What do you guys think about investing in Fundrise??

23 Replies

The acquisition fees and asset management fee and lackluster historical performance (10%ish/yr since 2014) has me choosing a public REIT instead.

Full liquidity and tradeability. Less cost. Same upside potential. 

REVIEWS

Significant risks during a down turn. There are few reviews online. For 11% return - FEEs it is OK but not spectacular. It is not PUBLIC REIT which is well regulated and watched but can turn risk into rewards when the market is good.

Suggest check out best REITs mutual funds first.

I would invest in well-established REIT before investing in Fundrise. Just ask those who invested in Realty Shares how that is going. If something goes wrong you cannot get your money out you are stuck in a sinking ship. Bad news on a REIT and I can click my mouse and be out in seconds. Having control of your exit is priceless.

Originally posted by @Dan Rudolph :

@Steve Vaughan How is 10% lackluster compared to public REITs?  The FTSE EPRA Nareit Global REITS Index has produced 6.02% over the last 4 years.

I was talking about buying the best in class REIT vs an index. Index investing is for the uninformed masses IMO.

If they are an index, why the 2% acquisition fee?  

How's the liquidity? Ease of receiving your tax documents? I don't see the benefits vs a solid single REIT I can buy for a $7 trading fee.

With a REIT I can also set buy limits, sell limits, stops, etc. Set a make me buy or sell price at my target and forget about it.

How's the buy or exit work with Fundrise? End of day pricing? End of quarter?  Year? Gotta hold it for set number of years?  Why mess wih all that to maybe get 10%?

@Steve Vaughan I understand the advantages of liquidity. If I can buy a publicly-traded REIT and make a consistent 10% annual return I will! What REIT do you recommend? Actually, if you can recommend 5 "best-in-class" REITs it will help me avoid past-performance bias.

 @Dan Rudolph

Here lies the problem.  It doesn't matter what Steve would recommend as the best 5 REITs.  You can buy the top 5 and still be at risk.  It's actually not that hard. Pull up some REITs look at the charts and price. Easy to find the best 5.

 Anything can happen at any time.  Up until last month, Boeing looked amazing. Price was climbing up and boom cliff dive.  The ones who know what they are doing will exit and take their loss.  The others who don't will be bag holders and feel more pain. 

Everyone thinks you pick the best stock or the best area to buy investments and that's how you make money.  That is so far from the truth.  You make money by having a process where you can analyze deals or stocks and have a predictable system to replicate it.  You also need to understand risk management and exits.  

So in your case here.  You need a system on how to enter and exit stocks.  If you don't have that it's just a matter of time before the market takes your money.  There is a reason why 86% of new stock traders blow up their account in the first 3 months.  What I suggest is educating yourself on the process.  

My stock trading mentor used to tell me all the time. If you can't handle a small loss its just a matter of time before you feel the mother of all losses.  This is so true.  I had to blow up 3 accounts before I finally learned my lesson.

I get why Fundrise Realty Shares look attractive to the avg investor. I can park my money and not do anything and collect a check. Yes, that is the ultimate goal for investors. The problem is that in the long run there is so much risk in that. Imagine 10yrs in everything is great and you got $500k. All sudden, black swan event and boom its all gone and don't say it can't happen. It already has to Realty Shares and the economy is fine at the moment. Just imagine if things turn bad. With REIT. I can cash out take my loss and live to fight another day. There is a lesson here and I really hope everyone can see what I am saying.

@Frank Wong Hey Guys, what happened with Realty Shares?

I have been thinking about investing in the Crowdstreet blended portfolio, in my IRA. Would you equate that to Realty Shares and Fundrise?

I work in REPE and was excited about the diversification you get in the blended portfolio.

Instead of investing in mass funds like Fundrise, @Avery Collins , have you considered being a passive investor in private placement multifamily syndication investments? Even if you're not accredited you can invest in multifamily apartment buildings through private individuals buying deals all over the country. It would take a little bit more learning than Fundrise, but average returns are 12-15% even still today. There are always risks with any investment, even leaving it in the bank, but it all comes down to risk/reward.

Let me know if you want to learn more, or check out Michael Blank's content - he teaches how to do syndication, but also hits on the benefits of buying into syndications as an investor. 

Originally posted by @Sean McCluskey :

@Frank Wong Hey Guys, what happened with Realty Shares?

I have been thinking about investing in the Crowdstreet blended portfolio, in my IRA. Would you equate that to Realty Shares and Fundrise?

I work in REPE and was excited about the diversification you get in the blended portfolio.

 Hi Sean,

From what I have read some of Realty Shares holdings were in trouble.  Some of the assets that people invested in.  I am not sure the extent of it and I didn't look into it.  

I am not saying that Fundrise is bad or Realty Shares is.  I have not invested in either or so have no first-hand experience.  Personally, I won't invest in any asset that I don't know my exit and have control of it.  Yes, I know I will never truly be in a position to be passive and have a check mailed to me.  I also know that I won't wake up one day and find that 20yrs of hard work is gone.  Just understand your risk and what you are getting into.   

I know first hand how it feels to lose money in something like this.  I lost a ton of money in a mortgage fund in the 2000s.  Lots of investors did.  I think the fund was like $100m and the person running it was sent to prison for running a Ponzi scheme.  Just know your risk.  Its a gut-wrenching feeling when you wake up and read it in the papers and the FBI is involved.  It is over at that point your money is gone instantly.  The positive out of it for me was that it happened in my 20s and it was a very expensive lesson.  I had enough time to make back my money.  Now if this happens in my 60s I have no time left to come back.

@Frank Wong I agree and invest in REITs to preserve capital as well. Last big market correction made me realize how vulnerable my portfolio was to being heavy in tech stocks in the chance of another correction later this year when I plan to put the money towards real estate. All my REITs barely budge or even sometimes go up when the rest of the market dips. While I know they come with their own set of risks, one of the things I like about them are the incredibly high dividends some of them pay regardless of their price per share growth

@Avery Collins , I invest in both public REITs and private syndications (including private REITs similar to Fundrise). In my opinion neither investment is 100% superior to the other. Both have their pros and cons and and I feel both have their place in a balanced portfolio.

The main advantage of the public REIT is the daily liquidity. (as well as more transparency and their ability to get cheap debt etc.) You can get out of it with very short notice, which can be very convenient and nice.

Downside is that public REITs are much more correlated to the stock market then private real estate. So you will have a lot more ups and downs that you have to endure. And if you are unfortunate or unlucky enough to put your money in at the wrong time or have to withdraw at the wrong time, then it can take a lot longer to reach your goal than another investor doing the exact same thing but just with better luck on timing. Also, public markets are so efficient that it is generally impossible for any individual operator like a REIT to generate substantial long-term returns over an index over a long period of time.

On the other side is private real estate via syndications and crowdfunding (which includes Private REITs like Fundrise. The big reason most people won’t touch it is because you might be locking up your money for five, seven or 10 years. However, lots of people I have money that they don’t intend to cash out in the short to medium term. In that case, locking it up as a big advantage because then you don’t have to pay the liquidity Premium. You have already noticed this. It is going to be very difficult to find a public ReIt retuning similar to private real estate unless you want to take much larger levels of risk with the amount of debt, the asset class etc. Also, since it is an inefficient market, skilled individual operators can add value to allow you to outperform averages.

Back to your very original question was whether Fundrise is recommended or not. I have interviewed hundreds of investors who have used Fundrise and the other platforms. In my opinion, if you are an accredited investor, then you can find lots of other syndication/Crowdfunding deals that have much more experienced sponsors, much higher skin in the game, and much better fees. On the other hand, if you are not accredited then you have limited options, and Fundrise, in my opinion, might make sense (especially if you are a more aggressive investor). If you are conservative, then I personally wouldn’t make Fundrise my first choice as there are many others that are more conservatively structured.

@Avery Collins Also, if you are looking for a more personable interaction with a sponsor, you may not get that. 

Some investors want to quasi learn the business as they invest and you wouldn't necessarily get that with a bigger investors like Fundrise.

Be forewarned with Fundrise!

It would be nice to be able to obtain high returns from rental properties in the USA without having to deal with tenants and cheating contractors. But Fundrise announces 12% and you'll get only 2.9% in 9 months. To recover your $ you must wait a minimum of 90 days and you will subtract new hidden penalty in addition to other disappearances of your funds.

Fundrise is, plain and simple, a legal fraud. I do not understand how the regulators let it work like that. They advertise an estimated annual return of the order of 7 to 14%. Now you will see my experience: I wanted to try with $ 10,000.00 in September of 2018, after 10 months I had in my account only $ 10,297.76 (since they discount a very high fee of more than 5%) this is that the annual return would be around of 3.12% more or less!

But there does not end everything. In view of the bad performance and considering that this happened at a time when the real estate market is still going through a good time, I decided to redeem my money. And here comes the worst. They tell you that they do not assure you that they can return the money some day, but that in the best case they will do it no sooner than 90 days after their return order is processed. And your redemption request made on June 24, 2019 will be processed only on August 31, 2019 and then ... to wait 90 days or never ...

But the bad news does not end there either: Even though on the website it says that your balance is $ 10,297.76 the Gross value of your all requested shares that appears on the website of the redemption, before the deductions that will later be seen, is of only $ 10,049.23 without anyone or anything else explaining why the difference of $ 161.36 disappeared, which was stolen directly.

But, there does not end this either: Fundrise deducts percentages as a penalty of anticipated redemtion, unless you leave it 5 years or more, in which case it promises not to deduct anything from you (Of course, if you are going to use the capital for 5 years and they will pay, in the best of cases, an interest of 3.2% per year!).

In my case Fundrise deducted 3% which gave an applied discount amount of $ 301.50.-

So, finally, of my $ 10,297.76 the net redemption value was $ 9,747.73! a steal of $ 462.86!

That is to say that after having used them for almost 10 months my $ 10,000.00 will return $ 9,747.73.-, a loss of $ 252.27 of my original capital!

Can any regulatory institution do anything about this to prevent them from making large profits with the money of others?

At least save yourselves who read this.

@Omar Santos

I went on the fundrise website and read up a little. It looks like all the fees you discuss are already laid out openly at the beginning.  I mean, yeah, they aren't great... but they are open about them. They explain that they want people to hold their money in fundrise for at least 5 years and an early withdrawal is subject to a 3% penalty, for example.   While you may not agree with the various fees, it seems a little much to label them crooks when you just did not read the information before investing $10,000.

I invested a small portion of my portfolio in Fundrise about (3) years ago, and I have been getting about 7-8% annual return. The annual return has been decreasing, and I believe it's because they are becoming more conservative in response to the heated market.

I think Fundrise is better than putting your money in the bank or buying bonds, but the return it provides is not as attractive as real estate investments, such as syndications, that provide you many tax benefits.

Not to mention that syndications typically get you minimum 10%-15% IRR depending on the strategy.

If you want decent return without doing much work, then I encourage you to become a passive investor in syndications. 

Feel free to reach out to me on BP if you have more questions. Happy to help!!

@Avery Collins

Are you guys forgetting about the depreciation benefits of a direct investment vs a retail REIT?

Its like buying a $50 shirt at Madewell when you could have gotten it for $20 at the factory, plus depreciation benefits on your K1.

Don’t know about you guys, but I don’t like paying taxes.

Originally posted by @Mason Fiascone :

Instead of investing in mass funds like Fundrise, @Avery Collins , have you considered being a passive investor in private placement multifamily syndication investments? Even if you're not accredited you can invest in multifamily apartment buildings through private individuals buying deals all over the country. It would take a little bit more learning than Fundrise, but average returns are 12-15% even still today. There are always risks with any investment, even leaving it in the bank, but it all comes down to risk/reward.

Let me know if you want to learn more, or check out Michael Blank's content - he teaches how to do syndication, but also hits on the benefits of buying into syndications as an investor. 

 Interested in this. Message me

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