AcreTrader offers investors easy entry to purchase and own farms

For decades buying a farm involved searching for one that was for sale, driving there to see it, interviewing the tenant and other farmers in the area, researching USDA records, scraping together sufficient capital, and possibly securing partners or a loan. No more.

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AcreTrader now makes it possible to sit at your home computer, pick a farm in minutes, and make a direct investment with a small amount of capital (sometimes $10,000 or less). Even better, you don't have to manage the farm during the investment holding period.

How It Works

The farm investments are done through single-purpose LLCs — one established for each new farm. An investor can buy as little as 1% of an opportunity. Farm holding periods generally vary from five to 10 years but are flexible as conditions change. The LLC members get biannual reports on how the farm is doing and annual distributions of their share of the net rental income, normally in December.

As a CPA, when I hear the words LLC or partnership, the first thing I think about is whether the K-1s (tax forms to the members) are getting done in a timely manner.

According to Carter Malloy, the founder and CEO of AcreTrader, all the farm LLC K-1s have been sent to their investors before the due date each year.

Fast Growth Path

AcreTrader, headquartered in Fayetteville, Arkansas, manages farms across the country. The cropland the company oversees includes soybeans, corn, wheat, peanuts, cotton, potatoes, onions, beets, and timberland. AcreTrader is actively working in 16 states to find farm investments and currently is adding about one per week. The latest locations include the Pacific Northwest (Idaho, Washington, and Oregon) as well as Texas and Florida, according to Malloy.

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During the past few years, AcreTrader has been on a fast growth path, raising $80 millionin capital and hiring more than 100 people. Today, the company manages over 100 farms through a combination of an internal management team and contract property managers. It uses relationships with existing tenant farmers as the primary source for new farm investment opportunities. Malloy says keeping farmer-tenants happy is the key to success — creating a win-win situation.

"We're looking for strong farming communities with good soil and water," he says. "Empowering people in rural America to build their businesses is central to who we are."

The company charges an annual management fee of 0.75% of either the farm purchase price or appraised value. It also owns the online real estate brokerage AcrePro, which is licensed in 16 states. Besides the management fees, farm transaction commissions are important to the company's operation.

What's Next?

Moving forward, the company is devising new tools including sophisticated online farm investment analysis, which may eventually be available to the public.

Malloy also envisions a platform that will allow farm investors to more easily find buyers for their LLC interests.