how does acre trader work?

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Hi all, I’ve been looking into alternative ways to invest and saw an ad for this investment platform, acre trader. You invest in shares of vetted farms and I’m curious if anyone knows the internal mechanics of this type of platform and these types of investments? How are investment dollars used? How does it make a return for the investor? Anything I’m missing?

I watched their instructional video but I think there’s more too it and I thought some of you might be able to break it down for me.

Thanks

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Anonymous 0 Comments

As I understand it, AcreTrader:

1. Forms an LLC, and funds it to purchase a farm
2. Rents the land to a farmer (presumably the farmer that’s already on the land. The rent is distributed to the investors, minus a management fee for AcreTrader
3. At the end of a predetermined period, sells the land, and the proceeds are returned to the investors.

The Cash Return value they list on the investments represents the income you’d expect to earn from rent. Apparently the rent varies within a range based on yield, so a good harvest would increase your profit.

The Net Annual return is the Cash Return + how much they expect the land to increase in value. This would be realized at the end of the period, when they sell the land.

AcreTrader takes their profit in a .75% management fee, plus the realtor’s commission (typically half of 5%, the other half going to the other realtor) of the purchase and sale prices. I’ll note that this means they will make a large profit on the real estate even if you lose money. And this means that if farmland grows in value by 50% over 10 years, you’ll see about 37.5% due to the commissions

You should also note that they have not completed any of these deals yet, so they have no track record as a company.

And finally, they probably don’t want your money. They are only taking money from “Accredited Investors”, which means

>Earn an annual income per individual of over $200,000 per year ($300,000 per couple) with the expectation of maintaining such level of income in the future.

>Have a net worth of more than $1 million (individually or jointly), excluding the value of a primary residence.