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Want To Invest In Farmland? You Need To See This First - YouTube
Channel: REtipster
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[Music]
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hey everybody how's it going this is
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Seth Williams I'm here with Ben Maddox
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of acre trader.com
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and my treasure troll here the reason
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we're here is cuz Ben works with a
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company called acre trader an acre
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trader won't you explain what acre
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trader has been Enka traders farmland
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investing platform investors can go on
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our website and see the different farms
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and properties we have up there and in
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really just a few minutes a few clicks
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you can directly own shares and US
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farmland and we have some minimums as
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low as five thousand dollars so is it
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essentially like a real estate
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crowdfunding platforms that the idea
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yeah basically so we're crowdfunding
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individual investments in each of the
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farms and you do directly own each piece
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of farmland okay for somebody who has
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never even thought about investing in
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farmland why farmland like why would
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somebody want to do yeah well first off
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farm lands boring and we love that about
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it yeah but really when you look at the
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big picture farmland has some some
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pretty great returns in terms of its
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historical performance and on top of
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that it's a lot less volatile than other
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asset classes and at the end of the day
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you still own a real asset - in farmland
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when people want to invest in farmland
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with you guys do people invest small
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chunks so they own like fractional
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ownership of the property or how does
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that work exactly yeah so you are
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investing in shares of an LLC so we'll
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put the farm in an individual LLC and
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you'll own a proportionate amount of
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that LLC based on your investment once
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you've put your money into that farm you
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make you make your turns in two ways so
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there's the annual cash yield which in
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the case of farmland is just the rent
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that the farmer pays each year and then
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there's the appreciation of that farm
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and on the back end when we do sell the
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property and we we turn our investments
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in everywhere from three to five to ten
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years just sort of based on the crop
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that we have in the ground there okay so
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if somebody wants to invest with acre
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trader and own a portion of this LLC
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that owns the property like what is the
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exit strategy how long are they
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committing to put their money in a
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project how long does it take to get
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their principal back you know with a
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annual row crop farm sister's corn
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behind us we're in Michigan today you
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know that might be a three to five year
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hold something a perennial crop like
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almonds we have an almond farm on our
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website right now that's a little bit
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longer hold maybe ten years just because
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those trees have a 25 your lifespan and
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you want to make sure you get the most
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out of their productivity and so really
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we're gonna adjust that hold depending
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on what the crop is in the ground and on
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what the local market conditions are
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doing in land so if we notice a huge
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jump in land prices we might exercise
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the right to sell the farm a little bit
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early to maximize shareholder value okay
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so you guys have like a management team
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in place and what do they do do they
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work directly with the farmer or with
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the investor like what's the role in all
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this yeah one of the most difficult
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parts about owning and investing in
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farmland is managing it so acre trader
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manages all the farms on our platform
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and what that means is we're finding
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tenants lining those up we're managing
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any projects like irrigation or earth
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shaping any sort of dirt work that needs
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to be done and we're doing all that to
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maximize the value of the investors and
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really that's the hardest part the
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biggest barrier to getting into farmland
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is gosh I don't know anything about
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agriculture I don't even get started
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Eggar traders a great solution yeah I
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have some experience trying to find good
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deals on farmland and I know it's pretty
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hard it's much much harder than trying
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to find a good deal on a vacant
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residential lot it's not the kind of
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thing where you can just make a lowball
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offer and people will just give it to
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you so it makes me wonder like how do
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you guys find deals on farming like
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where are you looking for this kind of
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thing and how do you put these deals
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together yeah so while we think farm
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land is a great asset class to invest in
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it it isn't it totally difficult to get
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started and part of that is because
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there's very low turnover in farmland
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not only is their limited vacancy in
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farmland but properties don't come up
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for sale that often and those farms that
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do come up for sale each year a lot of
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them are happening in private
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transactions like an arm's length
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transaction and so a Kerr trader has a
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national network of brokers farmers and
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fund managers and we're working with all
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them to build relationships and they'll
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send us deals in farmland when it comes
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up for sale and we're really out there
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we've got a dedicated team that's out
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there looking at those deals every day
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and that really simplifies the process
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for investors okay so it sounds like
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it's sort of have to be like constantly
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involved in the process right like
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always having your eyes on on the field
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and seeing what's happening yeah
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certainly I think that being present and
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always following up with people is a big
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part of what I do and what the rest of
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my team does there are brokers and Lane
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managers who are looking for people who
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will do repeat transactions right and so
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if you're just looking to buy one farm
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one time it's gonna be a lot harder to
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get brought into deals in the long run
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okay so from an investor's standpoint
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are they getting it both cash flow and
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appreciation like do they get quarterly
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or annual payments and then also they
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get their principal back plus some
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profit when the thing sells like how
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does that work yeah that's what we
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really love about farmland is that it's
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an alternative asset that also has an
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annual yield so investors will get their
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cash yield at the end of each calendar
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year and as I mentioned earlier that's
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just the cash rent on each property and
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we do anticipate annual appreciation for
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each of those farms again you know this
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is all based on 30 years of the
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historical analysis of US farmland but
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you know the running average has been
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about six percent a year appreciation in
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US farmland cool this global climate
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change thing that's happening in the
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world is that something that's investors
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or farmers or you know companies like
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acre trader need to be concerned about
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when is that gonna affect this kind of
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investment in the near future do you
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think yeah certainly I mean I think
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climate change is a systemic risk in the
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sense that it's really its scope and its
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impact is global and so I think all
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types of asset managers need to be think
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about climate change now certainly with
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farmland we do depend on sunshine rain
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which we have today in good weather more
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than other industries do but you know at
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a curt rate that we really focus on
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trying to mitigate an adapt to climate
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change and we do that by selecting
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properties that are not in drought prone
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or flood prone areas we always invest in
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properties have good irrigation and
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water rights that at the end of the day
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help mitigate some of those extremes in
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weather patterns here okay what
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information our investors able to see
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before they make a decision to invest
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you know among one of your properties
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that you guys have in your website like
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what information do you make available
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to them yeah sure so if you go on our
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website each one of the properties has a
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unique profile and in there you can see
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the different documents we have on each
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farm and those documents are going to
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include the pro forma expectations of
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returns for each property but we're also
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going to have information on water
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rights and soil quality and then we'll
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also have the Acre trader rating which
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encompasses kinds of different risk
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issues like flooding irrigation
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comparable sales as well yeah and so
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that rating is just another piece of the
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puzzle to help you do a your own due
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diligence and valuation on the deals on
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our site and if I understand outright
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the income that's being made from these
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properties that's basically the lease
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income that's paid by the farmers right
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so like if there's a annual crop that
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just as terrible is that burden mostly
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on the farmer and not on the investor
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and I acre trader yeah so the majority
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of farms not all of them but the
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majority of farms that we manage are
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actually in cash rent and the cash rent
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to some extent does shield or insulate
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the individual investor from temporary
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swings and commodity prices so it really
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stabilizes and levelized as the return
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profile the asset so I know there is a
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trade war of sorts going on right now
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with China does that have any impact on
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farmland as an investment or on
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investors with acre trader what does
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that have to do with all stuff yeah sure
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so you know I think the most important
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thing to take away in terms of investing
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in acre trader is that most of our farms
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are in cash rent and as I mentioned that
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does sort of shield the individual
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investor from those swings and commodity
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prices and I think also from a bigger
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picture while the trade war certainly a
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consequential and important we really
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view it as a temporary fluctuation in in
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terms of farmland value and commodity
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prices and at the end of the day
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farmland values in the long run are
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really influenced both by increasing
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global demand for agricultural products
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and commodities as well as the
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decreasing amount of farmland due to
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development okay and in your opinion
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what kind of investor is acre trader not
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for like what kind of person should not
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get involved with this do you think well
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you know I may be biased I think
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farmland investing is really for
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everyone at the end of the day I think
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acre traders a really good value for
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people who are looking to diversify
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their portfolio you know like I said
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farmland is traditionally not very
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volatile when compared to other asset
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classes and it's also not correlated
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with major stock indices right and so I
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think for someone who's really looking
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for good diversification with strong to
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moderate returns to their investment
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acre trader and finally it's a great
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value I mean would you say if somebody
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is the type who they want to get their
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money back within six months at 12
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months I mean it obviously doesn't make
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sense for them right so if you if you
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need your cash back immediately you
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probably shouldn't be putting in an acre
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trader is that a safe assumption or am I
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missing anything with that yeah I mean I
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think we definitely do take a long-term
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perspective on farmland we're very
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confident in its long-term performance
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as historical performance and so it's
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probably not a day trade type of
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opportunity but for folks who are
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looking for stable returns over the long
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run it's a great investment and if I
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understand correctly the value of
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farmland it doesn't necessarily go up
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and down with the value of conventional
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real estate Lakes you know single-family
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homes and that kind of thing like it
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sort of follows a different pattern
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right and what affects that pattern
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that's again none of the one of the
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great things about farmland is it's a
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largely non-correlated asset in terms of
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macroeconomic movements don't
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necessarily affect the value of farmland
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because at the end of the day there's
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very limited vacancy in US farmland and
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increasing global demand for food and AG
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commodities and so ultimately what
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influences farmland value the most is
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going to be global demand and then
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decreasing supply of farmland okay so
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then what kind of stuff do you guys look
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at when you're evaluating a deal like
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how do you know and how do you come up
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with a predictable outcome where like
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yes this will be a good farm opportunity
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it will most likely generate this kind
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of return over the next three to five
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years what do you look at how do you
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figure that out yeah I think that's a
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real value out of working with acre
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trader is that we do have a due
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diligence process it's quite thorough
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and begins with a income approach
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looking at a farm so that's all the
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intrinsic qualities of farmland so what
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is the asking price what is it being
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rent to debt so at the end of the day
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what is the cap rate on that piece of
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land and then we combine that in the
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second step with a market comparison and
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so in this stage we're really looking at
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our larger market forces affecting the
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price of farmland and then in the third
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stage is really our own due diligence
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and experience coming into play so you
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know we're here on a farm today in
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Michigan I'm doing a little bit of
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research on this particular farm and
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we're gonna look at everything from
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is the well good are the water rights in
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place just a water drain off the land
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appropriately and so that's sort of the
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third element of our due diligence
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process is that on the ground inspection
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right and so I think that's a real real
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asset that a crow trader has and that
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it's hard to just go out and buy
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farmland on your own if you don't have
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that experience yeah for sure now if you
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come across a property where I don't now
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say there's there's one issue with it
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where like the water does it doesn't
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drain properly or it's not currently
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irrigated like do you guys do anything
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to fix those problems or is it just like
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nope not the right I want we're gonna go
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find something else what's your approach
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to that yeah I mean because farmland is
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such a competitive market there are very
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few great deals waiting to be had and
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you have to do a little bit of work to
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go out and find them and to improve
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farmland to be a great deal and so we
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will do a little bit of value-add work
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and so that could be drilling a new well
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doing a little bit of land shaping or
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fixing up a poor drainage when we do
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that we can take what's an OK farm and
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make it a great farm and that really
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investors really benefit on the back end
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and in terms of the appreciation of that
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property when it's sold again that's it
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folks it's starting to rain here so
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we're gonna wrap this up but again acre
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trader Ari tipster does have an
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affiliate relationship with these guys
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if you want to check it out through our
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affiliate link it's Ari tipster com /a
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Kerr trader and we're also gonna have
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that link beneath this video in the
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description I hope you guys enjoy this
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hope you got something out of it and
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we'll see you next time ok
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