Minimum Investment: Most AcreTrader projects come with a minimum investment in the tens of thousands of dollars.
- Requires Accreditation: Most everyday investors do not meet the criteria for accreditation, which is required to invest with AcreTrader.
- Liquidity: While AcreTrader is planning to implement a secondary market, there is currently no easy way to liquidate an investment in AcreTrader.
Alternatives to AcreTrader
|Accredited Investors Only?||
Is AcreTrader Worth It?
AcreTrader clearly isn’t going to make sense for every investor, but it could be a good option for accredited investors who want to buy farmland through private placements.
Who AcreTrader Is Best For
AcreTrader is best for people who want to invest in farmland but aren’t ready to buy a property of their own.
If you are interested in farmland and you have several years to wait for your investment to mature, AcreTrader could be an ideal choice.
While virtually every asset class has at least some interplay with the rest of the market, farmland has a relatively low correlation with stocks, bonds, and other asset classes.
That also makes AcreTrader a natural choice for those who are heavily invested in certain kinds of assets and looking for a way to expand their portfolio.
Who AcreTrader Is Not For
Since AcreTrader properties are generally held for five years or longer, it’s not as practical for those who want a more liquid investment.
Additionally, farmland doesn’t offer the same potential for rapid growth that you can get with other investments.
With that in mind, AcreTrader doesn’t make sense for investors who are willing to take on more risk in exchange for additional upside.
Finally, another potential issue for investors is that AcreTrader focuses on individual properties instead of diversified portfolios.
Even though farmland has relatively low volatility as an asset class, diversifying tends to reduce risk compared to investing in a smaller number of assets.
How to Use AcreTrader (Step-by-Step)
- Click the “Sign Up” button at the top-right corner of the AcreTrader homepage.
- Enter your name and email address, or connect AcreTrader to your Facebook, LinkedIn, or Google account.
- Verify your status as an accredited investor, or indicate that you do not meet any of the required conditions. You will also be asked whether you have any experience investing in farmland.
- Enter your password and phone number, and finally confirm your email address to complete your registration.
Farmland isn’t the most exciting asset, and investors may be turned off by AcreTrader’s extensive holding periods.
Personally, if I had $25,000 or more to put into a single investment, I would think twice about a platform with low target returns and a long-term commitment in a niche that I don’t know very much about.
That said, many of AcreTrader’s listings come with strong cash flow, giving investors consistent returns on top of any gains from appreciation.
If farmland is something you’re interested in, AcreTrader could be a good way to get started.
Frequently Asked Questions
- Do I have to be an accredited investor to invest in AcreTrader?
While AcreTrader expects to offer assets for investors without accreditation in the future, it is currently limited to accredited investors.
- How do I withdraw from AcreTrader?
AcreTrader is primarily intended as a long-term investment, typically coming with hold periods of five, ten, or 20 years.
- Who owns AcreTrader?
AcreTrader was founded by Carter Malloy, who also currently serves as the company’s CEO. Malloy has extensive experience in major investing firms, but AcreTrader is his first project that’s specifically focused on farmland.
Katherine Peach is the former managing editor of Money Done Right. She has more than 12 years of experience in the financial industry. She particularly enjoys writing about stocks and the markets, as well as investing in art and antiques. Learn more about Katherine.