Fundrise: thoughts on investing?

14 Replies

Hey folks, just bought a condo in the Bay Area and it's sparked my interest in real estate investing. I'm looking for an easy way to dip my toes in, and heard about Fundrise as an easy-entry way to do so. Has anyone else used Fundrise? Thoughts?

Thomas, Im surprised no one as responded to your question, I have been in Fundrise for about a year and so far so good, I really like their platform since its easy to use. I also like their investments over a lot of the other crowdfunding platforms. They seem to focus more on residential rental projects but also flip rehabs and rehab/hold project. I've only invested about $10k so far and the returns seem to be decent around 10% which is not bad for not having to do any work. Here's a referral link if you want to try them out, you can start for as little as $500 https://fundrise.com/r/v17vq  Good Luck!

For you more seasoned Fundrise folks, I am getting $11.00 per day in dividends, which are reinvested. On my portfolio page, is says "next distribution mid October 2018". Does that refer to increased value of individual REIT shares, which is done quarterly ?

Thank you in advance 

@Thomas in my opinion Fundrise has a good debt fund. On the other hand, as a conservative investor, I feel many of their other funds are too risky at this late stage of the cycle. And they put every user into all of their funds, no matter how they choose the different choices on the wizard. I suspect most of their investors don't understand what they are buying.

In my opinion, it's better to pick the best funds across all the platforms, rather than taking everything one company happens to give you. If you can swing it, I feel Blackstone BREIT is a better initial/core holding because it is a much more conservative core plus strategy (or maybe stREITwise if no). Then I would add a debt fund like FundRise or RealtyMogul. Then I would start looking at the more aggressive/riskier funds in smaller amounts. But I am conservative as I said, and if you are a very aggressive investor looking to push the risk envelope, you might reverse my advice.

I've invested with Fundrise and RealtyMogul.  While my experience has been positive (it's easy, convenient, and simple), I will say that I have not been getting the returns these types of companies love to advertise.  The eREITs that I'm in market themselves as >8% but I am returning less than that.  My complaints center around:

(i) They pretend like their fees are lower but they're really not when you dig into it.  The reality is you're paying commissions and management fees on top of what you'd already be paying if you just bought the underlying asset directly.  The only "savings" is if you were coming from another private, untraded syndicate with high fees (which isn't that common for the majority of people on BP).  Kind of a meaningless comparison.  

(ii) Focusing solely on dividends and ignoring the net asset value is shortsighted.  These funds can give out their advertised dividends and simply drain the NAV (i.e. reduce the price per share) effectively negating your dividends.  

That being said, it doesn't mean they are a "bad" investment. I'm fairly happy with the experience and am glad I went through the exercise. My personal issue is that I have a hard time justifying further investment in one of these syndicate-type entities when I could just buy the Vanguard REIT or simply pay down the mortgage on my current investment (i.e. guaranteed 4.75% return). They are a great option for individuals who simply don't have the capital yet to do their own real estate investments or don't have the time to find a property, run the analysis, find a property manager, close on the property, etc.

I'm invested in four of the crowdfunding platforms (Fundrise, Rich Uncles, Realty Mogul and Groundfloor). I've been invested for about 2 years on almost all of these. It is a bit of a short amount of time but so far I am quite happy with the results of all of them.

Here are my IRR for the past two years and IRR for 2018, including change in NAV, including cash sitting idle between deals, etc. Full account IRRs:

  • Fundrise Growth: 10.9% | 13.5%
  • Fundrise Income: 10.6% | 9.5%
  • Rich Uncle NNN: 7.16% | 7.8%
  • Rich Uncle Students: 4.2% | 4.2%
  • Realty Mogul I: 6.0% | 6.3%
  • Groundfloor: 5.6% | 6.4%

As you can see Fundrise is outpacing the other options so far.This is mainly due to a good increase in NAV value (but this also means dropping yield). Also note that Groundfloor is growing slowly due to the slow pace or repayments and I expect it to close in on 9 to 10% annualized yield/IRR.

Below the IRRs over time:

You can see the the Fundrise started in the red due to a drop of the NAV early on. It has recovered nicely but that is something that may happen again.

Note that the S&P500 in the past two years has been about 15% IRR so this is great for diversification and it may keep pace with the market in the long run but true full diversification is also important.

Bottom line, as far as I am concerned, I would give a green light to Fundrise with the caveat of a reocmmendation to diversifying between multiple offerings (I like wide diversification for safety). I am considering adding stREITwise to my portfolio.

Here is an update on the IRR numbers two months later:

                  Cumulative All Time | 2018

  • Fundrise Growth:    11.3% | 14.8%
  • Fundrise Income:    10.4% | 11.1%
  • Rich Uncle NNN:        7.2% | 7.7%
  • Rich Uncle Students: 5.0% | 5.0%
  • Realty Mogul I:           6.2% | 6.6%
  • Groundfloor:              5.8% | 6.7%

All are up a bit on average.

Now with the S&P500 at about +4% for 2018 so far, these numbers start to look pretty good...

@Perig Vennetier , I am finally happy to see someone talking about these crowfunding sources in the "light" and not the darkness that tend to exist in. Are you happy with that level of growth, I am curious as to what your expectations going into it were. Over 3.5% percent growth in a month is impressive growth, but is that sustainable over the course of a year? two years? I have my doubts, and have wondered if those companies can deliver short term success, but struggle in the long term. It seems to me for rates on the open market to be higher, as people look for an alternative. 

@Matthew Perry , thanks for the comment.

The reason I started investing with these was for diversified investment income through the dividends they pay. I am not counting on appreciation for any of this even though I include it in the IRR calculations above which I know may not be the correct way... It is (feels like) a short term option to invest low amount of money and get a foot in the "real estate" field (sort of). I told myself that if the yields stay around 7 or 8% then that works for me. Time will tell but again, diversification is the main point for me. All these combined represent only about 5% of my portfolio.

All the advertised yields for these investments are advertised between 6 and 10% and it is what I see so far. These have been going at these rates for over 2 years, steadily increasing for most of them. Given it's not a very long time but as far as the business model is concerned, it seems sound and sustainable for me. What could change are terms and management fees which could dampen the yields. We will see if/when that comes.

Not sure how you calculated the "3.5% growth in a month" figure. For Fundrise, it went from 11.5% to 12.95% for the average of the two funds for 2018 so far, including appreciation (change in NAV). The increase was mostly driven by a change in NAV. The dividend yield has not changed at about 8% for the income fund and about 6% for the growth fund.

I am now investigating more tradition SFH buy and hold for rental but I am just looking at some of the deal on Roofstock to get a better idea of what makes sense. It's only been a few days since I've started to look at Roofstock (~100k sale price) but the deals I saw so far seem to net only about $100 per month. It's not all that bad I guess but that's just about the same I would get in dividends by putting $20k into Fundrise or other of these syndication (Groundfloor is my preferred place at this point).

Got to think about how tax, depreciation, etc. play into this but as a first pass, not sure what to think about the added headache that may come with remotely investing in SFH. Again diversification is an added benefit to that.

I do think all of these companies could be the future of the REI industry and can be niche for people who have the capital as accredited investors, and your talking to the man who bangs the drum for diversification in a real estate portfolio harder and longer than anyone else. My fear is that quality deals and projects will never make it to the capital market place, as the market will forever be in the hands of private marketers and private hands as it too rich a pipeline to concede to the open.

@Matthew Perry totally agree with using platforms similar to these companies to easily diversify your portfolio especially when you start thinking about correlation. Let me know if you want to talk in detail about it; I'm Chief Investment Officer of a REIT based in NYC.