AcreTrader is just like Fundrise, but for farmlands. Not familiar with both? Fret not, I got you. In particular, AcreTrader is a crowdfunded investment platform that allows individuals to buy shares of farmlands and realize possible gains with it. That’s without buying the whole thang. So, your usual REIT in short. But take note how I mentioned Fundrise first before REIT. I have my reasons why I did such and I’ll reveal it in the review below.
NEXT: Compare This To REIT
If you know Fundrise (you better be BTW, I have reviewed it here), you’ll get how it’s pretty problematic. Sixty plus complaints on BBB would indicate that. To some extent, AcreTrader is a bit problematic too, like Fundrise. Not as problematic to be fair, but still a teeny weeny problematic nonetheless. Hence, the reason I associate AcreTrader to Fundrise. Simple as that.
But how? To understand the problem with AcreTrader, let me explain how it operates first. To summarize, they’ll pool funds from different accredited investors to purchase farmland (that’s why I mentioned crowdfunded investment earlier), rent it out, then sell it after some time. That’s just the overview. For a much closer look on the process, let me share the deets that AcreTrader themselves listed on their website.
First, AcreTrader will select a farmland to purchase and put it, or its legal title rather, in an LLC. The latter process serves as a contract with the current land owner (before AcreTrader actually completes the purchase of the farmland), so AcreTrader will have enough time to complete due diligence, legal work, and raise funds.
Next, AcreTrader will open up investment opportunities. Y’know, the “raise funds” part. For each farm, one share means a tenth of an acre. Let’s say you’re interested in buying ten shares. That means you’ll have “ownership” equivalent to one acre of land. The computation would be ten multiplied to one tenth. Easy peasy math, amirite?
Then, AcreTrader will manage the said farmland. According to them, they’ll handle all the aspects of it, from collecting rent, securing insurance, to working with the farmers who’ll till the soil. All of that for a percent cut, their so-called administration fee. More on that later, but for now, let’s finish the discussion about the process with the last two steps.
The last two steps being distributing cash dividends (from rents) to investors annually, and then, selling off the land to give back appreciation (aka increase in value) to investors if there’s any. Given the nature of dividends, you can’t affix a fixed amount for it, but they list around 3%-5% in unlevered yield for low-risk properties. Meanwhile, selling off will only start after many years of holding the land. Around five to ten years, they say, although I see some chatters where they mentioned fifteen years as the standard.
Now we’re done with the process, let me tell you why it’s a bit problematic. One, your investment will be locked out from you for so many years. Five years, fifteen years, that kinda long. Not that I’m surprised because real estate space is known for highly illiquid assets. And just like Fundrise, they don’t give a flying f*ck ‘bout your feelings. Need funds for an emergency? Too bad, you can’t withdraw your OWN money out of the investment.
Two is something about the administration fee. A .75% cut on overall farm value and yearly income might seem small, but it really isn’t. Not when it’s fixed even on a down year. Not to mention the other fees on top of it that’ll definitely cut your earnings even further, if there’s any at all. I don’t know about you, but I won’t be fine with assuming all the financial risks as an investor. They can seriously just f*ck around and earn a large profit themselves while you, the one funding the thang, will likely end up losing money. Unfair!
My final reason why I say they’re a bit problematic is their lack of track record. Like, they haven’t completed a deal yet. Meaning, they’re not able to go through the whole process I mentioned earlier on any single farmland yet. Expected from a process that drags over time, but I wouldn’t want to be the Guinea pig trying this one out. Not when it’s hella expensive too, with AcreTrader charging a price of at least $16k for each share.
That being said, I’m not going to recommend AcreTrader. Especially not to newbies who might be tempted to invest what they CANNOT afford to lose. Although, those newbies won’t likely be able to invest given the (usual) high standards of being accredited investors. If you can be, then still don’t invest, er, gamble your money here, I guess.