Our in-depth review compiles crucial details to help you assess whether AcreTrader is legit, ensuring you make informed investment decisions.
What is AcreTrader and how does it work?
AcreTrader is a platform designed to simplify the process of investing in farmland. Functioning under AcreTrader Financial, LLC, a registered Broker-Dealer and member of FINRA/SIPC, the platform bridges the gap between agricultural landowners seeking to raise equity and investors looking to diversify their portfolio with farmland investments.
The process of investing through AcreTrader involves several key steps:
1. Farm Selection & Entity Creation: AcreTrader selects farmland based on quality, only choosing a small fraction of parcels it reviews. Each selected farm is then placed into a unique legal entity, typically a Limited Liability Company (LLC), to facilitate investment.
2. Investment: The ownership of each farm (or entity) is divided into fractional shares, making it possible for investors to purchase stakes in the property. Investors can buy shares according to their investment capacity, starting from a minimum investment threshold.
3. Farm Management: Once the investment is made, AcreTrader Management takes over the comprehensive administration and property management responsibilities. This includes handling insurance, accounting, liaising with local farmers, and focusing on sustainable practices to improve soil health.
4. Distributions: Investors receive distributions of any excess annual income generated from the farm. This could come from the sale of crops, rental income from the farmed land, or other revenue sources related to the property.
To ensure the security and legality of each transaction, funds from investors are held in escrow until the minimum subscription amount for the property is reached. Only then is the money transferred for the purpose of closing on the property. Each investor becomes a member of the entity owning the farm, holding a piece of real, productive land as part of their investment portfolio.
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How risky is AcreTrader?
3/5
— Moderate RiskInvesting through AcreTrader carries inherent risks, as no investment can be entirely free from potential losses.
Specifically, real estate investments, including those in farmland, are subject to several unique challenges and uncertainties:
- Casualty Risk: The risk of loss due to natural disasters or accidents that can damage property.
- Condemnation Risk: The possibility that the property could be seized by a government entity for public use, through eminent domain.
- Eminent Domain: A legal process through which the government can take private property for public use, often with compensation but not always to the satisfaction of the property owner.
It's crucial for potential investors to weigh these benefits against the inherent risks associated with real estate to make informed decisions.
How liquid is AcreTrader?
1/5
— Minimum LiquidityAcreTrader investments are inherently illiquid, aligning with the nature of real estate and farmland investments as long-term commitments. Investors should be prepared to hold their investments for the duration specified in the offering, which, in the context of Regulation D, Rule 506(c) offerings, generally means a minimum holding period of at least one year.
After the minimum holding period, investors may have the option to sell their shares in a private transaction, subject to the terms outlined in the LLC Agreement. However, it's crucial to consult with legal and tax advisers to ensure such a sale is permissible under the conditions set forth. Despite this possibility, there is no established market for these shares, which means there is no guarantee a sale can be executed, reinforcing the illiquid nature of these investments.
The shares or investment stakes in AcreTrader are not traded on public stock exchanges, making them difficult to sell or trade quickly. Any potential resale of an investment security would need to occur in a private transaction, adhering to specific restrictions for each investment and in compliance with the Securities Act of 1933. Given these resale restrictions can be quite limiting, investors should not anticipate the possibility of reselling their investment swiftly, if at all, and should view AcreTrader investments as illiquid assets meant for longer-term holding.
How volatile is AcreTrader?
3/5
— Moderate VolatilityThe assets available on AcreTrader are generally considered to be lower in volatility compared to traditional investment assets like stocks and bonds. Farmland, as a tangible asset, tends to exhibit less price fluctuation over short periods, owing to the intrinsic value of the land and its productivity. This stability is partly due to the essential nature of agriculture and the constant demand for food and agricultural products, which provides a buffer against the rapid changes often seen in financial markets.
Moreover, the value of farmland is not directly tied to the stock market's performance, making it a potentially attractive option for investors looking to reduce the overall volatility in their investment portfolio.
While all investments carry some level of risk and farmland is no exception, its historical performance suggests a trend of steady appreciation and resilience during economic downturns, further emphasizing its lower volatility nature.
However, investors should still conduct thorough research and consider their long-term investment goals and risk tolerance when investing in farmland through platforms like AcreTrader.
What is the average rate of return for AcreTrader?
9.4-30.3 %
— High ReturnThe returns on investments in AcreTrader can vary significantly, influenced by factors such as the duration of the hold period and the specific characteristics of the farmland.
Historical data from exited deals on the platform showcases a wide range of realized internal rates of return (IRR), exemplifying the potential outcomes for investors.
For instance, investments have seen IRRs as high as 30.3% over a 2.5-year period and as modest as 9.4% over a 4.2-year period. Other examples include a 14.9% IRR over 3 years and a 23.3% IRR over just 1.7 years.
These figures indicate that while farmland investment through AcreTrader can offer substantial returns, the performance of each investment can vary widely based on multiple factors, including market conditions and the effectiveness of farm management strategies.
What is the minimum investment amount for AcreTrader?
$15,000
The minimum investment amount on AcreTrader varies with each individual listing, reflecting the platform's approach to accommodating a range of investment capacities among its user base. This variability is influenced by several factors, including the total size of the offering, the price per acre, and other relevant considerations specific to each farm or property listed on the platform.
For most offerings on AcreTrader, the minimum initial investment typically starts at $15,000. This amount is designed to represent the investment value equivalent of approximately 1-5 acres of farmland on a pro-rata basis, depending on the specific parameters of each deal.
Additionally, it's worth noting that AcreTrader's portfolio of exited deals showcases a broad spectrum of minimum investments, ranging from as low as $3,000 to as high as $100,000.
What is the investment time horizon for AcreTrader?
3-10 years
The target hold periods for investments in AcreTrader typically range from 3 to 10 years. This window is not rigid, offering some flexibility regarding when a property might be sold.
The actual duration an investor might expect to hold onto a property before it is sold depends heavily on market conditions and the emergence of suitable buying opportunities. If an advantageous offer is presented, a property could be sold earlier than initially anticipated. On the other hand, if the market conditions are not favorable, the hold period might extend beyond the expected timeframe. This approach allows AcreTrader and its investors to adapt to the dynamics of the real estate market, aiming to optimize the timing of sales for the best possible outcomes.
Who can invest in AcreTrader?
United States
Investment opportunities on the AcreTrader Platform are exclusively available to accredited investors. According to the standards set by the Securities and Exchange Commission (SEC) under Rule 501 of Regulation D, individuals must meet specific financial criteria to be considered accredited investors. These criteria typically involve a certain level of income, net worth, or professional experience, ensuring that investors have the requisite financial sophistication and capacity to undertake the risks associated with private investments.
Furthermore, AcreTrader extends its investment opportunities to non-U.S. citizens, provided they are legal residents of the United States. This inclusivity allows a broader range of investors to participate in farmland investments, albeit within the regulatory framework designed to protect investors and maintain the integrity of the investment environment.
Is AcreTrader regulated or audited?
SEC Regulated
AcreTrader, in its capacity as a registered Broker-Dealer and a Member of FINRA/SIPC, operates within a stringent regulatory framework to ensure financial integrity and investor protection. This framework includes adherence to the Securities Exchange Act of 1934 (the "Exchange Act"), along with the rules and regulations set forth by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and applicable state laws. Such compliance underscores AcreTrader's commitment to upholding high standards of transparency and ethical business practices.
As part of its regulatory obligations, AcreTrader is subject to various laws, rules, and regulations that govern broker-dealer operations. This includes maintaining accurate financial records, undergoing regular inspections and audits by regulatory bodies, and adhering to ethical guidelines designed to protect investors and the integrity of the securities markets. These regulatory measures provide a foundation of trust and security for investors, ensuring that AcreTrader's operations are scrutinized and held to the highest standards of financial compliance.
Is AcreTrader insured?
Yes
AcreTrader doesn't specifically detail the insurance policies it holds for individual investments on its platform. However, in the context of real estate and farmland investment, it's common practice to insure properties against a range of risks such as natural disasters, fire, and other potential damages to protect the investment value. Investors considering AcreTrader should inquire directly about the specific types of insurance coverage applied to their investment to understand the protections in place for their assets.
Does AcreTrader distribute payouts?
Dividends
Investors in AcreTrader may receive distributions from net cash generated annually by the farmland investments, after operating expenses are covered. These distributions, typically made once a year in December, are not guaranteed in terms of amount or timing. The amount an investor receives is based on their proportional ownership of the Company.
To fully understand the potential for distributions and associated risks, it's important for investors to thoroughly review the offering documents of the specific deal they are considering. If distributions are made, AcreTrader usually credits the investor's allocated portion to their AcreTrader wallet, though alternate distribution methods may be accommodated upon request. For investments made through self-directed individual retirement accounts (SDIRAs) or IRA accounts, distributions are directed to the custodian as per their instructions.
How do I get my money back from AcreTrader?
Investors can expect to get their money back once the underlying property in which they have invested is sold, coinciding with the end of the property's expected hold period. These hold periods vary by property, with typical durations being 5, 10, or even 20 years, representing the time frame an investor should anticipate being involved with the investment.
What are the annual fees for AcreTrader?
Investors on AcreTrader encounter a few key fees at different stages of their investment journey. Initially, when making an investment, investors are responsible for covering various closing costs. These costs, which include legal and administrative expenses associated with setting up the investment, typically amount to approximately 2% of the total offering value, though this figure can vary.
Once the investment is active, there is an annual servicing fee of 0.75% of the land's value. This fee is paid to AcreTrader Management, LLC (ATM), an affiliate responsible for managing various aspects of the investment, including the land itself, relationships with farmers, as well as handling accounting, reporting, communication, and other administrative duties.
When it comes to revenue generation for AcreTrader and its affiliates, the primary source is the commission charged to the seller of the farm at the time of sale. This commission is typically set at a rate of 5% and is handled by AcrePro, LLC, another affiliate. Importantly, neither AcreTrader nor its affiliates impose a “carried interest fee” on offerings.
It’s essential for potential investors to note that the specific fee structure can vary between different deals. To understand the exact costs associated with any given investment, investors are advised to carefully review the listing details and offering documents for each property they consider investing in.
How do I handle my investments in AcreTrader?
Initially, investors can explore and evaluate available land investments, accessing comprehensive details about each property to make informed decisions. The platform facilitates secure transaction processes, allowing for a smooth investment experience.
After the investment is made, AcreTrader provides investors with a dedicated dashboard, accessible around the clock, enabling continuous monitoring of their investments. This dashboard serves as a central hub for investors to track the performance of their land investments, review financial statements, and stay updated on any developments related to their properties.
How does AcreTrader get taxed?
AcreTrader facilitates tax reporting for investors by aiming to deliver K-1 forms electronically through the platform by early March each year. The K-1 form is crucial for investors as it details their share of the profits, losses, and dividends from the investment, which is necessary for preparing their tax returns. However, the delivery of these forms can sometimes be delayed due to dependencies on outside reporting or the need for additional time to ensure the information presented is most beneficial to the investor. In certain cases, investors may need to file for extensions on their federal, state, and local tax returns to accommodate these delays.
Regarding the tax treatment of properties, those consisting solely of land are generally treated like other capital assets in tax reporting. Gains from properties sold within a year of purchase are taxed at short-term ordinary income rates, while those held longer are subject to long-term capital gains rates, which can vary based on the investor's income level. For properties with buildings or equipment, part of the gain might be taxed at ordinary rates up to the amount of depreciation previously allocated to investors, reflecting the tax implications of physical improvements and equipment on the property.
How many investors are on AcreTrader?
The website received an average of 57,000 visits in the last 3 months.
AcreTrader has funded 152 properties, showcasing its ability to attract and manage significant investment interest in the farmland sector. This achievement is further highlighted by the total equity raised through these investments, amounting to $371 million. Additionally, the properties funded through AcreTrader cover a vast expanse of land, totaling 51,300 acres.
Who is the CEO of AcreTrader?
Carter Malloy is the founder and CEO of AcreTrader. With roots deeply embedded in Arkansas farming, Carter's journey into the world of agriculture and investing was fueled by his upbringing in a farming family. His passion for agriculture seamlessly integrates with a robust background in investing, marking the inception of AcreTrader as a platform designed to democratize access to farmland investments.
Before the creation of AcreTrader, Carter was instrumental in the foundation of a global equity investment firm, dedicating five years to its growth and success. His role prior to embarking on his entrepreneurial journey involved a significant position at Stephens Inc., a notable private investment bank. There, as a Managing Director, he honed his expertise as an equity research analyst with a focus on Data & Analytics and Property Technology sectors, showcasing his ability to navigate and impact diverse investment landscapes.
Carter's professional journey is also marked by ventures into internet marketing and sustainable fuel technologies, evidencing a broad interest and commitment to innovation across various industries.
