Does anyone have any experience with Fundrise?

In My Humble Opinion
1

A coworker asked on this and I’ve done a little research. All of the reviews I’ve seen come across as paid promotion. It seems they buy commercial real estate (through eREITs (REIT ETFs it seems) and eFunds (whatever those are) and they have different plans that vary the ratio of appreciation and returns. Among the benefits they tout is low entry investment cost (only $500!!!) but I can open a stock account for that. Plus since you don’t own the ETFs directly it’s unclear how you sell back your investment. Overall it seems you are paying them 1% to do your thinking for you rather than doing the research yourself and buying REITs directly on the stock market.

So has anyone invested through Fundrise and can give me some first hand experience?

2

Moderator Action

Since this is looking for personal experiences, let’s move it to IMHO (from GQ).

3

Be careful of any internet articles you read. They might be paid ads or the people writing them might be getting paid through clicks. Here are a couple of discussions I found which seemed to have some honest evaluations:

One impression I get is that even if the underlying fund has good returns, that may not translate to your returns. Because of fees and such, your returns will likely be lower than what they say the fund does. Something that gives me pause is the age of their “investment team” shown on their homepage. They look like they are about 22-23. I’m assuming they are more like salespeople than experienced RE investors.

For the novice investor, probably a better place for $500 is in a Vanguard S&P fund. If the investor isn’t savvy enough to evaluate public REIT funds, then likely them investing in something like Fundrise isn’t the right choice. The investor is likely going to lose a lot of their return to fees and such to pay for the convenience.

4

I just started investing through them this year. I did get my dividend deposited for the second quarter, and they keep me updated on everything that’s happening, so I don’t know what else I would expect. I wouldn’t put a huge amount of money into it, though the $500 starter plan is extremely undiversified, at least when I was invested in it, and I upgraded to a core plan. I started out with Long-term growth since that’s my plan, but I still wasn’t happy with it because it had tons of my money in the same fund that had only one project. With the Balanced Investing I have something in pretty much every fund (even if I can’t specifically say where to put it) and so I have exposure to around 100 projects, although still it’s concentrated a lot in a few specific ones. I read their offering circulars and see that they are well aware of and disclose the risks involved with investing in real estate, especially in a blind pool like this, so they’re not trying to take your money and run.

I wouldn’t say it’s a great place to park most of your money (which should be in a Large Cap index fund), but I would consider it a reasonable alternative investment to try with a small bit of money you know you won’t need for 5 years or more. It’s a great way to get into investing in privately-held real estate deals without investing a ton of money, something made possible by a 2012 law that effectively allowed equity crowdfunding on a scale not previously allowed. If you’re an accredited investor, there are definitely better options.

There aren’t any real alternatives for non-accredited investors looking for diversity. One non-diverse outfit that I’m also invested in is 1st StREIT Office or something like that, run by StREITwise. There’s multiple names involved, one the name of the REIT the other of the platform, and they use “StREIT” somewhere in there, but the details are not something I keep track of. But they do offer a privately-held REIT for small investors ($1000) that up until recently had been paying 2.5% dividends each quarter. The NAV just went up a little but I doubt the dividends will, so they’ll be a bit under 10% for the year if you invest now. They aren’t very diverse, holding only two large office parks, but they do have a good number of major tenants in them.

Most people that I see having problems with Fundirse simply didn’t read the fine print. You’re shoved a whole bunch of documents to read when you sign up, and who really does? Well, if you’re plunking down a part of your hard-earned fortune, you better be reading what they give you! Yes, it’s hard to get your money out. Yes, it might be years until you make a return. If you invest in the long-term plans, don’t expect much in the way of dividends, and pray that they chose locations that will see long-term value increases. But it looks a lot better than parking it in a REIT index fund that’s heavily correlated with the market and you’re paying a large liquidity premium on. If you’re interested in having access to your money at any time, forget Fundrise. If you’re interested in picking your own properties because you think you have some skill as a real estate investor, forget Fundrise. If you’re an accredited investor and have 6 figures to invest, forget Fundrise. But if what you’re looking for is a real estate investment firm to help you put very small chunks of money into long-term private real estate offerings, that’s what you want Fundrise for.