I recently discovered a fascinating new site for accredited investors. It’s called AcreTrader, and it just launched this year. AcreTrader gives accredited investors the opportunity to buy pieces of real farms.
Here’s how it works, according to the site:
Each entity is divided into shares equivalent to 1/10 of an acre. So, if you buy 20 shares, your ownership represents the equivalent of 2 acres of land and the associated distributions.
AcreTrader takes care of all the due diligence (it selects less than 5% of the farms it reviews). It also handles managing the land, renting it to qualified farmers and coordinating all the other required details. The investors are passive and don’t have to get involved in the management of the farms at all. And there is an annual management fee of 0.75% (read more about how it works on AcreTrader).
I learned about AcreTrader on one of my favorite investing podcasts, The Meb Faber Show. AcreTrader founder Carter Malloy is very impressive. If you’re thinking about buying farmland online, I strongly suggest listening to the podcast. You’ll get a better understanding of how the site works and who is running it.
There are currently two farm offerings on AcreTrader. One is a traditional corn and soybean farm in Illinois. The minimum investment is $4,750.50, and the estimated return is 9.2% per year over approximately five years.
The other listing is an almond farm in California. The minimum investment for this one is $50,000, and it’s expected to yield 11.9% per year over five to 10 years.
The estimated returns are broken into two parts: rental income and land appreciation. Farmland is a scarce resource, so it tends to rise in value over time. When you combine annual rental income and price appreciation, most deals on AcreTrader should yield around 10% per year. After five to 10 years (usually), AcreTrader will sell the land and return any profits to investors.
AcreTrader is the most interesting accredited investing site I’ve come across in quite a while. Farmland is a unique investment, and I think it would make a great diversifier for most portfolios. I’ll be watching for great deals and will let you know if I see any. As far as I know, there are no other sites like AcreTrader in the U.S. So if you’re interested, take a few seconds and sign up for free.
Good investing,
Adam