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"Maybe it's time for a boring investment."
Don't let AcreTrader's advertising tagline fool you. Investing in farmland may be as dull as watching grass grow, but the company is not. CEO Carter Malloy has created a new financial resource for farmers who want to expand their acreage and made a tangible asset class readily available to accredited investors. It has grown to 125 employees, plus another 20 contractors, since the first employee was hired in 2018.
"If we want to build something big, it has to be a win for farmers and investors alike," Malloy said. Here's how it works:
AcreTrader's farm team assesses farmland that an experienced operator wants to farm. If the farmer and the farmland both show the requisite promise, AcreTrader creates a limited liability entity and rounds up investors to pool their money to buy the land.
The farmer doesn't have to come up with a big down payment or take on debt. Instead, the farmer either pays rent or shares revenue from the farm with the investors, who each have an account where they can access their share of the income or reinvest it.
More than 100 LLCs and LLPs (depending on the state where the farmland is located) have been fully funded since March 2018. Ultimately, the land will be resold — generally to the farm operator who has been working it — and investors share in the purchase price. "The yield isn't something [investors] get excited about, but the appreciation is," Malloy said. AcreTrader advertises an average annual return of 11%.
About half of AcreTrader's employees are software engineers, so the technology that allows investors to choose land, invest in it and then profit from it is a huge part of the business. In October, AcreTrader also launched a comprehensive land analysis and mapping tool called Acres, which the company believes will help bring transparency to the market for farmland by capturing comparable sales.
Other companies aren't AcreTrader's biggest competitors, Malloy said. Other investment instruments, particularly bonds and gold, are. Historically, he said, farmland has been an even better inflation hedge than gold — "Like gold with yield."