Fundrise- Has anyone used it?

11 Replies

Hi All, 

I recently heard about a site called Fundrise. It looks to be a site where you give them money and they create a share in a real estate portfolio for you. Has anyone used anything like this before? Can this be an actual avenue of investment? It seems a little to easy as a way to hop into real estate investing.

Looking for feedback. Thanks so much!! 

@Ryan Montes Hey man yesterday I actually created my first account with them. I think it’s dope you can invest in Real Estate crowdfunding/REIT Portfolio with as little as $500. I heard tons of great things about this site, and since I love Real Estate more than the stock market, I felt better taking some money and putting it in crowdfunding.

good to know- so that is what it is then, crowdfunding REITS? i was going to do some more research on it this weekend!

Thanks so much for the input!

A crowdfunding REIT is a Real Estate Investing Trust, and it's similar to a mutual fund sort of say. So when you give them that initial investment it goes towards the properties they are purchasing nationally. So if they have a property out in Miami beach that they used your money to purchase you could literally drive by it, and have the right to say " I own that." I think that's pretty dope honestly

@Ryan Montes I have a small amount invested with Fundrise. No real complaints. Just like others said: it’s a crowdsourcing type “eREIT” and you can log in anytime to see your current accrued dividends (paid to your or reinvested QTRLY). They also have an upcoming private IPO. Might be a good oppertunity if they ever do a public IPO. Liquidity: roughly 30 day redemption period though I haven’t tried it yet. It’s basically an indirect play at real estate but not trading like a REIT/stock. You only get a couple options for portfolio style.

@Ryan Montes , private real estate is not a liquid investment, so you are locked in. They allow you to change your mind and withdraw within the first 90 days without penalty. But after that until 3 years it's a 3% penalty for withdrawing. Then 2% penalty from 3 - 4 years. 1% from years 5-5. And then no fee afterwards.

They also charge a fee to deposit the money, and manage it.

I do like the fact that they do not charge a promote/profit sharing scheme like a few competitors do.

As a conservative investor, I feel Fundrise has a decent debt offering, but several of the others are way too aggressive. I also feel that they do a very bad job of explaining the risks to investors. They put everyone through a wizard which supposedly allocates you basically risk. However, they always put you into every one of their offerings no matter what you pick (and just tweak the percentage). That's great for them, because it fills their offerings. But in my opinion it does do the conservative investor an injustice, because they really shouldn't be in some of the riskier funds. If you are aggressive, you may not care about any of this, and it may be considered a plus to you.

In my opinion, another of their big weaknesses is that they have virtually no skin in the game. So they are not as aligned with investors as well as some other nonaccredited offerings. And if you are an accredited investor, you can find many many much better options in that regard.

@Ryan Montes I would have to agree with @Ian Ippolito detailed response. 

@Davian Brown Sorry to break your bubble but public REITs are part of the public (stock market). A private REIT is the worst of both worlds - non-liquid and with less regulatory oversight than public companies.

Also you're going to be severely limited yourself if you're seeking to avoid the stock market. Even the biggest real estate enterprises in the world are linked to the capital markets in one shape or form. Just because you don't see the price ticker move up or down on your screen doesn't mean their valuations don't change every few seconds. 

Glad to hear it, @Ryan.

@Omar, thanks.

On the issue of private REIT versus public: I agree with you that private REITs are less liquid and have less regulatory oversight. At the same time I think both private and public have their advantages and disadvantages and neither is 100% superior to the other. (Which is why put both in my portfolio).

Public REITs have the disadvantage of the liquidity premium: the ability to redeem at a time isn't free and comes at a significant cost. I can easily earn 9% in a private REIT investing in the same or similar strategy and asset class as a public REIT earning 3 to 4%. As a long-term investor, I don't need the instant liquidity, and would rather keep the premium for myself.

The other downside to the liquidity of a public REIT, is that it eliminates what to me one of the best features of real estate investing: that is not very correlated to the stock market and so including in a balanced portfolio reduces risk. If you compare privately held real estate fund performance to the stock market, you'll see that the stock market crashes all the time while the private real estate crashes maybe 1 out of every 3-4x. But if you're in a public REIT, you can count on participating in every crash.

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