Detailed AcreTrader Review 2020: crowdfunding real estate investment with AcreTrader
Our AcreTrader Review - Updated 30th June 2020
Getting into real estate investing can be difficult for most investors out there, particularly because of the high upfront capital involved. For example, investing in a duplex often requires 20% down or more. If the house is $200,000, that means you need to cough up $40,000, not counting closing costs!
Fortunately, the advent of online real estate portals and crowdfunding has made the process a bit simpler for the average homeowner. Tens of thousands of dollars are no longer expected to start investing in real estate.
Today, we're evaluating the AcreTrader platform to see what they're adding to the crowdfunded real estate investment table. This is a website that helps you to invest in the lesser known farmland commodity. The estimated contribution of $5,000 to $ 10,000 is considerably lower than the cost of purchasing a rental.
- AcreTrader is a crowdfunded real estate investing site for licensed investors who would like to invest in farmland.
- Investors using AcreTrader will buy farmland real estate shares, which will then be rented to private farmers or farming firms.
- Investors may make a return on their investment through dividends (rent payments) and/or capital appreciation (land appreciation).
- The minimum to invest in AcreTrader is between $5,000 and $10,000.
- Many properties have a total cost of $50,000. We've seen an average of $10,000 to $25,000.
- While real estate is not the most liquid property, AcreTrader provides the ability to sell the stock on a secondary market.
- Acretrader has done more than its fair share of due diligence to add only attractive investment options to its website.
- It also has a ranking system for each investment so that you can see all the risks involved.
AcreTrader deals primarily with farmland as its preferred real estate, which is what makes the site so special. We haven't come across any forum like this in our study! Farmland is definitely not the first thing you think of when you look at real estate, but it should not be ignored.
Investors have the opportunity to purchase farmland plots and to earn returns through land rents and appreciation in the land itself. The staff does all the papers, rent agreements and legwork for you.
Instead of buying farmland and trying to earn money, you can actively invest with AcreTrader. It's a lot better than buying the property yourself.
This unique business was created by Carter Malloy back in 2018. Although he had worked in financial services for some time, he had the idea for AcreTrader from growing up on his family farm.
This is a small organization with about 10 people, including its board of advisors and staff. However, they bring a wide variety of skills to the table, ranging from agriculture to financial services.
Since it has only been around since 2018, the operational history is very limited. Potential investors should keep that in mind.
How Does AcreTrader Work?
AcreTrader aims to make returns for investors in two ways.
- Capital appreciation of the increase in the value of the land.
- Dividends from farmers' rent payments.
AcreTrader investment is considered to be long-term with a holding period of 5 years. Some farmland investments AcreTrader suggests holding for 10 or 20 years.
The company is highly cautious about which land assets they want to be on its platform. Their website indicates that they approve just 5% of the researched opportunities.
The minimum amount to invest with AcreTrader is $5,000. Some of their properties allow you to invest in at least one acre or more so that some owners can make minimum investments of up to $50,000 in order to reap their benefits.
The holding period for their properties range between 5 and 20 years. But before your holding period expires, you can sell your shares on the marketplace of AcreTrader.
Nevertheless, to take advantage of anything on the AcreTrader website, you must be an accredited investor. Although they plan to add the ability for the non-accredited to invest in the future.
Is AcreTrader Secure?
AcreTrader does seem to be a safe investment site, but keep in mind the operational history is quite minimal. You should be comforted a bit by realizing that they hold an A-rating with the Better Business as of 2019.
Their founder and CEO is also the largest shareholder on the website, giving him personal reasons for the best interest of the company.
In fact, once the funds are in circulation, they move through the North Capital Private Securities Corporation, which is a member of FINRA and SIPC.
The company controlling the farmland shares is also independent from AcreTrader, which ensures that if AcreTrader goes out of business, the capital will be safe.
Of course, for investments, there are no promises when it comes to security, and you can still run at a loss. Even though their investments are low-risk, this does not mean that there is no risk involved.
Farmland is vulnerable to unique risks, such as natural disasters or poor weather, which can have a dramatic impact on farm income.
If you have any questions or concerns, we suggest that you contact them directly! They're still a small company, so they're very likely to come back to you with feedback.
Investing in Farmland
Farmland is a solid asset class that has demonstrated its ability to deliver stable returns over time.
Farming is generally considered to be less cyclical than other classes of assets. Usually, agricultural production remains consistent during a crisis, as people still need food to survive. This makes agricultural land less vulnerable to economic cycles.
You can also note that the value of agriculture has increased in recent years due to the growing need for food and fiber around the globe. In recent years, the United States has also made an effort to increase the amount of domestic cultivation.
One of the reasons AcreTrader stands out as a real estate investment website is the ability to sell your property in a secondary market. However, there are no promises as to how much you're going to get for your money.
This makes AcreTrader a somewhat more liquid crowdfunded venture in real estate than others. However, just because there is a secondary market does not necessarily mean that there will always be buyers. Especially during financially unstable periods such as economic recessions.
As a general rule of thumb, you should not invest in crowdfunded real estate unless you have a 5 year or more time horizon!
The economy also makes it much easier to make decisions about the assets you want to invest in. Before you make your purchase, you can see all the information and fees associated with each parcel.
The business is also taking a step further to give its customers a ranking on each of their products in order to give them a better idea of what they are receiving.
Their ratings range from A1 to D3, with A1 being the best and D3 the worst. This ranking requires a set of points - the more points a property has, the worse rating it will earn.
The rating system enables AcreTrader investors to track each individual asset and find the best investment.
There are several factors that determine the distribution of points.
Here's what we've got from their site...
AcreTrader Point Rating Categories
History of Flooding: Points will accrue if the property has suffered floods in the last 10 years that have destroyed 10% or more of its crops.
Direct Operations Planned: This attribute determines whether an investment capital is used for day-to-day tasks.
No Current Tenant: The property is currently empty.
No Direct Access to Maintained Roadway: Inadequate access to farmland would make it more difficult to get supplies and supply goods.
Water Access Problems: Concerns with reliable water supply may result in lower crop yields for farmland.
Closest Crop Distribution Point Over 50 Miles: If the closest crop distribution place is more than 50 miles away, it is seen as shortcoming of the property.
Changes Planned During the Holding Period: When improvements are made, this might result in a more productive farm.
Debt Involved In Trade: If debt is involved in a deal, the risk is normally greater than the cash transaction, depending on the circumstances.
High Loan to Debt Value: The loan to value ratio is the ratio of the amount of the debt paid out for the trade to the actual market value of the land. The high LTV ratio is more dangerous for the lender.
Non-Farming Leases or Profits In Place: There may be other industries renting the land, such as energy or crop storage.
Non-Farming Assets Priced as Part of the Transaction: Other assets on the land that can increase the value of the property.
Low Activity Land Sale Market: A claim is made if there has not been a sale of more than $100,000 in land within 100 miles of the property in the last 10 years.
Fees for AcreTrader
Like other investing sites, there are investment costs to be considered here.
While it is free to sign up for AcreTrader and browse their products, when you make an purchase, there will be fees added.
There is a 0.75% risk management charge on the AcreTrader website. This asset management fee is paid on an annual basis.
In fact, there is also a closure fee for each investment you make, but it depends on the basis of each arrangement. The average is around 2% of your overall investment sum for that land.
Since AcreTrader also offers services to farm owners, it is important to note that they pay a 5% fee when the underlying property is sold. This will not influence their creditors because this fee would be charged by the owner of the land.
Pros of AcreTrader
- Invest in farmland across the States
- Good service to the consumer
- High degree of analysis
- Opportunity to sell your stock on a secondary market
Cons of AcreTrader
- Not open to approved investors;
- Quite fresh limited-history business
- Higher minimum investment of $5,000
The AcreTrader has built its system with the aim of making it easier to invest in farmland. Its app is very easy to use and comes with a lot of great features for its users. Research tools make it very easy for accredited investors to practice due diligence on potential investments.
You can also rest easy knowing that AcreTrader rejects the majority of farmland submissions for sale.
However, in a few ways, AcreTrader falls short.
Being only open to accredited investors greatly restricts the number of people who will be able to take advantage of its services.
It's also a very new company, and while they've seen a lot of success, it's too early to tell whether or not it's going to continue.
AcreTrader states that it plans to provide its services in the future to non-accredited investors with access to Regulation A+ investments. That is not yet available today, however.
All in all, AcreTrader is a good platform that still has a few hoops to jump through in order to be truly great. If you are an accredited investor and would like to invest in agriculture, then AcreTrade can be a great platform for you.
AcreTrader main features and highlights
- Agricultural Real Estate
- Commercial Real Estate