So I’ve mentioned this before on the blog but I have a bit of a problem when it comes to managing my money – I often continually look for new investment opportunities and open new types of investment accounts. This becomes a challenge on an on-going basis; managing the money, making sure it’s growing, keeping an eye on things. It’s also a pain at tax time because that’s lots of investment tax forms that I need to put into the tax software that I use. I do worry if I prematurely departed this earth what a challenge it would be for Mrs. Money to figure everything out. Finally, I do wonder if I’m just chasing the hottest trend and always try to use my 8% rule to gauge if my investment has been worthwhile.

One such investment that I’ve made has been Fundrise, which is an online platform for real estate investing. I opened the account in January of 2022, so I’m about 9 months into investing with the platform. I opened it at the recommendation of some friends. As readers of the blog know, I’m into real estate and Mrs. Money and I have dabbled in real estate in the past (and currently are!). However, in January of 2022, Mrs. Money and I were getting frustrated! We’d been looking for a rental house for probably 3 months at that point and were not having any luck! The real estate market was HOT, every house we looked at we were competing with several other buyers or we were looking at a house that was not worth buying. We had been outbid many times, we had backed out of 2 houses and we were wondering if it was ever going to be possible to get a house! Fast-forward 4 months we finally got one! I was pretty bummed to not have gotten a house yet and the house money we had set aside was burning a hole in my pocket!

So, when I saw the chance to invest money in a real estate platform, I jumped at it! I’m always a bit nervous of new investments (during the crypto crash we saw several companies go out of business and investors lose their money!) so I only put $1,000 in. I figured I’d let it ride and see how things panned out! Here’s the good, the bad and the ugly with investing in Fundrise.

What it is

Investment funds that invest in real estate are nothing new; REITS (real estate investment trusts have been around for a while) are publically traded and are a lower cost way to own real estate. Fundrise essentially (as best I can tell) operates similar to a REIT – they pool money from investors and then use that to buy real estate – for the purposes of buying and holding and making money from rent/appreciation. So why would you buy into Fundrise vs a REIT? It’s a question I’m asking myself now nearly a year in but the pitch is that it’s a lower cost way to do so vs a REIT. Their website talks about how they bring “big billion dollar investment fund research, backing and buying power to the average investor – all at a low cost“! My Fundrise portfolio right now is a good mix of: single family, apartments, townhomes, industrial buildings and land (strangely no commercial). In theory I’m just a property owner / landlord but on a broad, diversified scale! Fundrise does allow you to pull your money out at any time, although it may take a few days / week to liquidate your holdings and you might be hit with some fees. Fundrise does recommend holding for 5+ years which isn’t unrealistic for real estate investing.

How I’ve fared

2022 has been a tough year pretty much across the board. Stocks (especially tech) has really fallen (the NASDAQ is down 20ish%), real estate may be dipping slightly, and crypto has been demolished. So if I can find an investment in my portfolio that I haven’t lost money – I’m happy! Fundrise is one such bright spot – to date I’m up 7.3%! 6% is appreciation and 1% is ‘dividends’. I’ve paid .000054% in fees, so basically a negligible amount.

I like to compare this to some other real estate that I own – STWD which is a REIT that I’ve owned for a while. To date it’s down 5%, but I’ve gotten an annualized dividend rate of 8%, so I guess still technically in the positives, but less than my Fundrise return. STWD doesn’t have ‘fees’ like Fundrise does, their fees are just expenses as part of the business.

So all in all I guess I’ve fared pretty good?!?

Why I’m nervous

I always get nervous with a new investment account and what taxes look like. It looks like the forms they issue are fairly straightforward with a 1099-DIV, 1099-B and/or a K-1 so these are all hopefully things my tax software can handle. I do get a little nervous as Fundrise isn’t a publicly traded company so technically it’s still in startup -sh mode and we’ve seen a lot of startups suffer (layoffs, lower valuations) in this economic slowdown (I can’t bring myself to say ‘recession’!). I feel like my money is safe but who really knows! Finally, I’m a bit nervous as so much of my gains were from appreciation and in a slowdown I know that appreciation will slow down too!

Would I do it again

I’m not pulling my money from Fundrise but not necessarily putting more in right now. FWIW I do have a buddy that liquidated his Fundrise account and he got all his money back minus some early withdrawal fees. The returns have been good, but not that much better vs doing a regular REIT. With a regular REIT I feel a bit more secure in investing (as they are publicly audited) and I can get my money back a lot quicker. I suppose we’ll see how year 2 and beyond goes. I’m not unhappy with my returns, it just feels like opening another account may not have been worth the slightly larger return!

Shameless plug with my referral code though if you are looking to passively invest in real estate and like what you see with Fundrise, I would appreciate the referral!