Can I Fix My Credit in a Week?

If you’re getting ready to apply for a car loan, mortgage or credit card, you may have heard it’s a good idea to check your credit before doing so. But, waiting until the last minute to check your credit before applying may have you surprised — if you find you have low credit scores for any number of reasons, you may be wondering just how quickly you can fix your credit.

“Unfortunately, there are no quick fixes for credit because it took time for this problem to arise and it generally takes much more than a week to resolve it,” John Heath, a credit expert and consumer attorney for Lexington Law, a Credit.com affiliate, said in an email.

Timing Is Everything

Credit scores are based on information in your credit files, which includes new data about how you handle your accounts reported by your creditors every month, according to Jeff Richardson, a spokesperson for VantageScore Solutions.

This monthly reporting date differs from lender to lender and the monthly date your credit scores update also differs depending on the reporting bureau, which is one of many reasons the cycle for fixing your credit may take more than 30 days, Richardson said.

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Another example of timing limitations arises when you attempt to fix your credit by disputing errors on your credit reports, according to Heath. These disputes may include a current account, collection, bankruptcy, public record, tax lien or late payment that can’t be substantiated, isn’t yours, is inaccurately reported or is outdated.

“One of the major rules of the Fair Credit Reporting Act grants the credit reporting agencies 30 days to review your challenges to items on the credit report,” Heath said.

According to a 2012 VantageScore report, showing the impact of different positive and negative credit behaviors, you can typically improve your credit scores by 10 to 15 points within a few months with simple credit management techniques such as paying bills on time and paying down debt. For larger score improvements, it can take even longer depending on your specific credit report and account history.

Credit Fixes Accomplished in 30 Days

In general, the negative score impact of running up the balances on your credit cards can usually be corrected by a payoff the next month, according to Richardson.

“Pay down the balance all the way to zero, or at least under 30% of your total available credit, and you may see a credit score bump back up the next month, so long as there are no other negative credit events on your report,” he said.

Again, depending on timing, there might be one way you might improve your credit score in one week, according to Richardson.

“A score increase or decrease will depend upon when the lenders update your file,” Richardson said. “If you can find out when, say, a credit card issuer is reporting to the credit bureaus and reduce your balance significantly beforehand it is possible to see a score increase in a short time period.”

He favors taking a longer view of your credit health and improving your credit before you need to apply for any new credit, if possible.

Heath said you could spend one week reviewing your credit reports thoroughly making sure you recognize all the listings on the report and creating a budget that assures timely payments. Both of these actions, easily completed in one week, go a long way toward improving your credit in the long run.

No matter what steps you take to improve your credit scores — whether it’s to repair errors you discover or simply improve your habits — it’s important to note that these are things you can do on your own. There are also professional credit repair experts who are available to help you, but opting to turn to one for help is not essential.

If you are unsure where your credit currently stands, you can view two of your credit scores for free, updated ever 30 days, on Credit.com.

Image: Rawpixel Ltd

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Source: credit.com

Jasper Mastercard® Review

Advertiser Disclosure: This post includes references to offers from our partners. We receive compensation when you click on links to those products. However, the opinions expressed here are ours alone and at no time has the editorial content been provided, reviewed, or approved by any issuer.

The Jasper Mastercard® (Jasper Card) is an unsecured credit card designed for first-time credit card users and those looking to build credit.

Although it’s not technically a student credit card, the fact that it doesn’t require a credit history for approval — thanks to an innovative underwriting process — and its availability for foreign nationals in the United States on student or work visas make it appropriate for those pursuing higher degrees.

And it’s an excellent alternative to secured credit cards, which require what’s effectively a down payment as a condition of use.

Jasper isn’t perfect. It lacks an introductory APR promotion, for example. But it’s an above-average choice for anyone in the process of building or rebuilding credit.

Key Features

The Jasper Mastercard’s most important features include:

Referral Bonus

For each friend you successfully refer to Jasper, you’ll earn an extra 0.5% cash back for a full year, up to 6% total cash back (5% above the 1% cash-back baseline).

Underwriting Process

Jasper uses a nontraditional underwriting process that considers noncredit factors, including sufficient proof of income, to produce a more holistic gauge of applicant risk. Not having a credit score or having limited credit will not necessarily disqualify your application from consideration.

However, if you have good credit, your application will be considered using common credit factors.

Credit Limit

Jasper offers credit limits up to $5,000 with no security deposit required. Your actual credit limit will depend on your income, creditworthiness, and other factors.

Earning and Redeeming Rewards

All eligible Jasper purchases earn 1% cash back. Cash back doesn’t expire as long as your account remains open and in good standing and is automatically applied to your account balance at the end of each statement cycle.

Important Fees

This card has no annual fee. Other fees may apply, including a foreign transaction fee for purchases made outside the United States or denominated in foreign currencies.

Card Benefits

The Jasper Mastercard has a number of perks and benefits underwritten by Mastercard, including:

  • Satisfaction Guarantee for Purchases. Select Jasper Mastercard purchases — those made in full with the card — qualify for Mastercard’s satisfaction guarantee protection for 60 days from the date of purchase.
  • Extended Warranty on Select Purchases. Eligible purchases also qualify for a one-year extended warranty, for total warranty coverage (including the original manufacturer’s warranty) of 24 months or less.
  • Price Protection on Select Purchases. Jasper is one of the few remaining credit cards offering price protection coverage on eligible items for 60 days from purchase. If you find a lower price on an identical item during the coverage period, this benefit may refund the difference. Note that this benefit is subject to change or revocation at any time.
  • Purchase Assurance. This benefit provides reimbursement for covered theft, loss, or damage on eligible items for up to 90 days from purchase, subject to policy limits and exclusions.
  • Mastercard Travel Benefits. Jasper’s comprehensive Mastercard-backed travel benefits include a car rental loss and damage waiver, lost or damaged luggage protection, travel accident insurance, trip interruption and cancellation insurance, and more.
  • Cellphone Protection. Enjoy reimbursement for covered damages to your eligible cellular telephone device, subject to limitations and deductibles.

Credit Required

Jasper is appropriate for applicants with fair to excellent credit. Applicants with limited or nonexistent credit may qualify for approval, depending on income and other underwriting factors.

Jasper reports account information, including payment history, to the three major credit bureaus, so your use of the card will be reflected on your future credit score.

Advantages

The Jasper Mastercard is an effective product for building and rebuilding credit. It has some other notable advantages as well.

  1. No Annual Fee. This card doesn’t charge an annual fee. That’s welcome news for frugal cardholders who can’t be bothered to pay a recurring levy.
  2. No Credit History Required for Approval. Jasper doesn’t require new credit applicants to demonstrate any particular length of credit history — or any credit history at all if their income and other underwriting factors qualify them for approval. This makes Jasper a fantastic first credit card option for younger cardholders.
  3. No Security Deposit Required. Unlike many other cards for people with limited or fair credit, this card doesn’t require a security deposit as a condition of account opening.
  4. 1% Cash Back on All Eligible Purchases. Jasper earns 1% cash back on all eligible purchases. That’s a nice rate of return for an entry-level card, as many direct competitors lack rewards programs at all.
  5. Nice Referral Bonus. Each successful referral earns 0.5% bonus cash back for a full year, up to 6% cash back (5% above the base rate).
  6. Impressive Mastercard Benefits, Including Price Protection. Jasper Mastercard has an impressive lineup of premium Mastercard benefits, including basic travel insurance and price protection. It’s one of the few remaining credit cards offering price protection to new account holders, in fact.
  7. Regular Credit Bureau Reporting. Jasper regularly reports account activity to all three major consumer credit reporting bureaus. This is good news for cardholders eager to build credit and improve their credit scores with a pattern of timely repayment and responsible credit use.
  8. Credit Limit Up to $5,000. Jasper offers credit limits as high as $5,000 to qualified cardholders. This is higher than many competing cards.

Disadvantages

Jasper isn’t perfect. Its drawbacks include a less-generous rewards program and no introductory APR promotion.

  1. Cash Back Capped at 1%. There’s no way to earn cash back on Jasper purchases at a rate greater than 1%. This is a drawback for cardholders who’d like to earn a high return on everyday spending (and who qualify for more generous cash back cards).
  2. No Introductory APR Promotion. Jasper has no introductory interest rates (APR) promotion, so it’s not appropriate for applicants looking to cheaply finance major purchases or pay down high-interest debt accrued elsewhere through balance transfers.

Final Word

The Jasper Mastercard® is one of the best credit cards for new-to-credit applicants and those with less-than-perfect credit, bar none. If you’re eager to begin using an unsecured credit card but concerned about the drawbacks of secured credit cards, Jasper could be just the answer you’ve been waiting for.

If you decide after careful consideration that Jasper isn’t right for you, don’t fret — plenty of high-quality unsecured credit cards appeal to first-timers.

Source: moneycrashers.com

What is My FICO Credit Score?

man working on credit application in coffee shop

A FICO credit score is a number ranging from 300 to 850 (up to 900 for certain industry scores) that’s calculated using information from your credit reports. The Fair Isaac Corporation (FICO) introduced the first FICO credit bureau risk score in 1981. Since then, the FICO score is now recognized as a highly reliable source for credit information.

Your FICO score is important because many creditors use it to inform their decisions about their relationship with you. For example, a high FICO credit score increases your likelihood of getting approved for loans and credit cards. On the other hand, a low score is likely to hike up your interest rates.

Knowing your FICO score is also helpful when fixing your credit and preparing for large purchases like a new home. To get you started, we’ve broken down everything you need to know about your FICO credit score in our guide below.

What Is the Difference Between Your FICO Score and Your Credit Score?

Your FICO credit score is the score determined using FICO’s scoring model while your credit score refers to the number calculated by any scoring model (such as VantageScore). VantageScore uses their own scoring criteria with features like clear “reason codes” why scores aren’t higher. To make matters even more confusing, you also have multiple FICO scores. Below, we explain why this is and what you need to know about your different scores.

fico score types include base scores and industry-specific scores

Why Are There Different FICO Credit Scores?

There are different FICO scores because lenders use different types of scores the bureaus use different data to report FICO scores. 

First off, there are two types of FICO scores: base scores and industry-specific scores.

  • Base FICO scores: This is the most commonly used type of score designed to predict late or missed payments for any credit product.
  • Industry-specific FICO scores: This score is tailored to specific credit products like mortgages and credit cards. FICO Auto Scores and FICO Bankcard Scores are two examples of industry-specific scores.

In addition, there are multiple FICO score versions. FICO has updated its score model over the years to accurately reflect changes in society like our use of credit and evolving requirements from lenders. FICO Score 8 is widely used today, but FICO will release it’s newest scoring model in summer 2020.

Finally, scores can differ based on the reporting credit bureau. Scores can differ slightly since:

  • Your credit information varies with each credit bureau. Some lenders report to all three bureaus while others do not. This results in inconsistent scores across the bureaus.
  • Lenders can decide if and when they upgrade to the newest FICO scoring model. This means lenders are free to use FICO Score 8 or older models even if newer models are released.

You can ask your creditors what type of score and version they’re using so you can understand the criteria you’re being evaluated against.

What Is a Good FICO Credit Score?

A FICO score in the “good” range is a score that falls between 670 and 739

However, you can achieve a higher score since the FICO credit score can go as high as 900. Take a look at the list below to see what rating each score range falls under and what constitutes a good credit score.

fico credit score range
  • Less than 580: Poor
  • 580 to 669: Fair
  • 670 to 739: Good
  • 740 to 799: Very good
  • 800+: Exceptional

Keep in mind that lenders have their own criteria and guidelines they use to make lending decisions. Many use other factors, like monthly income, in addition to your credit score to decide if you meet their requirements.

What Factors Affect Your FICO Score?  

FICO credit scores are determined by five categories: payment history, amounts owed, credit history, mix of credit and new credit. Actions that fall under these categories can raise or lower your score. For example, opening too many credit card accounts at once can lower your score.

You can learn more about the all five FICO score factors below.

factors that make up your credit score include new credit credit mix credit history length payment history amounts owed
  • 35 percent – Payment history. The biggest impact on your score comes from your ability to consistently make payments on time. Late and missed payments hurt your score.
  • 30 percent – Amounts owed. The amount of money you owe compared to the amount of credit you have available makes the second largest impact on your score. This ratio is also known as your credit utilization. The lower your credit utilization, the better your score.
  • 15 percent – Length of credit history. The next most impactful category is your credit age. Longer credit histories give credit bureaus a bigger picture of your past payments and other behavior. 
  • 10 percent – Credit mix. The types of credit you have also make a small impact on your credit score. Successfully managing a mix of credit cards, mortgage loans and other things can give your score a positive bump.
  • 10 percent – New credit. Opening multiple credit accounts in a short period of time can make a small, negative impact on your score.

Attempting to open accounts results in multiple requests, known as hard inquiries, that also negatively impact your score. Multiple hard inquiries and new accounts in a short period appears risky to lenders, especially for people who have short credit histories. 

There are several ways you can check your credit score and credit report to see where you stand and what information each bureau has on you. Learning how to evaluate your credit report is important to ensure your information is reported accurately and fairly.

How Do You Keep Your FICO Credit Score Accurate? 

While you’re actively working on building your credit and improving your FICO score, you may notice that your scores don’t seem to reflect all of your hard work.

reasons for inaccurate scores

This is due to a number of things. Your lender might not have reported to the bureaus, your recent history might not be reflected in your current score, or you could have an error (or errors) on your credit report. It’s crucial to periodically check your score and report since some errors can drastically and unfairly drop your score.

Lexington Law provides and monitors your FICO credit score as a part of our suite of paid services. In addition to credit monitoring, we also contact the bureaus on your behalf to ensure your information is accurate and up to date. Learn more about our credit repair services to see how we can help you fix your credit and ensure your information is fairly reported.

Source: lexingtonlaw.com

How Much Is Self-Employment Tax & How Do You Pay It?

Being self-employed is awesome. You enjoy more control over your work-life balance, choose your hours, and have more say in the people and clients you work with. But before you hand in your letter of resignation, you need to understand the challenges of being self-employed. More specifically, you need to consider self-employment tax.

Like most tax rules, self-employment tax may seem incomprehensible at first. But take the time to read up on the subject, and you just might find that getting a handle on this aspect of self-employment is easier than you think.

What Is Self-Employment Tax?

If you have a job, you’re familiar with the Social Security tax and Medicare taxes, commonly called FICA taxes, which your employer withholds from each paycheck. Self-employment taxes are the equivalent of Social Security and Medicare taxes for the self-employed. If you’re a freelancer, independent contractor, or small-business owner, you don’t have an employer to withhold these taxes for you, so you’re responsible for paying them on your own.

If you had self-employment income of $400 or more during the tax year, you’re required to calculate self-employment taxes and file Schedule SE attached to your individual tax return, Form 1040.

The Self-Employment Tax Rate

The self-employment tax rate is currently 15.3%. This rate includes two components: 2.9% for Medicare and 12.4% for Social Security.

There’s no limit to the amount of your net earnings from self-employment that’s subject to the Medicare portion of the self-employment tax, but there is a cap on the Social Security portion. This cap is called the Social Security wage base, and it changes every year. For the tax year 2020, the Social Security wage base is $137,700. For 2021, it rises to $142,800.

When you work for an employer, your employer withholds half of these amounts from your paycheck — 1.45% of your wages for Medicare and 6.2% for Social Security — and matches the other half on your behalf. As a self-employed taxpayer, you’re responsible for the full tax. However, you can deduct half of your self-employment tax as an adjustment to your gross income on Line 14 of Schedule 1.

In addition to the 2.9% Medicare tax, high earners pay an additional Medicare tax of 0.9% on income above the following thresholds:

Filing Status Threshold
Married filing jointly $250,000
Married filing separate $125,000
Single $200,000
Head of household $200,000
Qualifying widow(er) $200,000

How to Pay Self-Employment Tax

Now that you have an understanding of self-employment tax basics, you need to know how to pay the taxes you owe.

Like federal income taxes, self-employment taxes are a pay-as-you-go system. That’s why employers withhold federal and state income taxes and FICA taxes from each paycheck rather than having you write a big check to the IRS at the end of the year with your tax return. When you’re self-employed, you’re required to make quarterly estimated payments if you owe taxes of $1,000 or more.

IRS Form 1040-ES includes a worksheet on Page 6 for calculating your estimated self-employment tax, as well as your deduction for one-half of your self-employment taxes. You can use Form 1040-ES to calculate both your estimated self-employment tax and estimated income tax for the year, divide them by four, and pay them in four equal installments. Those installments are due on April 15, June 15, September 15, and January 15 of the following year. These due dates move to the following business day if the 15th falls on a weekend or holiday.

You can make your quarterly estimated payments online using IRS Direct Pay or by mailing a check with the vouchers included with Form 1040-ES.

When you file your tax return at the end of the year, you’ll reconcile the total amount of estimated tax payments you made with the amount of income and self-employment taxes you owe. If you paid too much, you can choose whether to have your overpayment refunded to you or applied to next year’s estimated payments. If you paid too little, you’ll have to pay the difference, and you might also be charged an underpayment penalty.

What Happens If You Don’t Pay Self-Employment Taxes on Time?

If you owe at least $1,000 in combined income and self-employment taxes for the year and don’t make quarterly estimated payments, the IRS will assess a penalty for underpayment of estimated tax when you file your tax return.

The IRS calculates the underpayment penalty by first calculating how much you should have paid for each of the four quarterly installments. Next, the difference between what you paid and what you should have paid is multiplied by the effective interest rate for the period. The effective interest rate is set quarterly. For the first quarter of 2021, that interest rate is 3%.

The penalty is calculated separately for each installment, so you may be charged a penalty for one quarter but not the others.


How to Reduce Your Self-Employment Taxes

Self-employed individuals have a lot of opportunities to reduce their tax bill through tax deductions. The more deductions you have, the lower your net income — and thus your self-employment tax — will be.

In order to qualify for a deduction, your business expenses must be both ordinary and necessary. Ordinary expenses are common and accepted in your trade or business; necessary expenses are helpful and appropriate for your business.

The kinds of expenses that are ordinary and necessary for your business depend on the type of business you’re in. Some common ones include:

  • Advertising
  • Auto expenses
  • Credit card merchant fees
  • Dues and membership fees
  • Home office expenses
  • Insurance
  • Interest
  • Legal and professional fees
  • Office expenses
  • Rent or lease payments
  • Repairs and maintenance
  • Subscriptions
  • Supplies
  • Taxes and licenses
  • Telephone and cellphone service
  • Travel
  • Utilities
  • Wages

For more details on common business expenses and what is and is not deductible on Schedule C, check out IRS Publication 535.

Before you go on a spending spree to avoid taxes, remember that you don’t get a dollar-for-dollar reduction in your taxes for every dollar you spend. Unless the expense is something you actually need for your business, it’s not a smart move to spend money simply to lower your tax bill.

For example, say you’re considering spending $1,000 on a new laptop. If you’re in the 24% tax bracket, spending $1,000 will save you about $240 in taxes. If you need a new laptop, spending the money may be a smart move. But if you’re spending $1,000 to avoid paying $240 in taxes, you’re better off keeping the $1,000 in your pocket.

Consider self-employment tax just another cost of doing business. Owing taxes means you’re making money. So while every smart business owner wants to do what they legally can to lower their tax bill, spending money unnecessarily isn’t the answer.


Final Word

If you’re still confused about self-employment tax, it’s time to get in touch with a professional, such as a CPA or Enrolled Agent. You can locate one in your area through H&R Block. If you’re new to the world of self-employment, a tax pro can answer any question you have, help you estimate your self-employment taxes, and give you smart ideas for lowering your tax bill.

So add those tax due dates on your calendar and come up with a plan to estimate and pay your self-employment taxes. It’s an important part of being your own boss.

Source: moneycrashers.com

AcreTrader Review – An Easier Way to Invest in Farmland

One of the most important parts of building a successful investment portfolio is diversification. Holding a mixture of different assets, like stocks, bonds, and real estate can help you reduce volatility. If one asset does poorly, another type might perform well and offset the losses.

Real estate investing can be very complex. Investing in real estate can be difficult without the help of vehicles such as real estate investment trusts (REITs). Even then, there are many different types of real estate you can invest in.

AcreTrader is a unique real estate investing platform that helps everyday people invest in an often-overlooked type of real estate: farmland.

What Is AcreTrader?

AcreTrader is a real estate crowdfunding platform that facilitates investments in U.S. farmland in places like Arkansas and other states across the Midwest. Traditionally, farmland investments have been difficult for the average investor to make, so AcreTrader aims to make the process easier.

The company has a team that combines experience in both agriculture and finance. The company carefully selects the opportunities it offers to investors and claims that it only selects 1% of the investment opportunities it sees.

AcreTrader also handles the management of these investments, paying out rental income and facilitating a marketplace where investors can sell their shares of farmland to others interested in buying farmland.


Key Features of AcreTrader

There are a few key facts to know about AcreTrader.

Thorough Underwriting

For many investors, it can be difficult to do due diligence when investing in real estate. Several factors influence the value of real estate and its potential returns, and farmland is unique enough that most people don’t know what to consider when thinking about an investment.

AcreTrader offers help with this through its underwriting process. The company only accepts 1% of the opportunities it receives from farm owners, based on the research and knowledge of its leadership.

AcreTrader displays investment opportunities for customers to consider. It also assigns a rating to each opportunity based on its risk and potential return according to AcreTrader’s vetting process. Investors can see the expected cash return, the overall expected return, the location of the farm, and the crops that will be grown.

By only accepting the best opportunities, AcreTrader hopes to provide strong returns and limit risks for investors.

Buying in Small Amounts

AcreTrader places each farm it buys into a limited liability company. It then divides the farm into shares representing one-tenth of an acre. That makes it easy for investors to invest the exact amount that they want.

Keep in mind that each offering has a minimum investment based on the size of the farm. The minimums tend to range from $15,000 to $20,000.

AcreTrader is only open to accredited investors, meaning people with an annual income of $200,000 or more ($300,000 for couples) or a net worth exceeding $1 million. That makes the $15,000 to $20,000 minimum relatively reasonable for its intended audience.

Multiple Sources of Return

Once an investment offering is fully subscribed, AcreTrader takes over the management of the farm. It works with professionals in agriculture and local farmers to help improve farm value through:

  • Sustainability improvements
  • Implementing best practices
  • Technological improvements
  • Capital investment

The farmers working the land also pay rent to AcreTrader annually. AcreTrader charges an annual management fee of 0.75% of the land value to its investors, taken out of the rent income it pays out to the investors.

AcreTrader states that it typically looks for opportunities that will yield 3% to 5% after fees and capital appreciation sufficient to result in an annual return of 7% to 9%.

Trade Shares or Hold Until Maturity

Investors on AcreTrader have two options for earning a return when they invest in farmland.

It operates a marketplace where its customers can sell shares to other investors. Customers can only sell AcreTrader shares through AcreTrader; they cannot sell them on the open market. This can make the shares far less liquid than the securities many people are used to, which trade frequently on the open market.

For people who don’t want to sell or who cannot find a buyer, AcreTrader investments come with a maturity date. When AcreTrader buys a property, it typically intends to hold it for three to five years, although sometimes the time frame extends as long as 10 years. This gives the company’s team time to make improvements to the land and the methods used to farm it, increasing its value.

Once the investment’s end date arrives, AcreTrader sells the farm and distributes the proceeds to the shareholders.

Flat Fees

AcreTrader charges a simple 0.75% fee for its investments, based on the value of the underlying farmland. Investors don’t pay the fees out of pocket. Instead, the company deducts the cost of managing the investment from the cash rent payments it receives from farmers. It passes the remainder on to investors as annual distributions.

Some opportunities may also come with closing costs associated with purchasing the land.

The 0.75% annual fee is relatively typical for companies that facilitate real estate investments.


How Have Farmland Investments Fared in the Past?

Past performance doesn’t indicate future results, but looking at how farmland investing performed in the past can provide some information to investors.

AcreTrader claims that since 1990, farmland has been one of the best-performing assets in the United States, outpacing the returns offered by stocks, bonds, precious metals, and traditional real estate. According to the company, an investment of $10,000 made in 1990 would now be worth nearly $200,000.

Much of this growth came from a recovery in the market for farmland following a crash that saw prices fall from a high in the early 1980s, as well as a boom in the late 2000s caused by increasing demand for ethanol.

Inflation-adjusted, farmland saw little change in value between 1900 and the 1960s, until the boom that began in the late 1960s and early 1970s.

Keep in mind that part of AcreTrader’s value proposition is improving the operating of the farms it purchases. The company’s team includes people highly experienced with agricultural best practices and technology. Even if farmland as an asset class holds steady or falls in value, AcreTrader may manage to increase the value of the specific properties it buys through the improvements it implements.

The promise of distributions from the rent AcreTrader receives also helps to offset the risk of falling or stagnant land values.

All in all, that means that is certainly potential for farmland to be a successful investment, but there’s no guarantee it will offer significant returns or outperform other asset classes.


Advantages

AcreTrader brings a few important benefits to the table.

1. Access to a Unique Asset Class

One of the primary benefits of investing through AcreTrader is access to investments in farmland. Farmland is a relatively unique asset class. It can be hard to get exposure to it through more traditional channels.

That means AcreTrader provides a unique opportunity to diversify your portfolio and capture gains most people don’t have access to.

2. Carefully Selected Offerings

AcreTrader touts its team’s combined experience in the worlds of both agriculture and finance. The company says it only accepts 1% of the opportunities that are presented because it has strict requirements that ensure the investments available through its site are of the highest quality.

If you believe in the expertise of AcreTrader’s management team, you can feel confident that you’re investing in high-quality farmland with great potential to produce income and grow in value.

3. Annual Cash Payments

AcreTrader offers returns in two forms: cash from the rental payments made by farmers working the land AcreTrader owns, and land appreciation created by the investments AcreTrader makes into updating the farms it purchases. These investments can help increase crop yields and make the land more valuable.

The regular cash payments can help smooth out returns if farmland fluctuates in value and provide investors with passive income. It can also provide a stream of income investors can use to add to their portfolio or cover other expenses.


Disadvantages

AcreTrader isn’t perfect, and it’s important to know the drawbacks before you start investing.

1. Relatively Unproven

AcreTrader was founded in 2018, which means the company has only been around for a few years. While the company is reputable, it doesn’t have the long track record of producing a positive return that other investment companies have.

It also means the company doesn’t have significant experience handling changing market conditions, which could increase risk during market turbulence. You might also worry about leaving the management of land that’s miles away from you to AcreTrader’s management team.

If you want to invest in similar asset classes, you might consider commercial real estate or other alternatives if you dislike AcreTrader’s lack of history. There are other real estate crowdfunding platforms, such as Fundrise, that facilitate commercial real estate investing.

2. Potentially Low Liquidity

When you buy shares in a farm through AcreTrader, it may be difficult to sell those shares to other investors. With traditional investments like stocks, bonds, and mutual funds, you can generally sell your investment on demand. This is important if you need to access your funds because of a financial crisis.

On AcreTrader, you can only sell your shares to other AcreTrader users through the platform’s marketplace. AcreTrader restricts investment to accredited investors, which limits the number of people who can join the platform. Non-accredited investors can’t get involved. That means there’s no guarantee you’ll find someone who wants to buy the shares you’re selling.

Given that the investment is relatively illiquid, if you need your money back, you might find yourself having to wait through the five- to 10-year holding period for AcreTrader to liquidate the investment and distribute the proceeds to investors.

3. Available to Accredited Investors Only

AcreTrader is only open to accredited investors. To qualify as an accredited investor, you must meet one of the following requirements:

  • Have an individual or joint (with a spouse) net worth exceeding $1 million, excluding your primary residence
  • Have an individual income exceeding $200,000 per year and a reasonable expectation of the same level of income in the current year
  • Have a joint income (with a spouse) exceeding $300,000 per year and a reasonable expectation of the same level of income in the current year

According to 2016 Federal Reserve data, only about 10% of households qualified as accredited investors, which means the majority of people cannot invest through AcreTrader.


Final Word

AcreTrader offers exposure to an unusual and potentially lucrative asset class for investors with sufficient net worth or income to qualify. The company helps with due diligence by only offering the best opportunities it comes across, but further research should be part of every individual’s investing process.

If you can’t invest through AcreTrader, or you’d prefer to invest in real estate through more traditional means, REITs provide an easy way to invest in different kinds of real estate while letting you use your regular brokerage account. You can also look into other real estate crowdfunding sites and investment platforms.

Source: moneycrashers.com