(mellow electronic music)
- Hey everybody, how's it goin'?
This is Seth Williams, I'm here with Ben Maddox,
of AcreTrader.com and my treasure troll here.
(laughing)
The reason we're here is 'cause Ben works with a company
called Acre Trader.
Acre Trader, why don't you explain what Acre Trader is, Ben.
- Acre Trader is a farmland investing platform.
Investors can go on our website and see the different farms
and properties we have up there.
And in really just a few minutes, a few clicks,
you can directly own shares in US farmland,
and we have some minimums as low as $5,000.
- So is it essentially like a real estate
crowd funding platform, is that the idea?
- Yeah, basically.
So we're crowd funding individual investments
in each of the farms.
And you do directly own each piece of farmland.
- Okay.
For somebody who has never even thought about
investing in farmland, why farmland?
Like why would somebody wanna do that?
- Well first off, farmland's boring
and we love that about it.
But really when you look at the big picture,
farmland has some pretty great returns
in term of its historical performance.
And on top of that, it's a lot less volatile
than other asset classes.
And at the end of the day, you still own
a real asset too, in farmland.
- Sure.
When people wanna invest in farmland with you guys,
do people invest small chunks so they own like fractional
ownership of the property?
Or how does that work exactly?
- Yeah, so you are investing in shares of an LLC.
So we'll put the farm in an individual LLC
and you'll own a proportional amount of that LLC,
based on your investment.
Once you've out your money into that farm,
you make your returns in two ways.
So there's the annual cash yield,
which in that case of farmland, is just the rent
that the farmer pays each year.
And then there's the appreciation of that farmland
on the back end, when we do sell the property.
And we term out investments anywhere from three to five,
to 10 years, just sort of based on the crop that we have
in the ground there.
- Okay, so if somebody wants to invest with Acre Trader
and own a portion of this LLC that owns the property,
like what is the exit strategy?
How long are they committing to put their money
in a project, how long does it take
to get their principal back?
- You know, with an annual road crop farm,
since this is corn behind us, we're in Michigan today,
you know, that might be a three to five year hold.
Something perennial crop, like almonds,
we have an almond farm on our website right now.
That's a little bit longer hold, maybe 10 years.
Just because those trees have a 25 year lifespan
and you wanna make sure you get the most
out of their productivity.
And so really we're gonna adjust that hold,
depending on what the crop is in the ground
and on what the local market conditions are doing and land.
So if we notice a huge jump in land prices,
we might exercise the right to sell the farm
a little bit early, to maximize shareholder value.
- Okay, so you guys have like a management team in place?
- Yup.
- And what do they do?
Do they work directly with the farmer or with the investor?
Like what's their role in all this.
- Yeah, one of the most difficult parts about owning
and investing in farmland is managing it.
So Acre Trader manages all the farms on our platform
and what that means is we're finding tenants,
lining those up, we're managing any projects like irrigation
or earth shaping, any sort of dirt work
that needs to be done, and we're doing all that
to maximize the value of the investors.
And really, that's the hardest part, the biggest barrier
to getting into farmland.
Is, "Gosh, I don't know anything about agriculture.
"How do I even get started?"
Acre Trader is a great solution.
- Yeah, I have some experience trying to find good deals
on farmland, and I know it's pretty hard.
It's much, much harder than trying to find a good deal
on a vacant residential lot.
It's not the kinda thing where you can just make
a low ball offer and people will just give it to ya.
So it makes me wonder, like how do you guys
find deals on farmland.
Like where are you lookin' for this kind of thing,
and how do you put these deals together?
- Yeah, so while we think farmland's a great asset class
to invest in, it is notoriously difficult to get started.
And part of that is because
there's very low turnover in farmland.
Not only is there limited vacancy in farmland,
but properties don't come up for sale that often.
And those farms that do come up for sale each year,
a lot of them are happening in private transactions,
like an arms length transaction.
And so Acre Trader has a national network of brokers,
farmers, and fund managers, and we're working with all them
to build relationships and they'll send us deals
in farmland, when it comes up for sale.
And we're really out there, we've got a dedicated team
that's out there, looking at those deal everyday.
And that really simplifies the process for investors.
- Yeah, so it sounds like you sorta have to be like
constantly involved in the process, right?
Like always having your eyes on the field
and seeing what's happening?
- Yeah, certainly.
I think that being present
and always following up with people
is a bit part of what I do,
and what the rest of my team does.
There are brokers and land managers who are looking for
people who will do repeat transactions, right?
So if you're just looking to buy one farm, one time,
it's gonna be a lot harder to get brought into deals
in the long run.
- Okay, so from an investor's standpoint,
are they getting it both cashflow and appreciation?
Like do they get quarterly or annual payments
and then also they get their principal back
plus some profit when the thing sells?
Like how does that work?
- Yeah, that's what we really love about farmland,
is that it's an alternative asset
that also has an annual yield.
So investors will get their cash yield at the end
of each calendar year.
And as I mentioned earlier, that's just the cash rent
on each property.
And we do anticipate annual appreciation
for each of those farms.
Again, you know this is all based on 30 years
of historical analysis of US farmland, but you know,
the running average has been about 6% a year appreciation
in US farmland.
- Okay, cool.
This global climate change thing
that's happening in the world,
is that something that investors or farmers or companies
like Acre Trader need to be concerned about?
Like is that gonna affect this kind of investment
in the near future do you think?
- Yeah, certainly.
I mean, I think climate change is a systemic risk
in the sense that really it's scope
and it's impact is global.
And so I think all types of asset managers
need to be thinking about climate change.
Now certainly with farmland, we do depend on sunshine,
rain which we have today, and good weather
more than other industries do.
But you know at Acre Trader, we really focus
on trying to mitigate and adapt to climate change.
And we do that by selecting properties
that are not in drought-prone or flood-prone areas.
We always invest in properties that have good irrigation
and water rights, that at the end of the day,
help mitigate some of those extremes in weather patterns.
- Sure, okay.
What information are investors able to see
before they make a decision to invest among one of
your properties that you guys have in your website.
Like what information do you make available to them?
- Yeah, sure.
So if you go on our website, each one of the properties
has a unique profile.
And in there you can see the different documents
we have on each farm.
And those documents are going to include
the pro forma expectations of returns for each property,
but we're also going to have information on water rights
and soil quality, and then we'll also have
the Acre Trader rating, which encompasses all kinds of
different risk issues, like flooding, irrigation,
comparable sales as well.
And so that rating is just another piece of the puzzle
to help you do your own due diligence and evaluation
on the deals on our site.
- Sure.
And if I understand it right, the income that's being made
from these properties, that's basically lease-income
that's paid by the farmers, right?
So like if there's an annual crop that just does terrible,
is that burden mostly on the farmer and not on the investor
and on Acre Trader?
- Yeah, so the majority of farms, not all of them,
but the majority of farms that we manage
are actually in cash rent and the cash rent,
to some extent, does shield or insulate
the individual investor from temporary swings
in commodity prices.
So it really stabilizes and levelizes the return profile
of the asset.
- Okay, so I know there is a trade war of sorts going on
right now with China.
Does that have any impact on farmland as an investment?
Or on investors with Acre Trader?
What does that have to do with all this stuff?
- Yeah, sure.
So you know, I think the most important thing to take away
in terms of investing in Acre Trader,
is that most of our farms are in cash rent,
and as I mentioned, that does sort of shield
the individual investor from those swings
in commodity prices.
And I think also from a bigger picture,
while the trade war is certainly consequential
and important, we really view it as a temporary fluctuation
in terms of farmland value and commodity prices.
And at the end of the day, farmland values, in the long run,
are really influenced both by increasing global demand
for agricultural products and commodities,
as well as the decreasing amount of farmland
due to development.
- Okay, and in your opinion, what kind of investor
is Acre Trader not for?
Like what kind of person should not get involved
with this do you think?
- Well you know, I may be biased.
I think farmland investing is really for everyone.
At the end of the day, I think Acre Trader's
a really good value for people who are looking to
diversify their portfolio.
You know, like I said, farmland is traditionally
not very volatile when compared to other asset classes.
And it's also not correlated
with major stock indices, right?
And so I think for someone who's really looking
for good diversification with strong to moderate returns
to their investment, Acre Trader and farmland's
a great value.
- Okay.
I mean, would you say if somebody is the type who
they'll wanna get their money back within six months
or 12 months, obviously it doesn't make sense
for them, right?
So if you need your cash back immediately,
you probably shouldn't be puttin' into Acre Trader.
Is that a safe assumption?
Or am I missing anything with that?
- Yeah, I mean I think we definitely do take a long-term
perspective on farmland.
We're very confident in its long-term performance,
its historical performance,
so it's probably not a day-trade type of opportunity.
But for folks who are lookin' for stable returns
over the long run, it's a great investment.
- Okay, and if I understand correctly,
the value of farmland, it doesn't necessarily go up and down
with the value of conventional real estate,
like single family homes and that kinda thing?
Like it sorta follows a different pattern, right?
And what affects that pattern?
- That's again, another one of the great things
about farmland, is it's a largely non-correlated asset
in terms of macroeconomic movements don't necessarily
affect the value of farmland, because at the end of the day,
there's very limited vacancy in US farmland,
and increasing global demand for food and AG commodities.
And so ultimately, what influences farmland value the most
is going to be global demand
and then decrease in supply of farmland.
- Okay so Ben, what kind of stuff do you guys look at
when you're evaluating a deal?
Like how do you know and how do you come up with
a predictable outcome, where like,
yes, this will be a good farm opportunity.
It will most likely generate this kind of return
over the next three to five years.
Like what do you look at?
How do you figure that out?
- Yeah I think that's a real value add of working
with Acre Trader, is that we do have due diligence process
that's quite thorough.
It begins with an income approach look at a farm.
So that's all the intrinsic qualities of farmland.
So what is the asking price, what is it being rented at?
So at the end of the day, what is the cap rate
on that piece of land?
And then we combine that in a second step
with a market comparison.
And so in this stage, we're really looking at
our larger market forces affecting the price of farmland.
And then the third stage is really our own due diligence
and experience coming into play.
So you know, we're here on a farm today in Michigan.
I'm doin' a little bit of research on this particular farm.
And we're gonna look at everything from is the well good?
Are the water rights in place?
Does the water drain off the land appropriately?
And so that's sort of the third element
of our due diligence process,
is that on the ground inspection, right?
And so I think that's a real asset
that Acre Trader has, in that it's hard to just go out
and buy farmland on your own,
if you don't have that experience.
- Yeah, for sure.
Now if you come across a property where, I don't know,
say there's one issue with it, where like the water
doesn't drain properly or it's not currently irrigated.
Like do you guys do anything to fix those problems
or is it just like, "Nope, not the right one.
"We're gonna go find somethin' else."
What's your approach to that?
- Yeah I mean because farmland is such a competitive market,
there are very few great deals waiting to be had.
And you have to do a little bit of work
to go out and find them and to improve farmland
to be a great deal.
And so we will do a little bit of value-add work.
And so that could be drilling a new well,
doing a little bit of land shaping,
or fixing up poor drainage.
When we do that, we can take what's an okay farm
and make it a great farm, and investors really benefit
on the back end, in terms of the appreciation
of that property when it's sold again.
- I gotcha.
Well folks, it's startin' to rain here,
so we're gonna wrap this up.
But again, Acre Trader, RE Tipster does have an affiliate
relationship with these guys.
If you wanna check it out through our affiliate link,
it's Retipster.com/AcreTrader.
And we're also gonna have that link beneath this video
in the description.
I hope you guys enjoyed this,
hope you got somethin' out of it.
And we'll see ya next time.
- Bye guys.
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