May 16, 2021

FarmTogether Review

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Want steady returns even when stocks are volatile? If so, consider farmland investing with FarmTogether. Discover the pros and cons in this review.

FarmTogether
Invest in US Farmland

Overall Score

3.3

Annual Fee

3.5

Minimum Deposit

3.0

Ease of Use

3.5
5-point scale (the higher, the better)

Pros and Cons

  • Able to choose investments
  • Low investment minimum
  • Low fees
  • Accredited investors only
  • Low liquidity
  • Some risks with asset class

Bottom Line

Invest in farmland with low fees and low minimum deposits

Did you know farmland investing has annualized returns of 7-13%?

With platforms like FarmTogether, you can get in on those yields.

In this review, learn how farmland investing works with FarmTogether, what it costs, and more. Plus, see how it compares to platforms like AcreTrader and FarmFundr.

What is FarmTogether?

Founded in 2017, FarmTogether is an investment platform offering accredited investors the ability to invest in U.S. farmland. Their mission to democratize farmland investing by applying a crowdfunding model to agriculture.

The platform is run by a team of professionals with decades of collective experience in food, agriculture, and farmland investing. CEO Artem Milinchuk was previously the VP of Operations for Full Harvest Technologies, a B2B platform for buying and selling surplus produce.

Based out of San Francisco, FarmTogether was founded by a team of four, including the current CEO. According to Crunchbase, they are backed by $3.7 million of venture capital funding, with the latest financing taking place in July 2020.[1]

Is FarmTogether legit? Yes, FarmTogether is legit. Farmland as an asset class has delivered strong and steady returns over the last couple decades that compare favorably to stocks but with much less volatility.

FarmTogether is run by an experienced team and offers an affordable way to add diversified farmland exposure to your portfolio. As the world's population continues to grow rapidly, there will always be strong demand for quality foods and the fertile land they are grown on.

How Does FarmTogether Work?

The FarmTogether platform works similar to other types of real estate crowdfunding. Here's their process:[2]

  • Their team identifies prospective farmland properties in the U.S. in need of funding.

  • If the property meets their list of investment criteria (e.g., type of crop, property location and valuation, the operator's experience and capabilities), they'll negotiate the terms and then list it on their platform.

  • Investors can then browse the available properties and their investment profiles (e.g., target IRR, cash yield, holding period, and how much capital investors have already committed to the deal).

  • Required minimums start at $15,000. This is generally low enough to allow you to diversify across a few different properties depending on the size of your allocation.

  • After you make an investment, the day-to-day crop maintenance and selling of the harvest are all handled by FarmTogether and their contracted partners.

  • You earn returns in 3 ways - (1) quarterly or annual cash flows resulting from the sale of the harvest, (2) lease payments by operators, and (3) proceeds from the eventual sale of the property at the end of the investment holding period.

The FarmTogether platform supports accounts for individual and corporate entities, self-directed IRAs, and 401(k) accounts.

Note: Although management is planning to eventually open their platform to all investors, it is currently only available to accredited investors. This means you must have an annual income of at least $200,000 ($300,000 if filing jointly) or a net worth of at least $1 million (excluding the value of your primary home).

What are the Pros and Cons?

On the fence about FarmTogether? Review these pros and cons before signing up.

Pros

  • Freedom to choose your investment: Unlike other platforms that assign you an investment, you have the ability to choose which properties you want to invest in.

  • High-quality investment: You're investing in a tangible asset class with intrinsic value and strong historical returns.

  • Low investment minimums compared to other real estate: FarmTogether's minimum of $15K is much lower than other platforms that require as much as $250K.

  • Low fees: Fees are low (1% - 2%) relative to most private real estate investments that can charge as much as 8% - 10%.

Cons

  • Only available to accredited investors: While the minimum investment is low, the requirements to be an accredited investor are still intangible for many.

  • Low liquidity: Your money is "locked up" for 5-10 years or more. If you need to sell early, FarmTogether can assist you on a best efforts basis in locating a buyer. But it may be at a discount to the initial investment or subject to transaction fees.

    Note: FarmTogether has a pilot secondary liquidity market. They plan to offer liquidity options for all deals.

  • Asset class has some risks: These risks include unpredictability of nature, weather, pests, and crop prices.

How Much Does FarmTogether Cost?

It's free to sign up for the FarmTogether platform. You won't owe any fees until you actually make an investment. Those fees vary and are unique to each property. In general, here's what you can expect in fees:

Transaction fee
A one-time, upfront fee that averages about 2%.

Management fee
An annual fee between 1% and 2% that goes to the partners managing the day-to-day farm operations.

It's important to read the offering documents carefully, though, as each deal has its own fee arrangements, and some may even include profit sharing for the managers.

Is FarmTogether safe to use?
Investing through the platform is safe in the sense that you are not investing in FarmTogether but rather you own a portion of the actual farmland (usually structured as an LLC), which protects your investment in the event that FarmTogether fails. FarmTogether is not SIPC insured because that only applies to brokerages that deal with publicly traded securities, like stocks and bonds.

Is FarmTogether a Good Investment?

No investment comes with zero risk, but farmland offers a very attractive risk/reward profile and acts as a great diversifier for a balanced portfolio of stocks and bonds.

According to their website, farmland:

  1. Yielded an average annual return of about 10% over the 20 years (leading up to 2018)
  2. Has low volatility and low correlation to stock performance
  3. Didn't post a single year of negative returns over this time period

The fees on the FarmTogether platform are also very reasonable compared to other private investments. Plus, people will always need to eat, so there's little risk of a large, sustained downturn in farmland values.

Overall, the risk/reward profile of FarmTogether is strong.

Other Ways to Invest in U.S. Farmland or Real Estate

While we think FarmTogether is a great addition to most portfolios, there are other competing real estate platforms for both farmland and commercial and residential buildings.

Depending on the size of your portfolio and the type of real estate you want, you may want to consider one of these competitors.

FarmTogether vs. AcreTrader
AcreTrader is a close competitor to FarmTogether as they also offer direct investments in individual U.S. farmland properties that you can choose from on their platform.

The two platforms are very similar in terms of types of crops, minimum investment size, holding period, returns, and fees. AcreTrader charges an annual management fee of 0.75% of the value of your investment in addition to closing fees that are charged for each deal, which average about 2%.

AcreTrader plans to open a "marketplace" on their platform where investors can sell their AcreTrader investments before the holding period is complete if they want the cash sooner.

This is a nice feature as it creates liquidity and flexibility in an investment that is otherwise very illiquid and long term, but we are careful to note that this is still in the planning phase.

The primary difference between the two platforms is crop types. FarmTogether is permanent and row, while AcreTrader focuses primarily on row.

Overall, we think FarmTogether and AcreTrader both offer an attractive platform for farmland investing. If you are looking to invest in this space, consider opening an account on both (opening an account is free) so you are able to browse deals on both platforms and take advantage of the most attractive properties.

Is AcreTrader legit?
AcreTrader is legit. They claim that their review process is so strict that they only accept ~1% of the properties they research. Similar to FarmTogether, they also hold each of their properties in a separate LLC (which the actual investors own). So your investments are protected even if AcreTrader fails.

FarmTogether vs Fundrise
Fundrise is another popular private real estate investing platform. In 2015, they launched the eREIT, which is an ETF that holds a large diversified mix of real estate investments from different sectors (commercial and residential).

They offer three different eREITs, each one tailored to a specific mix of dividend income vs. longer-term capital appreciation. You can invest across their portfolios with as little as $10.

Besides their low investment minimums, Fundrise also offers better diversification and more liquidity than you can get with FarmTogether.

Fundrise will let you withdraw funds early (after just 90 days, if you need) for a small redemption fee. And their fees are attractive as well - with just a 1% annual management fee applying to most accounts.

A downside of Fundrise is that they don't offer farmland on their platform, so this makes FarmTogether an obvious choice between the two if you know farmland is where you want to invest.

FarmTogether vs. FarmFundr
FarmFundr is another close competitor of FarmTogether. FarmFundr is a smaller platform founded by a 4th generation California farmer and currently only offers a handful of local properties. Like FarmTogether, they also only accept accredited investors.

Features that add to FarmFundr's small, "local" vibe include a free box of produce from your farm each year, and even an open invitation to come visit and spend the weekend at the farm.

FarmFundr also has shorter holding periods, which vary from 1 to 7 years, and higher target returns of 13 to 15%. While these target returns are higher than what FarmTogether advertises, it's important to note that FarmFundr has a limited track record.

They currently only have three projects in crops that command higher prices (pistachios and almonds), and these prices can also vary a lot over time, affecting investors' returns.

We also like that FarmFundr takes an equity stake in each of their properties, ensuring that they have skin in the game. Despite their small size and limited history, we think their high target returns are enough of a reason to consider FarmFundr.

Bottom line: Should You Invest in FarmTogether?

With carefully curated farmland, competitive returns, and years of industry experience, FarmTogether has a lot going for it.

Plus, investing in farmland is a smart move. Because it has little correlation to stocks, farmland investments can cushion your broader portfolio during a bear market.

The diversified investor of the past might have left farmland out of their portfolio because of the high investment requirement, the constant upkeep, and the need for planning out every aspect of a harvest.

But being a farmland investor in 2021 has never been easier thanks to crowdfunding platforms like FarmTogether.

References

  1. ^ "FarmTogether": Crunchbase, 2021.
  2. ^ "How it Works": FarmTogether, 2021.
FarmTogether

Invest in US Farmland

$15,000 Minimum Investment

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