Any smart investor is well aware that fees matter. Some investments may seem profitable, but when fees are taken into account the proposition may not be as attractive as it once was.
For example, traditional stock brokerages charge a 1% annual fee on average for all assets under management. This doesn’t take into account commissions, trading fees, or any add-ons.
Investing in farmland with AcreTrader is one of the simplest ways to gain exposure to agricultural land while paying relatively low fees. This asset class’s unique selling points differentiate it from both residential and conventional real estate investments.
In our AcreTrader review, we speak about how this is one of the best ways to invest in agricultural land. But what should you expect to pay?
What You Need to Know About Being an Accredited Investor
An accredited investor is a sophisticated investor with the opportunity to invest in assets not registered with the SEC.
To invest in AcreTrader farmland, you must be an accredited investor. There are two routes you can take to gain your accreditation.
- Income — Prove an annual income of $200,000 if filing as an individual investor, or $300,000 together with your spouse. Two years of income statements must be submitted.
- Net Worth — Show a net worth of $1 million individually or jointly with your spouse. This cannot include your primary residence.
In AcreTrader’s case, they outsource the issue of accreditation to an independent company called North Capital.
Understandably, this already excludes the majority of investors from investing with AcreTrader. However, the platform has announced plans in the past to open up its platform to non-accredited investors in the future.
Why AcreTrader Charges Fees
Beyond the obvious answer, AcreTrader farms are fully managed by the company’s project managers. Investors are creating a passive income stream when they buy farmland with AcreTrader.
Project managers handle everything from heavy equipment, crop harvesting, expenses like seeds and soil, as well as collecting rent from tenants.
According to AcreTrader, its project managers bring substantial farming and management experience to the table.
Naturally, this is what most of the fees go towards as these managers need to be paid for their services.
AcreTrader Fees Explained
In most cases, farmland investment platforms charge a fee of 5% and up on all assets held within your portfolio. Due to the historically high returns offered by agricultural land, investors are often willing to pay this.
AcreTrader, on the other hand, charges a flat 0.75% to 1% fee on all assets. The exact percentage depends on the scope of the project.
Some agricultural investing platforms will also take a portion of the profits in what’s known as a "carry."
There are no carries with AcreTrader, meaning all profits made are kept by you. Compared to other farmland investment platforms, AcreTrader charges some of the lowest fees around.
How Much Money Will I Make with AcreTrader?
Fees matter only in the context of how much you make. The profitability of your investment depends entirely on the dollar amount.
Remember, you pay your 1% per year regardless of whether your farm makes a profit. With a minimum investment of $10,000-$50,000 on most assets, even a 1% fee is a significant dollar amount if you fail to turn a profit.
So how much can you expect to make with AcreTrader investing?
According to the site, shareholders can expect to make between 9% and 11% per year. In real estate investing terms, this is an amazing return on investment.
Your profits come from three sources.
1. The general increase in the overall value of your farmland.
2. Annual rent paid by the tenant farmer to you.
3. Crop profits (depending on the project)
There is a caveat to these numbers, however. Farmland investing is unsuitable for investors looking for an immediate stream of income.
Expect to invest and hold for a minimum of five years before turning in the numbers described above.
Like anything, there is also no guarantee that your farmland will turn a profit whatsoever. On the other hand, farmland is stable, with volatility resembling that of low-risk 10-year government bonds.
While farmland can be an extremely exciting investment, it’s far from a guaranteed win. You must perform your due diligence when investing in any AcreTrader farm.
It’s also well worth looking into increasing or decreasing your share percentage on a farm. AcreTrader offers an open marketplace where members can buy and sell shares in a secure environment.
You have the flexibility to own farmland as a whole or by purchasing just a portion.
The Bottom Line
The fees charged by AcreTrader are some of the lowest in the industry. However, the fact only accredited investors have the option of investing on this platform is a huge downside.
What the rise of robo-advisors like M1 Finance and low-cost investment apps like Robinhood has demonstrated is that things are moving quickly, and AcreTrader has spoken about allowing unaccredited investors to use their platform before.
If you meet the platform’s requirements, create an AcreTrader account and start investing today by clicking on this link.