I believe in being aware of both my financial responsibility and social responsibility when I invest money, don’t you? I’m hard-pressed to find any investment that’s more sustainable than farmland.
After all, land (in this context at least) has been around for millennia, and farmland likely will be around in future millennia. To me, farmland is the ultimate sustainable investment.
Investing in farmland is like investing in humanity. The global population is growing and is expected to reach more than 9 billion people by 2050. But, our supply of arable farmland isn’t growing. In fact, the supply of farmland is shrinking. Some years we lose more than 1 million acres of farmland in the United States alone.
Population growth means we’ll need 70 percent more food by 2050. Rising incomes throughout the world also mean that people are consuming more calories. To continue to be able to feed the growing population, we need to keep all our farmland, and we need to do all we can to improve the productivity of each acre. If we truly want to support and sustain the planet, we need to do all we can to support the farming industry.
Table of Contents
- The Trend Toward Farmland Investing
- Who Should Invest In Farmland?
- How to Invest in Farmland
- What is AcreTrader?
- How AcreTrader Works
- AcreTrader’s Impact
- What is FarmTogether?
- How It Works
- FarmTogether’s Impact
- AcreTrader vs FarmTogether: What are the Differences?
- Minimum Investments
- Different Investment Types
- Fee Structure
- AcreTrader vs FarmTogether: What are the Similarities?
- Support of Farmland as a Good Investment
- Mission Statements and Vision
- A Relatively Small Minimum Investment
- Free Signup
- Experienced Management Teams
- Innovative Technology
- Support of Various Account Types
- The Opportunity to Choose Your Investments
- Which is Better AcreTrader or FarmTogether?
- What is Better About AcreTrader?
- What is Better About FarmTogether?
- Who Should Get AcreTrader?
- Who Should Get FarmTogether?
- The Bottom Line
The Trend Toward Farmland Investing
I’m not the only one who believes that farmland investing is a good idea. Billionaire Bill Gates has bought more than 260,000 acres over the past few years. Jeff Bezos also is making farmland investments. If they see farmland as a good personal finance choice, then I do, too.
A farmland investment can help me build wealth. Historically, farm properties, like other types of real estate, have provided excellent returns and have been a great hedge against inflation. Farmland’s past performance demonstrates a 70 percent correlation with the Consumer Price Index.
While the value of other investments rises and falls, farmland has consistently had positive returns since 1990. The falling supply of land and rising demand for food will cause farmland prices to increase, meaning that I can sell my farmland at a profit in the future if I want to.
Farmland can also be an excellent source of passive income, especially rental income from leasing the land. Net farmland income increased 25 percent from 2020 to 2021, and estimates say that double-digit growth will continue.
Who Should Invest In Farmland?
Farmland investing is a good opportunity for people like me who own other types of investments to diversify. While farmland is historically a particularly lucrative investment, not everyone should invest in it. Farmland deals are best suited to individuals who can afford to keep their money invested for the long term, such as five to 10 years or longer.
Also, even with crowdfunding platforms such as AcreTrader and FarmTogether, investors still need at least to make minimum investments of at least $10,000. Finally, most of the properties on these platforms are available only to accredited investors. To be eligible to become an accredited investor you must be:
- A single person must have an income of at least $200,000. A couple must have a minimum income of $300,000.
- You must have a net worth of more than $1 million, excluding your primary residence.
Fortunately, I meet both categories.
I also understand that although farmland is generally considered a solid investment, I shouldn’t invest money if I can’t afford to incur at least some financial risk.
How to Invest in Farmland
Many opportunities exist to invest in farmland, even for a small investor like me. Examples are farmland REITs, real estate crowdfunding platforms, and 1031 Exchanges. Of course, more wealthy folks like Gates and Bezos can buy a whole farm.
Interested? Join me as I compare AcreTrader vs FarmTogether.
What is AcreTrader?
AcreTrader is an online marketplace and crowdfunding platform for farmland investing. It lowers some of the barriers that have prevented some people from investing in farmland.
Founded in 2018, AcreTrader buys parcels it believes have potential and creates a unique limited liability company for each parcel. It divides each LLC into shares equal to one-tenth of an acre and offers shares to accredited investors through the platform. The accredited investors can buy one share or several shares, so I can make a minimum investment of $10,000 to $25,000 and still take part.
How AcreTrader Works
Investors sign up and then peruse the potential farm offerings and make their investments online within the platform. AcreTrader handles all the management issues, renting the land to farmers who typically pay rent in cash.
Farmers generally pay in advance of the growing season, which limits investor risks. AcreTrader holds the rent paid in a special bank account as a reserve for taxes owed or capital improvements.
AcreTrader returns excess income to investors in an annual distribution in December. AcreTrader charges 0.75 of the property’s value as an upfront fee for management.
It also charges closing costs on each transaction. While income isn’t guaranteed, AcreTrader says investors can have a reasonable expectation of a 3 percent to 5 percent cash yield on lower-risk properties and a higher cash yield on more risky ones.
Most investors hold their AcreTrader real estate investment for five to 10 years. Some properties have a longer minimum holding period.
At the end of the holding period, the properties are sold and investors receive their principal and long-term capital appreciation at the time of sale. AcreTrader works with its affiliate brokerage and other partners to try to ensure the best sales price for each farm, which means the best financial outcome for me and other investors.
Before AcreTrader’s founding, farmland investment opportunities were limited, carried high fees, and required a lot of capital. With AcreTrader, a small accredited investor with a minimum initial investment can gain access.
AcreTrader also helps farmers who need to sell their farms or expand acreage. It also invests in sustainable energy sources, such as wind farms.
See Related: AcreTrader Review: Is It Legit or Worth It?
What is FarmTogether?
FarmTogether provides investment opportunities for large and small, primarily accredited investors through its several programs. Investors who want to invest $3 million or more can be solo investors in bespoke farms.
Accredited investors can invest in the Farmland Fund, a portfolio of sustainable institutional-grade farmland with a minimum investment of $100,000. Smaller investors can participate in crowdfunding farmland investing with a $15,000 minimum investment. Finally, investors can swap a property or business in a 1031 exchange to defer the capital gains taxation.
How It Works
For the crowdfunding scheme that I am most interested in, the management team selects properties that need funding and that they believe have potential. They negotiate with the owners, then list the properties on their platform.
Investors sign up and then peruse the platform to find a property that meets their investment strategy. Once investors decide on an investment, they pay a transaction fee that averages about 2 percent. They also pay a management fee that varies by property in exchange for the FarmTogether’s team to manage the property.
Investors earn money through this scheme in three ways. They receive quarterly or annual income from the sale of the harvest.
They also receive income from the lease payments of farmers. Finally, they receive capital gains when they sell the property at the end of the holding period.
FarmTogether was founded in 2017 and has a team of more than 40 people in seven countries. It provides institutional-grade farmland investments.
It partners with local farmers, ensures sustainable practices, and targets net cash yields between 2 percent and 9 percent. Expected net returns are between 6 percent and 13 percent. FarmTogether also can help investors sell their properties when they are ready to take their capital gains.
FarmTogether provides diverse land offerings so that investors can choose the one that fits into their investment strategy. The platform says that only 2 percent of the deals it reviews pass its rigorous tests to be included on the platform. Factors important in selecting farmland are
- Soil quality
- Excellent, experienced operators
- Location relative to processing, storage, and transportation infrastructure
- Availability of water
- Climates conducive to growing crops
FarmTogether has lowered fees and other barriers to farmland investing for smaller investors like me, while also providing an easier way for larger investors to buy farmland.
See Related: FarmTogether Review: Is It Legit or Worth It?
AcreTrader vs FarmTogether: What are the Differences?
Although both platforms ease access to farmland deals, they do differ from each other.
AcreTrader has a lower minimum investment. You could invest as little as $10,000, depending on the property. Some properties have a slightly higher minimum, but even the highest minimum is only $25,000.
FarmTogether has several different ways to invest, each with a different investment minimum. The crowdfunding offerings start at $15,000, but solo investments require $3 million or more.
Different Investment Types
AcreTrader offers only crowdfunding investments. On the other hand, FarmTogether offers four different types: Crowdfunding, Solo, a Sustainable Fund (which is similar to a REIT), and 1031 Exchange.
The fee structures have some similarities. Both charge management fees for the services they provide and both have additional fees. However, the fee structures also differ.
For example, AcreTrader charges a management fee of 0.75 percent, deducted from the farm’s income. It also charges closing fees.
FarmTogether’s management fee varies slightly depending on the property. It averages between 1 percent and 2 percent. FarmTogether also charges transaction fees.
AcreTrader vs FarmTogether: What are the Similarities?
While they have a few key differences, AcreTrader and FarmTogether also have a number of core similarities.
Support of Farmland as a Good Investment
Both platforms tout farmland as an excellent investment opportunity and both suggest the likelihood of good returns, regardless of the performance of the stock market and other financial markets. They also both aim to provide passive income and capital appreciation. Of course, the possibility that I will lose money exists with both platforms, although both seem to do their due diligence in deciding which properties to support.
Mission Statements and Vision
AcreTrader seeks to help its customers buy and sell land more easily through the use of technology, data, and expertise. Its vision is to make the buying and selling of land easier.
FarmlandTogether‘s mission also includes opening up the asset class to more investors. While its vision is similar to AcreTrader’s because it focuses on buying and selling land, it tends to focus more globally on concepts such as peace and sustainability.
A Relatively Small Minimum Investment
Both platforms require a minimum investment, although the requirement is considerably smaller than I’d have to make if I were to try to invest in farmland or any commercial real estate on my own.
Both AcreTrader and FarmTogether offer free signup, so potential investors can look around at potential properties before deciding whether to invest.
Both companies help manage the farms to ensure profitability. Because they manage the properties, I don’t have to worry about managing them on my own nor do I have to learn much about farming. I can keep my day job.
Experienced Management Teams
The management teams of both AcreTrader and FarmTogether are experienced in financial services, investment, and farmland investing. AcreTrader’s leadership team consists of 13 people, all of whom are well-qualified. I’ll give you three examples.
Founder Carter Malloy grew up in a farming family and has several years of experience in a global equity firm. He’s also owned a couple of businesses, including one that focused on sustainable fuel technologies.
COO Garrett McClintock also has farm roots. He worked for Oxbow Agriculture, managing agriculture businesses with more than $40 million in annual revenues.
Ben Maddox, the director of farm operations has worked as a farm analyst for Heifer International. He has an MBA and an accreditation in farm management from the American Society of Farm Managers and Rural Appraisers.
FarmTogether‘s leadership team consists of nine people, who also are knowledgeable and qualified. I’ll tell you about three of them.
CEO Jared Hine has experience in asset and wealth management at JP Morgan Chase and Bank of America. He also worked for Nuveen supporting the growth of timberland and farm businesses.
Artem Milinchuk is co-founder and head of strategy. He has an MBA and more than a decade of finance-related experience in agriculture and farmland.
Josiah Terrell-Perica is another co-founder and director of farmland investing. He’s previously worked in real assets investing at Wood Creek Capital and done research and underwriting at PGIM’s Agricultural Investments.
Both farmland crowdfunding platforms make use of innovative technology to help investors learn about selected properties and invest in them. They have a seamless online investment process. They also both offer an online Learning Center that provides information about agriculture and farmland investments.
Support of Various Account Types
Both platforms support investment accounts for individuals or entities. They also both support self-directed retirement accounts. AcreTrader also supports trust accounts.
The Opportunity to Choose Your Investments
Investors who participate in either AcreTrader or FarmTogether have the opportunity to decide which farms they will fund from among a diverse offering. I really like being able to make my own choices. Some farmland investing platforms automatically invest your money in a particular real estate portfolio, which may not necessarily meet my overall goals.
Which is Better AcreTrader or FarmTogether?
Each real estate crowdfunding platform has its unique strengths. The best farmland investment platform will differ by individual. The answer to which of these two platforms is better depends on how much you have to invest, your goals, and the types of investments you want to make.
What is Better About AcreTrader?
The minimum initial investment at AcreTrader is slightly smaller than that of FarmTogether, which makes it accessible to more investors and means I can tie up less of my money. It also supports trust accounts, which FarmTogether does not, making it the only choice for this type of account. It offers new investment opportunities each week, so it is a good choice for an accredited investor like me who is looking for opportunities to diversify a portfolio of stocks and bonds to include alternative investments.
AcreTrader’s fees tend to be a little lower than those on FarmTogether, and its investments are less risky. AcreTrader accepts a smaller percentage of the farms it reviews. The tradeoff is that the expected returns are a little lower than FarmTogether’s, however.
AcreTrader also presents a good opportunity for farmers who want to expand the amount of acreage they farm without having to buy the property themselves.
What is Better About FarmTogether?
FarmTogether provides a wider variety of investment opportunities as compared with Acretrader. While Acretrader has only the opportunity to crowdfund specific farms, FarmTogether has opportunities for entities or individuals to invest in farms as solo investors.
It also offers the opportunity to participate in a sustainable Farm Fund, which functions as a REIT. The Fund requires a $100,000 minimum investment for Class A and a $5 million investment for Class I.
Overall, FarmTogether’s investments tend to offer higher potential returns, but the risk tends to be higher as well.
FarmTogether also offers some additional benefits to those who need to sell their ownership shares before the holding period ends. FarmTogether has a secondary market that allows for early selling and buying, but AcreTrader does not.
See Related: How to Save Money & Go Green; a Step-by-Step Guide
Who Should Get AcreTrader?
The question of who should get AcreTrader also depends upon needs. AcreTrader offers crowdfunding investment opportunities only. Those who want to buy shares in a specific farm and have at least $10,000 to invest will find it a straightforward platform.
AcreTrader also offers fairly conservative investment options, which may be suitable for inclusion in my retirement accounts or for any investor who tends to be very risk-averse.
Who Should Get FarmTogether?
While still offering a stable investment, FarmTogether offers crowdfunding opportunities that have higher returns and greater risks than AcreTrader. Those investors who are willing to accept more risk will find it a more suitable crowdfunding platform than AcreTrader.
Also, while you shouldn’t invest in farmland unless you can afford to hold onto it for many years, FarmTogether does have a secondary market that provides the option to get out early if you have to do so. It may be more appropriate for those who are only 90 percent sure they can tie up their money for years or decades.
Those who want an online way to buy a whole farm will find FarmTogether a suitable choice, as will those who want to do a 1031 exchange. Also, those who want to invest in a sustainable farm fund and can invest a significant amount will find FarmTogether a suitable investment.
The Bottom Line
A real estate investment is generally considered one of the most stable investments. I find farmland to be a particularly attractive investment because:
- Supply is limited
- Historical returns have been good
- Land values tend to appreciate
- As the population grows, the demand for food will grow
- Investing in farmland fits with my ESG investment goals
Because of farmland crowdfunding platforms such as AcreTrader and FarmTogether, farmland investments are now accessible to more people like me who have smaller amounts to invest. Those whose incomes are above $200,000 and have at least $10,000 to invest over the long term can qualify.
Farmland investments provide passive income through harvests and rental income. They also tend to provide long-term capital appreciation and provide a nice nest egg when sold.
Both AcreTrader and FarmTogether are well-established companies. They have excellent management teams that understand financial markets and agriculture.
Both also are excellent platforms for investing in this asset class. Both are very selective in choosing the projects they will offer for funding. Both offer free signup and the opportunity for me to choose my investments.
Once I choose an investment on either platform, I will pay fees for closing transactions and for the company to manage the farm. However, I am very willing to pay a management fee because I don’t have to become an expert in agriculture to derive benefits from my investment.
Each of the two options has its own unique strengths. AcreTrader has a more conservative strategy, although neither platform chooses high-risk investments. FarmTogether offers other investment options besides crowdfunding, including a sustainable Farm Fund.
I still haven’t decided which platform I will ultimately use for my farmland investment. However, because they both offer a free signup, I will continue to look over the potential investments until I find the one that best fits my long-term investment strategy.
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