Just over 2 years ago, we began investing in Fundrise, a crowdsourcing online real estate investment service. It calls itself “the future of real estate investing.” The basic idea: it’s a low entry-point way for investors to gain access to private real estate investments.
- According to the Fundrise website, “You do not need to be an accredited investor to invest with us.”
- The minimum investment is $500. The website is very easy to use and intuitive. In short, it is very accessible. We have made one-off investments as well as used the “auto-invest” feature.
- The service provides access to a wide array of investment types in private real estate. The portfolios we are invested in have holdings in commercial, residential, land, and so forth. These are investments that would be hard for most small investors to access in the ordinary course.
- The Fundrise site claims that there service is “low-fee.” It’s a little hard to understand the fee structure, so you’ll either have to take this assertion on faith or do a lot of digging on your own. The “advisory fees” are certainly modest. On a total investment of about $50,000, the total “advisory fees” that we have paid are $50.25 over two years. There is no question that there are other fees being extracted by Fundrise along the way.
- It’s not especially liquid. Fundrise tells you that you should consider your investment a long-term hold proposition. It suggests that you consider the investment a “5+ year” hold period. If you are used to private real estate, this suggestion should not be a problem. But if you might need the money sooner, perhaps it is not a great choice for this particular chunk of funds.
- As noted above, the costs are not especially transparent.
- Fundrise has a relatively short track record as an operating company. While they were early to the real estate crowdfunding business, they have not yet weathered a major downturn as an entity. Many of its competitors in the online real estate crowdfunding space have failed. All that said, they do say a fair amount about their conservative approach and seemed to handle the COVID-19 downturn in March, 2020, in a conservative and effective manner. And they appear to be relatively well-run and well-capitalized compared to many of their rivals.
Well, how has our Fundrise investment done? We have invested over a two-year period. The total invested is just under $50,000. The “net returns” according to the “Performance” tab show:
- $3,462 in total, comprised of
- $1,726 in “dividends” and
- $1,786 in “appreciation.”
- The all-time “Weighted average” return is 6.5%.
All numbers above are from the Fundrise site. Again, the total invested is just short of $50,000 and the hold time is just over two years. Our investment has been in 11 funds and the Fundrise iPO. The website suggests that we are currently invested in 95 different projects across these funds.
We are always interested in the impact of our investments and prefer those that clearly have a “double-bottom line” aspect. The Fundrise site does not make much of the impact investing angle, though they periodically mention the social good associated with the work they do to improve properties and neighborhoods from community to community. Most of the investments we have had in our portfolios have been in buildings that Fundrise has improved for the purpose of commercial or residential use–by and large, one could make the case in favor of “beneficial” use or re-use, many in urban areas such as Washington, DC, Los Angeles, CA, and Chicago, IL.
One property we are especially pleased to be invested in is the Whole Foods in the Englewood neighborhood of Chicago. One of our Fundrise funds invested $500,000 in preferred equity after the lead investor, DL3 Realty. This Whole Foods has been a major boost to a neighborhood on the South Side of Chicago that has suffered from long-term disinvestment. We were thrilled to see that some of our funds are invested in a way as to help reverse this trend and help address the need for high-quality food options in the Englewood neighborhood.
As with respect to all articles on this site, they should not be construed as investment advice. This site is entirely for entertainment purposes only. We are simply describing the experience we have had in case it is valuable for others to see as you consider how to save and invest for your family–especially if you are concerned about both the impact of your investments as well as the returns you earn.