REIG Elise | Investing In Farmland

 

The future of a country can be greatly linked to farmlands because this is where food supply comes from. Today, Monick Halm talks about real estate and farmland with Elise Alexander, the VP and General Counsel at AcreTrader. According to Elise, investing in farmlands may not be too enticing, but it can be a promising long-term investment. She shares some aspects of the syndication of these lands and who can potentially invest in it. She also offers some advice for women who want to enter the real estate world. Listen further as Elise gives us some heads up on what we can expect from farmland investments.

Listen to the podcast here:

Investing In Farm Land — Interview With Elise Alexander Of AcreTrader

My guest is Elise Alexander who works for this cool company called AcreTrader. She was raised on a farm and cattle ranch in Crawford County, Arkansas. Since 2003, she has served as President of a large family office managing several companies and serving as legal counsel. From 2003 to 2012, she served as VP and General Counsel for T.A.W. Inc., an oilfield services company with $200 million in revenue across multiple states. Prior to that, she worked as an associate in Orrick firm in Silicon Valley. She is an attorney like me. She was in the corporate division forming and advising startups and public companies regarding securities, mergers and acquisitions, and IPOs. Before that, she was an in-house corporate counsel for Varian Associates in Palo Alto. She studied at Texas A&M University and went to law school at Pepperdine, which is my backyard. I’m super excited to have her. Welcome, Elise.

Thank you for having me. We’re excited to meet you and talk about real estate and farmland.

I’m excited to have you here talking about farmland too because that is a class that I’m barely familiar with at all. How did you get started in real estate in general? How did you get into farmland?

I grew up on a cattle ranch in a small town in Arkansas. Starting out, farmland was just something we grew things on or fed cattle on. I never considered it to be an investment. I knew generally that real estate had its value, especially in inflationary times. Farmland, traditionally, has not been liquid. It doesn’t change hands often and there was not a traditional market for it. I happenstance met the AcreTrader guys. They were looking for investors in the company and met with my brother over in Memphis. He happened to mention that they were looking for general counsel and he said, “I happen to know somebody who checks all the boxes for you all.” I had worked previously in HR, insurance, securities, startups, IPOs, and merge and acquisitions, and they needed someone. I fell in love with the concept first of AcreTrader and what it did in the technology platform. As I began to get educated about the values of farmland, how it appreciates and how it’s non-correlated to the stock market more so than traditional real estate. I’m learning more and I love it. It’s interesting.

Was farmland your first real estate investment? Did you invest in real estate before that?

Through my family, we’ve invested in real estate. Before that, we built some apartments using tax credits. That was an interesting learning experience. Besides the farmland that we farm on, we also have invested in some hunting/farming properties both in Arkansas that have performed well for us. We’ve sold the original farm that we bought that we grew rice on it, as well as allowed others to hunt. We’re rolling those funds with some of our other members into other farmland because it did great. When my brother first brought it up, I thought, “This is not a good idea.” He was right and I was wrong.

He brought up the idea of investing in the hunting land?

Farmland that you allow others to hunt on. That particular property grew rice. We more than doubled our money in allowing other people to hunt ducks on it.

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There are many ways to make money with real estate. Renting out for hunting, that’s genius. Tell us a little bit more about why farmland is different from others because you were saying that farmland is even more different or less tied to the greater economy than other types of real estate. Tell me why farmland? Why do you like it? Why should somebody invest in it?

We joke that farmland is boring but in this case, boring is a good thing. If you look back 20 to 30 years and you track the appreciation of value in farmland against the stock market, the volatility is not correlated at all that we can tell from looking at historical data with ups and downs in the stock market. Generally, other asset classes such as gold, stocks and bonds, it plumps along. It’s not ever going to grow at a super quick rate, but it’s steady and it has appreciated year over year. We liked that. In the statistic, I learned that in the United States, we lose on average three acres of farmland per minute. I don’t know about the rest of the world, but in the US, that’s the statistic. Yet, our population is growing and we need to feed people.

There’s a first older generation of farmers who are nearing the end of their careers. Sometimes, their children want to grow on the farm and sometimes, they do not. You may have a mix within a family. Carter started thinking about farmland, how we could make it more accessible to other people and how we could help our country ensure continuity of food supply. Perhaps, provide some liquidity for some families that don’t want to farm anymore. He conceptualized the idea of AcreTrader. The other thing about farmland that’s good is you get annual income generated by rent paid by a tenant. About 30% to 40% of farms in the United States are not operated by their owners. You have a lot of rented farmland. In our case, we have an annual income that comes in cash. In some instances, there could be crop sharing as well but generally, it’s cash rent. We get that every year and distribute it to investors. Over time, you have the year over year appreciation value of the real estate farmland itself. When we find a good opportunity to liquidate the farmland and sell it to a new owner, we distribute those profits as well.

There are a couple of cool things that I’m learning about farmland. One is when supply dwindling, that would definitely help with the appreciation and values. What returns can you get with farmland?

If you look back over the last few years, probably it averages 10% to 11%, sometimes as high as 12%. That does include adding the yield you get annually to the growth, the appreciation value, but it’s not a bad return. Historically, a big barrier to entry for farming is it’s expensive. A lot of people don’t have the knowledge base to farm or know where to start. Our idea was to make it accessible. We take care of managing the farm, filing the property taxes, and doing the diligence on the property to find out if we think it would be a good value in a long-term good investment for people. It’s passive investing for investors in AcreTrader farms because they don’t have to do anything other than collect money and wait a little bit.

We talked a lot about syndications, which is the type of crowdfunding bringing investors together to purchase larger properties. That’s essentially what you’re doing here. You’re syndicating farmland and that’s neat. Who can invest in AcreTrader?

At this point, the exemption we’re using with the Securities and Exchange Commission is Rule 506(c) of Regulation D. We’re only able to accept accredited investors, but we’re definitely strongly considering using Reg A+ and trying to do some offerings that way to open it up to other investors. Our minimum investment is about $5,000 and sometimes, depending on the size of the property and the value, the initial entry could be as high as $10,000. It doesn’t take long to go on and look through our offerings and decide if you wanted to invest. You could do so in not many minutes.

Accredited investors, that means you have to have an income minimum of $200,000 as an individual, $300,000 as a married couple or have a net worth of $1 million, not including your primary residence. I’m a syndicator. That’s what I do. Not farmland, but I definitely need to know my 506(b), 506(c) and Reg A+. For those who are reading, if you fall under that, if you’re an accredited investor, it’s a super interesting type of opportunity and you can get in for a lot less than their typical syndication. Often, minimums are $50,000 to get into syndications. That’s something that you can get into for as little as $5,000.

REIG Elise | Investing In Farmland

Investing In Farmland: The United States loses an average of three acres of farmland per minute Yet, the population is growing and the more we need to feed people.

 

We are having a ball. We are working hard, learning as fast as we can and trying to do well for our investors in the world and try to help make it a better place.

What are some of the challenges that you experience with investing in real estate and farmland and doing it in this way?

Supply is challenging in some ways because farmland does not transact frequently. When it does, it’s often private transactions. Most farms are not listed on the multi-list services. Our challenge to grow our business is to create a network of contacts with realtors all across the country who might specialize in farmland. Also, get our name out there and teach people because we are a fairly new company. We went live in March of 2019. It takes a while to build trust and for people to understand what we’re doing and how, so we face a lot of challenges, but we’re growing. Things are coming along well and we’re excited about it. As I said, we try. We all learn something new every day and that’s one of my favorite things about my job.

One of the questions that I ask all of my guests because I find that we learned more when things go wrong versus when things are smooth sailing. What would you say was your biggest mistake in your real estate investing career? What did you learn from it?

There’s a two-part answer. The first is not starting sooner is a mistake, but with respect to the apartment complex that we built that was multifamily housing that we use tax credits. I didn’t do enough background research to understand truly what we were getting into in terms of the length of the commitment. I would encourage all the real estate goddesses out there to make sure you’ve fully done your diligence and don’t just rely on what someone is telling you. Certainly, surround yourself with mentors, people you trust and want you to learn and grow, but don’t take anything for granted. Do your research. Make sure you understand what you’re getting into.

What would you have done differently?

That project, I might have passed on. Not that they aren’t worthwhile projects and create a lot of public good. That particular project houses a lot of people with disabilities, which is a good thing. The thing that I personally don’t like about it is that it’s not liquid and you had to commit to keeping the project for a certain number of years to earn the tax credits. That’s just a personal preference. It doesn’t mean that those types of projects aren’t good and that we won’t do well in it.

How long do you have to keep it for the tax credits?

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I can’t remember specifically, but it’s about fifteen years. You can sell it before then, but you have to get some special permission from state authorities as well as the people that buy your tax credits. It’s not an easy process, but I’ve learned a lot through that. Real estate residential and other types of real estate investing are great investments as well. At this point, I know a bit more about farmland and I have spotted several podcasts on your website that I’d like to watch and learn more.

There are many different ways to invest in real estate. That’s why I’m excited to have you. I love it when I get somebody in that’s still doing something that I don’t know much about yet. There are many different types of properties and different ways of investing. I love this farmland idea. What are you most proud of?

I’m proud of the team that we’re building. Honestly, we’re all in it to make money and create better lives for our families. I love the fact that we’re preserving farmland and open space and trying to promote sustainability and growth. We hope to have some sustainable and organic offerings in the near future. I like the idea of saving that for our future generations and helping to assure that we can feed our country and the world. The United States exports a lot of stuff, but I’m also proud of the team that we’ve assembled at AcreTrader. I like technology with a background in Silicon Valley. Technology companies are interesting to me and appealing. We are a combination of old school farming and high tech.

You’ve been quite successful in your career. To what do you attribute your success?

Mostly, hard work. I’ve been incredibly lucky to have some awesome mentors. One of those is my father who was this serial entrepreneur who never met a deal he didn’t like. We always joke that he would sell his children if he could, but he wouldn’t get returns, so we were safe. Also, being incredibly curious about business, deals and having grown up in a household where that was a common language and the vocabulary was there. Mostly, it’s hard work and not being afraid to try new things and don’t be afraid to fail. If you do, you get up and you start over. Quitting is not an option.

It’s not a failure. It’s feedback.

Most of the things that we learn and retain are because we made a mistake and sometimes, we learn the hard way, but you don’t forget.

That’s why I always ask about the mistakes. Partly because hopefully, the goddess reading can avoid that same mistake, but also because there’s gold when you have that. That’s where the most gold happens.

REIG Elise | Investing In Farmland

Investing In Farmland: In real estate investing, make sure you’ve fully done your diligence and don’t just rely on what someone is telling you.

 

There’s a lot of luck involved, but what you’re doing is phenomenal because you’re encouraging growth and helping teach women to help and support each other. If we, as humans, did that across the country, whether it’s real estate, farming or whatever it might be, our world will be better. Thank you for what you’re doing.

What advice do you have for a woman who’s just starting out in real estate investing? What do you wish you’d known at the beginning that you now know?

I wish that I had taken time early on to educate myself more about financial concepts. That language and vocabulary, I wish that I had started earlier but people sometimes, as humans, we’re reluctant to try something new. Everything seems too big at first when it’s something new. With respect to investing in real estate, you must not be afraid to try. It’s all relative. What’s big for me might be small for another person. We have to be self-aware enough and understand what we can afford to lose. If you’ve made that determination for yourself, then you know what you can afford to invest. The syndications are a great idea because you’re growing your money with someone else, but you’re also de-risking yourself. I wish I had known all of those concepts early on. A lot of that knowledge was not available other than in the classroom. I would encourage all those goddesses out there and the wanna-be goddesses to do your research, but don’t be afraid to try.

You have to get educated, but you can’t just wait. You have to get out there and take action.

If we wait, there’s always going to be that next hurdle or that next impediment to keeping you from starting.

They say that real estate investing is like planting a tree. The best time was 20 years ago, so you have to get into it and get started. Before we get into our famed end of show trinity, which is our brag, attitude and our desire, what’s the best way for people to reach you or find out about AcreTrader?

Our website address for AcreTrader is www.AcreTrader.com. Our office number is (479) 335-5660 and my email address is [email protected].com. We welcome questions and inquiries. Even if someone maybe can’t invest yet, if they still want to know more about farming, we’re happy to talk and share what we know and maybe learn something from them.

Time for this trinity. What’s one thing you’re celebrating?

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I am celebrating a tremendous amount of knowledge I’ve had to acquire. I’ve had to relearn some things I forgot. Crowdfunding was even an inexistence the last time I practiced law in a firm, so I have to say my brain is less pliable than it was back a few years ago. I love learning and this is exciting.

What’s one thing you’re grateful for?

I am thankful for my immediate family as well as extended and I’m thankful for my coworkers at AcreTrader. I feel like I’ve found my tribe. Not that I didn’t fit in other places, but everything’s lined up and it’s a blessing.

Last but certainly not least, what’s the one thing that you desire?

I desire to be wildly successful and accomplish more things in the next ten years than I ever imagined I could. I know that’s not specific but as I’ve gotten older, I’ve had this nagging suspicion that I could have done more, so I would love to see AcreTrader be successful. I don’t know what that exit looks like yet, but I can’t wait to find out.

So shall your desire be or so much better than you can imagine.

Thank you.

You’re welcome. Thanks for joining us and sharing this fascinating asset class and your story with us. It was a pleasure.

Thank you for having me. I enjoyed it.

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