At least not in the traditional sense; I have not had much luck when it comes to investing in real estate. Because of this, I don't speak about investing in real estate nearly as often as I should. On the other hand, I began investing in real estate crowdfunding via Fundrise approximately four years ago, and I'm delighted to report that I've succeeded. I was familiar with Fundrise in the past, and it seemed to be an excellent option to invest in real estate without running the risk of going bankrupt. On the other hand, as has been my custom over the years, I decided to dive in and give it a go. That seems to be the most effective method of education to me. That was four years ago, and just lately, Fundrise sent me a celebratory message on my "anniversary." Because of this, it seems like the right moment to take a look at the past and evaluate how well the investment has worked out. It is not enough to just consider the performance in question. Aside from comparing the investment's results to other real estate deals, I want to evaluate how it performs against those of similar real estate transactions, as well as against those of different types of investments. I really hope that the fact that we will be doing a lot of number crunching here won't bother you. It is the only way to know what is really going on in the market when it comes to investing.
Who is Fundrise?Fundrise was founded in 2012, and since then, the company has grown to become one of the most successful crowdfunding platforms in the real estate industry. They may be even the best platform. They will have originated over $4 billion in commercial real estate deals across the United States by 2022. As of January 2022, the entire value of real estate assets was estimated to be $7.1 billion. The corporation had distributed an astonishing total of 160 million dollars in dividends to more than 260,000 investors.
Private REITsWhile working as a financial advisor, I started investing in private real estate investment trusts (REITs). Since they are comparable to Fundrise, I am already acquainted with the general idea. You have a passion for selling investments since you are a financial planner. They paid fees ranging from 7 to 10 percent of the entire investment money. If one of your customers made an investment of one hundred thousand dollars, you would be eligible for a commission of seven thousand dollars or more. When an investor sells their position, they often aren't aware of the commission they paid, which is something that financial planners find to be an additional source of satisfaction. A few private REITs fared pretty well up to the market meltdown in 2008, which occurred in the real estate industry. It was far worse than only the decreases in the value of the trusts. During the depths of the Great Recession, renters were breaking their leases, cash flow came to a grinding halt, and investors demanded their money back. They couldn't pay back investors in their private REITs at that time due to the absence of financial resources of their proprietors. Due to the liquidity issue, it was almost hard to get even a portion of your money back from the investment you made. When it comes to private REITs, such a result is not inconceivable. The language that advises investors that there may be instances in which they may lose part or all of their money is buried deep inside the agreement's small print. However, as you can probably guess, very few people get into any kind of venture with the expectation that they would lose money on their investment, much less lose the whole amount of money they invested. It even happened to one of my friends, or more accurately, it occurred to one of my friend's mothers. She invested either one hundred thousand or two hundred thousand dollars in a private REIT, and then she received the letter alerting her that all of her money had been lost. That is not precisely how Fundrise operates, which is one of why I appreciate using their platform.
The Fundrise Approach to the ProblemWhen it comes to private real estate investment trusts (REITs), you face a high level of risk and a lack of transparency on the costs associated with the investment. That was precisely the problem that Fundrise wanted to solve when it was founded. Fundrise investments feature cheaper costs, and there is complete transparency on the charged fees. You do not need at least $100,000 to invest in something that is much more significant. You just need a little quantity of money to begin participating. If you lose money on this little investment, you won't lose as much money as investors who lost money on private REITs during the last economic collapse. Fundrise does provide information on the potential dangers associated with investing in commercial real estate. This includes the risk that you may not be able to close out your position in the market. In the days leading up to the COVID epidemic, I received a handful of messages from Fundrise that made that point quite obvious. The letters stressed the possibility that Fundrise may be obliged to cease investor redemptions if the market were to suffer a significant nosedive. Because real estate, and commercial real estate, in particular, is not a liquid investment, every investment in commercial real estate has some level of risk. In contrast to a mutual fund, a private REIT is not permitted to sell shares to generate funds to pay investors. There is usually little demand for office buildings or apartment complexes in a poor market, making it very hard to sell either one of these types of properties. It can't be helped, but I give Fundrise credit for keeping their investors informed on a frequent basis about the chance that it may happen anyhow. You won't have to pay any fees upfront when you use Fundrise, and you'll be aware of all that you'll be entering into, including the costs that you'll pay along the road.
Other Platforms for Crowdfunding Real Estate TransactionsThere are several more platforms than Fundrise that provide real estate crowdfunding. There are a number of others that give chances that are similar to these, and they too offer cheap investments and charge systems that are clear. YieldStreet operates in a manner quite similar to that of Fundrise in that it provides opportunities to invest in commercial real estate. However, they also include non-traditional assets like loans on boats and artwork, as well as lending for private businesses. Those investors who are more experienced and have a greater tolerance for risk would probably benefit the most from this opportunity. Fundrise isn't the only company that invests in commercial real estate; Groundfloor does, too but in a different manner. They engage in finance for commercial projects rather than providing opportunities for long-term development and equity investments. This allows them to concentrate on investing in commercial ventures. You may start investing with as little as ten dollars, and the duration of the investments is often much less than one year. DiversyFund is the name of yet another real estate crowdfunding platform that specializes in commercial property investments. The vast bulk of their efforts, however, are focused on massive apartment buildings, which they believe to be better long-term investments. To begin investing in their REIT, you just need $500. I feel that RealtyMogul is Fundrise's most direct competitor in the real estate business. As little as $1,000 may get you started, but the investments they make are significantly more specialized than those provided by most other financial companies. You might, for example, invest in a number of properties. However, there is a catch: you must be an accredited investor in order to utilize RealtyMogul. As a result, in order to be considered, you must meet a slew of onerous financial conditions. The presence of a number of different platforms that provide crowdfunding for real estate investments is evidence of the robust demand for this particular kind of investment. But what is equally crucial is that the presence of competition compels each platform to provide an improved investment opportunity to their respective consumer bases.
Where do I go from here to begin using Fundrise?The fact that Fundrise not only hosts its product on this website but also makes it accessible through mobile devices is one of the company's most notable selling points. This is not like the private REITs I was discussing previously, where information is difficult to discover and sometimes hidden in the tiny print. This information is easy to access here. You will always be aware of everything that is happening at any given moment because of the transparency that Fundrise provides. You may sign up for an account straight immediately on the Fundrise website. You have complete control over how much money you spend and what kind of strategy works best for you. In order to get started, you don't have to pay anything. Fundrise provides users with a total of four distinct payment options, each of which will be discussed in further depth in the following paragraphs.
Fundrise Plans & PortfoliosFundrise provides users with the option to choose from four different portfolios: Basic, Core, Advanced, and Premium. If, on the other hand, this is your first time investing in commercial real estate, you should probably look into the Starter Plan.
Starter PlanThe Starter Portfolio is one of the aspects of Fundrise that I find to be very appealing. I am sure that there are other investors out there who, similar to me, will have at least a modicum of dread around the prospect of investing in commercial real estate. On the other hand, it is the raison d'e?tre of this scheme. You may start a Starter Plan account for free and invest as little as $500 if you want to do so. Although it's a very little outlay of capital, doing so offers a significant degree of portfolio diversity. In addition to investing in commercial properties like office buildings and apartment complexes, they invest in single-family homes as well. Examples of commercial assets that they support include: You also benefit from geographical diversity as a result of the fact that the properties owned in the portfolio are situated all across the United States.
BasicYou have the option of purchasing their Basic Plan with an initial commitment of $1,000. You will have access to dividend reinvestment and automatic investment, as well as the flexibility to set and monitor your investment objectives with this plan. In addition, the Basic Plan waives your monthly charge for a period of three months for any person that you refer to Fundrise and who subsequently establishes and funds an account.
CoreThe following strategy is known as the Core Investment Strategy, and it has a minimum investment requirement of $5,000. This includes all of the features that are included in the Basic Plan, as well as access to Fundrise's private REIT fund and the option to personalize your investing plan. This is the strategy that I am working with right now, and it consists of the following three distinct investing strategies:
- Supplemental Income is the strategy that you should go with if you are primarily concerned with the generation of a consistent income for yourself.
- Long-term Growth: This is comparable to making an investment in the stock market, in which case you will be mainly concerned with the accumulation of long-term capital gains.
- Balanced investing is a strategy that gives you the opportunity to earn additional income while still contributing to your wealth over the long run.
AdvancedAt least $10,000 is required to participate in the Advanced Plan. This plan gives you access to all of the benefits and features of the previous three tiers. In addition, if you invite a friend to join Fundrise, you won't have to pay any fees for the first nine months. (It's not clear whether the fee waiver is just applied to friends who sign up for the $10,000 plan or if it is applicable to any program Fundrise offers.)
PremiumThe last option is the Premium Plan, which needs a minimum commitment of one hundred thousand dollars. I'm not going to get into this one since I believe it goes beyond the scope of what the majority of people who read this site are interested in and even beyond what I would take into consideration. My Fundrise Portfolio I invested $1,000 in Fundrise's Basic diversified portfolio plan when I first got started with the platform in February of 2018. A little over a month later, Fundrise announced that they would be conducting an initial public offering (IPO), which is a topic that never fails to pique my interest. But in order to benefit from the IPO, I needed to have a minimum investment of $5,000, and in order to do so, I had to upgrade to the Core plan. Adding an extra $4,000 to my initial investment was all that was required to accomplish that. My account now has a balance of around $11,113.83 dollars. Out of that total, $8,055.99 represents the increase that was achieved on the initial investment of $5,000. My share of the Fundrise IPO is equal to the amount that is still available in the account. My initial investment of $5,000 has grown to a total of $3,055.99 in only four years, thanks to the appreciation of the real estate market.
Average annual return: 13.3%I do not have the whole dollar breakdown for each year, but the following is what I do have, along with the analysis of dividends and appreciation of capital:
- In 2018, investors received $274 in dividends and saw capital appreciation of $74, resulting in a total return of $348 after expenses were deducted.
- 2019 saw a total return of $506 after accounting for dividends of $383, capital appreciation of $131, and an advisory fee of $7.97.
- Dividends of $226 and capital appreciation of $234 add up to a total return of $452 in 2020 after deducting all costs.
- In 2021, investors will get $229 in dividends and $1,308.36 in capital appreciation for a total return of $1,528 after expenses.
- Through March of 2022, the total return for the year was $219 after deducting all fees.
- The cumulative total of all four years' net returns is $3,055.86This is the part that appeals to me the most! They detail not just the total amount you make but also the specific sources of your income. They will also inform you when a property has been purchased by another party. The dashboard that Fundrise provides access to contains all of this information.As a point of reference for comparing my returns, the following information may be found on the Fundrise website: