All Forum Posts by: Mark Enoch

I've received my 1099-DIV form for 2017 and have reached out to Fundrise to help explain what they're doing. The distributions gave me cause for concern. The Growth eREIT distributions in 2017 were 91% return of capital after reporting over 50% return of capital on the 2016 distributions. The East Cost eREIT was 43% and the Heartland eREIT was 38% return of capital in 2017. I'm concerned Fundrise is attempting to inflate the yield of the eREITs due to lack of income generated distributions in the form of dividends or capital gains? Maybe it's just a tax deferment strategy that they didn't make clear...?

I have yet to hear back from them. Has anyone else noticed this or know how to explain it? 

I used Homeunion briefly, but pulled out of the contract after I found out some distrubing business practices. They have a lot of fees, and you need to understand them and see how they compare to the local market via other options. For example, There management fee was 10.5% which was high compared to other local property managers in the cities I was looking to invest in. They do not use escalation clauses, and instead have you agree to a range that the local Homeunion buying agents can work with. The home I went after had been on the market a few weeks with no offers, and the HomeUnion local agents that work with the selling agent indicated that one other offer came into the mix last minute. The HomeUnion agent went with the highest end of my bid range vice using an esclator. I decided to speak with the selling agent myself and they were surprised we didn't use an escalator. 

It all started to make sense though. The fee structure with HomeUnion is they get a 3.5% acquisition fee, so a higher closing price nets them more fees (and makes it that much more expensive for no value gain to you). So the incentives for them don't match up with the investor in all cases, such as using a escalator in keep the price down. I'd suggest other options for SFR investing.

I used Homeunion briefly, but pulled out of the contract after I found out some distrubing business practices. As @Dan Guidara indicated above you give them a range to bid. They do not use escalation clauses and seemed confused with the concept. The home I went after had been on the market a few weeks with no offers, and the HomeUnion local agents that work with the selling agent indicated that one other offer magically came into the mix. The HomeUnion agent went with the highest end of my bid range vice using an esclator. I decided to speak with the selling agent myself and they were surprised we didn't use an escalator. 

It all started to make sense though. The fee structure with HomeUnion is they get a 3.5% acquisition fee, so a higher closing price nets them more fees (and makes it that much more expensive for no value gain to you). So the incentives for them don't match up with the investor. I'd suggest other options to SFR investing.

I've invested in all 5 eREITs now. I'm a non-accredited investor, so those are the only options available to me at the moment. The three region specific eREITs are ramping up now and still open for investment. While the first two (Income & Growth) are fully subscribed and closed for investment. Regulation A+ only allows them to raise $50 million a year, and they haven't announced plans on how they are going to proceed with year 2 either. So they may open up for more fund raising or not, and what sort of implications further fundraising would have on current shareholders. This next year should provide a good indication of where exacting the eREIT concept is headed over the long-term.

Overall, I'm pleased with the types of investments that are being made. You can review them on their website. I would love to see more on what the deal structure is and more performance data then what's currently provided. But maybe the annual report will offer some more in depth analysis then the short updates they provide to shareholders on occasion.

Also, they do have plans of offering a IRA vehicle in 2017, which will also make it a bit more tax efficient since no such option exists at the moment.