How Do Farmland Investors Earn Annual Income? (Video)

December 27, 2019
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Video Transcript

I've got a question here about lease payments. Does the leasee pay a portion of the crop proceeds to AcreTrader owners?

So, that's a little bit of a complicated question, we'll go through two different scenarios.

The first is our permanent crop offerings. With those, you are actually investing in the ongoing concerns of that farm itself. So, you do receive a portion of the profits in most cases from the land and operations; so that's scenario one.

Scenario two are our row crop offerings.

Now, row crop offerings have three different types of leases primarily. You'll have a crop share, which is a revenue share agreement. Next, you have a cash agreement, and then you have a flex lease, which is a combination of the first two.

In most cases, we are doing a cash lease because of its simplicity. In a very rare scenario we may do a flex lease that of the combination but that would be structured so that it would have a lower floor and then have some upside for the AcreTrader investors.

And that's advantageous both to the farmer, because his absolute number can be lower in times that are not as profitable, and the investor because then he shares in his upside with the AcreTrader investors if it's a good year.

For more on how landowners earn income, please read this article on how farmland owners earn income in our Learning Center.

*Please note: this article is meant to be a topical overview and, as such, does not include specific financial advice. Every situation is unique, and you should consult with a licensed attorney, accountant, and/or financial advisor prior to entering any written contract or verbal agreement. *

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