AcreTrader vs FarmTogether 2023
Farmland was an asset class previously reserved for only the extremely wealthy. New platforms allow the general public to invest in agricultural land for the first time. Farmland has become a point of interest for retail investors, as, since 1992, farmland has outperformed most asset classes, including equities, bonds, and real estate.
It makes sense because farmland doesn’t obey the conventional rules of the markets. Just because stocks go down doesn’t mean agricultural land follows the same path.
This emerging investment sector has few players, but there are two platforms of interest: AcreTrader and FarmTogether. Which one is the best option for jumping into agricultural investing?
Since opening its doors in 2018, investors have received the opportunity to invest in America’s farms. Currently, you can only invest in Regulation D investments, so you can’t invest in anything you like. Plus, there are only a limited number of investments available on the platform at any one time.
You will need a $10,000 minimum to invest in the site. Compared to the price of even a tiny U.S. farm, this is a generous minimum, and the crowdfunded approach to agricultural land has opened a land of opportunity.
As we mention in our AcreTrader review, this is one of the best opportunities available for anyone interested in diversifying via agricultural land.
Like any form of real estate or land, expect to hold these investments for a minimum of three to five years. You gain an income in two ways. Firstly, if the value of your investment increases, you make a profit. Investors also gain access to dividends via the rental prices paid by the farmers working the land every year.
Note that investing with AcreTrader is currently open only to accredited investors, but this is expected to change soon.
|Management Fees||0.75%-1% per year|
Anyone with an AcreTrader account can look through their catalog to see which investments are available for you to invest in. The platform runs through each investment proposition and claims to reject 90% of opportunities because they do not meet the strict standards they’ve put in place to protect investors.
What makes AcreTrader different from other investment platforms that specialize in agricultural land is they don’t simply buy agricultural land and hope it’ll increase in value in the coming years.
Instead, they actively invest in appreciating the value of each farm through implementing new technology, advising farmers on how to maximize their profits, and making capital investments. For those concerned about the environment, these are sustainable investments as they make efforts to implement more sustainable farming methods.
Remember that every investment differs. The minimum investment may be higher than the $10,000 platform minimum in some cases. It’s not uncommon to spot investments requiring a minimum of $50,000 or more to get started.
Finally, read through the holding period carefully. Some investments may have a holding period, which will prevent you from selling before it’s up.
AcreTrader charges a 0.75%-1% fee for any assets held per year. Compared to traditional brokerages and other investment platforms, these fees are more than reasonable and shouldn’t be a reason to turn away.
With the historical track record of farmland, your appreciation over a few years will more than cover the fees paid.
AcreTrader searches for investment opportunities that will return a minimum of 3% per year after taking fees into account.
In theory, a good investment held over a reasonable period will be highly profitable.
- Great way to diversify
- Profitable investment opportunities
- Low fees
- Only open to accredited investors for now
- High investment minimum
- Short track record
AcreTrader is part of a new wave of alternative investment platforms creating new lands of opportunity for ordinary American investors. Learn more about how it all works with our review on AcreTrader.
FarmTogether offers a similar product to AcreTrader. You can invest in different farmland deals and use their investment calculator to figure out your potential gains over time. Since 2017, FarmTogether has raised $1.8 million to accelerate its growth.
This platform provides accredited investors with institutional-graded agricultural investments based out of Silicon Valley. Like AcreTrader, the goal was to make it simpler to purchase farmlands without going through the difficulties of making a direct purchase.
Minimum investments begin at $15,000, which is significantly higher than AcreTrader. There’s a big focus on sustainable farmland practices. For this reason, the only deals you’ll find on the site are those that practice carbon-negative farming techniques.
While this is great for investors who make sustainability a priority, it means potentially missing out on profitable agricultural deals because they’re unavailable on the site.
|Management Fees||1% annual management fee|
|Account Types||Agricultural land|
To start with, the main benefit of using FarmTogether is you get the opportunity to diversify your portfolio while allowing the platform to do all the work for you. There’s never a reason to get your hands dirty when you invest in this manner.
The downside is that you either need to be an accredited investor or work with an expensive wealth manager who can invest via the platform on your behalf.
There are also fees to consider. FarmTogether has a selection of standard costs, including a purchasing and management fee. The problem is that every deal has its own fee structure, so you could end up paying much more in fees than you initially expected.
Just like AcreTrader, you can make money in two ways. The appreciation of the farm will add to your portfolio, but you’ll also receive dividends each year from the rents paid by the tenant farmers. Again, your dividends depend on the deal.
Regarding returns, FarmTogether calculates a cash yield of between 3% and 9%, with overall returns ranging from 7% to 13%. There are no guarantees, and there’s a chance that a particular deal will lose money.
One problem that investors will notice in the debate between AcreTrader vs. FarmTogether is the lack of available investments. The commitment to sustainability while applying common investment standards means that sometimes there’s a minimal number of investments available to take advantage of.
If you’re looking to diversify your portfolio right now, you may find yourself to be out of luck.
As already mentioned, every investor on the platform will need to pay a 1% management fee every year. There’s also an additional 1% upfront fee to pay each time you make a new investment. This added charge can sting and already leaves you at a loss.
The fee structure will vary from deal to deal, and it’s not immediately obvious what each one is if you lack experience in analyzing investments.
For this reason, at Modest Money, we recommend that you tread with care before investing any money on FarmTogether.
- Commitment to sustainability
- Early selling possible
- Can use a self-directed IRA
- Multiple fees to pay
- Lack of transparency in individual fee structures
- Limited investment opportunities
|Open to Non-Accredited Investors?||No||No|
|Platform’s Overall Projected Returns||7%-9%||7%-13%|
|Best For||Impatient Investors||Socially Responsible Investors|
AcreTrader vs. FarmTogether: Which One is Right for You?
Firstly, it should be mentioned that the overall projected returns of AcreTrader are artificially low due to the depressed market for agricultural land. Over the past 20 years, the actual average for agricultural land is 12%, so AcreTrader is clearly lowballing to take the current market into account.
At Modest Money, we recommend investing with AcreTrader over FarmTogether because of the fees. The added costs and lack of transparency at FarmTogether are a deal-breaker. There’s a huge difference between $10,000 and $15,000.
Furthermore, there are simply more opportunities available through AcreTrader. Although FarmTogether’s commitment to sustainable farming practices is admirable, they have reduced their platform’s number of investment options.
Also, AcreTrader is committed to sustainability and regularly invests in the farms under their management to help tenant farmers help the environment.
Both platforms work similarly, with tax advantages included. The cost of getting started, on the other hand, is the defining factor. For investors with less money to spare, AcreTrader is the superior proposition.
Regardless of the platform you choose, it’s clear that agricultural land is an excellent option for hedging against inflation and proofing your portfolio against major economic crashes. With a growing population and the shrinking availability of farmland, now has never been a better time to diversify.