Author Topic: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)  (Read 4158 times)

jeromedawg

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Hey all,

Was curious if anyone out there has experience investing in both eREITs and traditional REITs (perhaps with the intention of exposure and first-hand performance comparisons). I've seen quite a few here happy with their investments at Fundrise, etc overall. For those of you who are invested in both positions to-date, do you have any feedback on how things are going and if you would keep things as-is or move towards investing in one position over the other?

Any information would be great. I've initially invested in some FSRVX but am curious about eREITS too. I've also been interested in standard buy & hold real estate investing but just haven't gotten off the ground with that (particularly because I lean towards buying locally and live in a HCOL: Southern California, where housing is ridiculous). Out of state is the next option for that but I don't want to just blindly jump into anything without extensive research - narrowing down areas of the country to invest in and then finding the right people to help you in any of those given areas is no trivial task or small time committment...

GGNoob

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #1 on: January 22, 2018, 12:09:58 PM »
I invested at Fundrise in the eREIT for about a year, just to fool around. I liked it and I still like the idea of it. I think I also have "shiny object syndrome" towards it and just want it because the website draws me in.

The biggest things for me are:
  • I don't want my REITs in a taxable account (or can you do IRAs now at Fundrise?)
  • With REIT stocks/funds I can hold them in any of my retirement accounts which makes rebalancing easier
  • REIT stocks/funds are a lot more liquid than Fundrise

jeromedawg

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #2 on: January 22, 2018, 12:16:15 PM »
I invested at Fundrise in the eREIT for about a year, just to fool around. I liked it and I still like the idea of it. I think I also have "shiny object syndrome" towards it and just want it because the website draws me in.

The biggest things for me are:
  • I don't want my REITs in a taxable account (or can you do IRAs now at Fundrise?)
  • With REIT stocks/funds I can hold them in any of my retirement accounts which makes rebalancing easier
  • REIT stocks/funds are a lot more liquid than Fundrise


Yea, following the tax-efficiency placement model per Bogleheads, I too want to avoid REITs that would be in a taxable account. FSRVX is currently in my Roth IRA but I will probably buy more in my wife's traditional IRA or rebalance so that all of it is in the tIRA instead.

I look at Fundrise, etc as being a 'test bed' investment more than anything... this is how I view the funds I've put into Wisebanyan as well.

protostache

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #3 on: January 22, 2018, 02:30:31 PM »
Income from REITs gets the 20% pass through deduction starting in TY2018, which takes a little of the sting out of holding them in taxable accounts.

jeromedawg

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #4 on: January 22, 2018, 03:13:32 PM »
Income from REITs gets the 20% pass through deduction starting in TY2018, which takes a little of the sting out of holding them in taxable accounts.

Nice! Didn't know that... I'll definitely need to take this into consideration then. Are there any eREITS you guys would advise staying as far away from as possible?

BTDretire

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #5 on: January 23, 2018, 08:58:36 AM »
 Hmm, after I wrote my post I reread your subject line, I missed the mark!
But I'm leaving it for those that may have an interest in REIT stocks.
I started buying a few REITS and preferred REITs a couple years ago.
I started with REITS and then moved more into preferreds.
At this time I have 5 Preferred REITs averaging 7.9% dividend and
share price increase of  average 2%.
 I have one Commercial mREIT paying 8% and a Mall REIT paying 12.3%.
I'm down in price about 5% on the last two, but I'm not concerned about them.
I follow an analyst on Seeking Alpha and pay for his service to guide me, I have been
very happy with his buy and sell points, unhappy that I haven't got in on all his calls.
 I use my REITs as a proxy for bonds, just as bonds they are having a harder time in this
rising rate environment, but the end result is higher income for REITs, getting there takes
an adjustment period for the REITs.

Timodeus

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #6 on: January 23, 2018, 09:15:47 AM »
I have 5% of my portfolio in REITs. I wanted some real estate exposure for diversification and non-correlation to VTI. I also am currently a renter and wanted to have at least some exposure to real estate. I recently put a little in the Starter Portfolio (50% in Growth eREIT, 50% in Income eREIT) but most of my REIT assets are in VNQ. What bothered me about the REIT index is its exposure to large commercial properties (malls especially). One of the things I like about the Fundrise REITs is that the focus is mainly on multi-unit residential properties. I may put a little more over time into Fundrise but it's still new and unproven in the long term. I'll probably wait before making higher bets. Overall Fundrise so far is decent, but one complaint is the advertised yield which I think is not 100% accurate. When I put my initial investment in I was expected to get 9.25%, I'm getting less than 7.5% currently. I'm not too upset about it, it wasn't why I bought into the eREITs but it's not a good sign either.

12gauge

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #7 on: January 23, 2018, 09:12:54 PM »
my return in 2017 for fundrise was 11.44%, 1500 shares of west coast, 750 growth and 750 income reit.    bought in 2015. 

Liquitity is my biggest fear and that my investment could just disapear in a some shady accounting or other lawsuits they have been accused of.

so far only the growth reit has an estimated value higher than the 10$ per share paid.  and that is there valuation.  who know what an independent auditor would come up with.

i think it was a terrible investment since all my ETFs returned between 20 and 35% this year.  I bought it after my 401K only did 4% in 2015, so I looked at real estate instead.  oops



Debonair

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #8 on: January 24, 2018, 10:23:07 PM »
I own some of both. Now because I am an American that lives and works outside the USA my taxes are weird and I don't feel the sting of the dividend being treated like income.

I like fundraise but I do not intend to increase my exposure to them any time soon. I reinvest the dividen into other REITS that are more liquid. As health care REITS have taken a beating that is where I am investing.

Mighty-Dollar

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #9 on: January 26, 2018, 02:26:57 AM »
Always avoid non-traded REITS. If it's not traded on the stock exchange then don't touch it.

In 2012 Blue Vault Partners LLC and The University of Texas at Austin McCombs School of Business conducted a study and determined that 71% of non-traded REIT's under performed their benchmarks.

A professor at the University of Texas studied 17 non-traded REITs. He determined that they under performed comparable publicly traded REIT's by about 1.4 percent per year during a 21 year period ending in 2011.

JR

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #10 on: January 26, 2018, 03:54:45 PM »
I have 5% of my portfolio in REITs. I wanted some real estate exposure for diversification and non-correlation to VTI. I also am currently a renter and wanted to have at least some exposure to real estate. I recently put a little in the Starter Portfolio (50% in Growth eREIT, 50% in Income eREIT) but most of my REIT assets are in VNQ. What bothered me about the REIT index is its exposure to large commercial properties (malls especially). One of the things I like about the Fundrise REITs is that the focus is mainly on multi-unit residential properties. I may put a little more over time into Fundrise but it's still new and unproven in the long term. I'll probably wait before making higher bets. Overall Fundrise so far is decent, but one complaint is the advertised yield which I think is not 100% accurate. When I put my initial investment in I was expected to get 9.25%, I'm getting less than 7.5% currently. I'm not too upset about it, it wasn't why I bought into the eREITs but it's not a good sign either.

IShares has a residential REIT ETF under the ticker REZ. In reality the REIT is only 45% residential but it does lack retail and office building REITs (the balance is mostly self storage and senior living facilities). I too have been hesitant to invest in REIT index funds due to their high allocation to brick and mortar retail. However, I have seen three “dead malls” in my area revived into busy fully leased “Town Centers” (the interior of the mall was eliminated) so maybe that fear is unwarranted.
« Last Edit: January 26, 2018, 09:07:05 PM by JR »

ChpBstrd

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #11 on: January 26, 2018, 07:38:36 PM »
1) Establish a new financial business model that avoids the regulations and consumer protection laws traditional banks and funds are required to follow. Simply declared you are in a different category of business during a period of loose regulation. They'll let you.
2) Raise tens of millions (billions) of investor dollars on the promise that you can earn higher returns by avoiding all that bureaucracy.
3) Make lots and lots of loans without doing some key expensive step like verifying income, checking credit, or assessing collateral. Declare the debt top-grade.
4) Loans such as these typically perform well for the first six months to year, "proving" your business concept. More investor dollars arrive.
5) Sell out and retire a multi-millionaire as the loans start defaulting at higher-than-expected rates.

----------
For the preceding process, plug in:
-peer to peer lending (see https://forum.mrmoneymustache.com/investor-alley/lending-club-time-to-panic/ for the latest)
-circa 2006-2007 "liar loans" on mortgages
-subprime credit a few years ago
-Asian debt in the 1990's
-S&L debt in the 1980's
-eREITs???

CanuckExpat

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #12 on: January 26, 2018, 11:02:07 PM »
There is a bit of an ongoing "experiment" related to what you were asking starting here: http://www.mymoneyblog.com/fundrise-starter-portfolio-vs-reit-etf-review.html

Acastus

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #13 on: January 29, 2018, 11:12:38 AM »
I added 5% REITS to my 'stache when I moved to a sluggish real estate area. Housing never crashed here in 2008, because it never went anywhere in the 1st place. I have had 2 bad years in a row with the fund, with overall 16% return @ 70% stocks last year.

Trying to decide if there is a fundamental change in returns for this sector, or if it is just an annoyingly long deviation from the mean. The new tax law kneecaps the mortgage deduction for 80% of America. I could see this create a drag on the industry for several years. Most REITs invest in commercial real estate, and companies keep the deduction. I am on the fence about what the actual affect will be.

ChpBstrd

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Re: eREITs (Fundrise, RealtyMogul, etc) vs traditional REITs (FSRVX, etc)
« Reply #14 on: January 29, 2018, 01:20:39 PM »
I added 5% REITS to my 'stache when I moved to a sluggish real estate area. Housing never crashed here in 2008, because it never went anywhere in the 1st place. I have had 2 bad years in a row with the fund, with overall 16% return @ 70% stocks last year.

Trying to decide if there is a fundamental change in returns for this sector, or if it is just an annoyingly long deviation from the mean. The new tax law kneecaps the mortgage deduction for 80% of America. I could see this create a drag on the industry for several years. Most REITs invest in commercial real estate, and companies keep the deduction. I am on the fence about what the actual affect will be.
Dig in and I bet you'll find the sluggish returns came from mall operators and healthcare REITs.The first because physical retail is dying. The second because the current administration and Congress are taking steps to reduce Medicare/Medicaid renumeration. I doubt the mortgage deduction cap for SFH's affected REITs.