Author Topic: Why use Fundrise vs buy your own rentals?  (Read 1869 times)

FrugalSaver

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Why use Fundrise vs buy your own rentals?
« on: March 26, 2018, 06:47:46 PM »
If you can afford your own rentals,  would you invest in Fundrise?

Papa bear

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Re: Why use Fundrise vs buy your own rentals?
« Reply #1 on: March 26, 2018, 10:19:53 PM »
So it's a REIT? My real estate holdings are local, and all of these investments held are outside of my market.  Could be a way to diversify? 

Website didn't help me much in getting details. Was more geared to sell me on their "product."


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pantherchams

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Re: Why use Fundrise vs buy your own rentals?
« Reply #2 on: March 27, 2018, 09:29:32 PM »
I put $5k in ~2 years ago to see how it did and I've made great returns.  I don't know if it is stupid, but I've been planning to add some more.

In my market, a decent single family rental is going to run $250k on up, so you're looking at going in with a pretty bug chunk of change to make the rent numbers work, which isn't in my plans.  But, I do like have some skin in the real estate game.


Rosy

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Re: Why use Fundrise vs buy your own rentals?
« Reply #3 on: March 28, 2018, 09:54:47 AM »
If you look at the various reviews online it states that the fees are higher than an index fund (Vanguard does offer Reit's). It also discusses different tax implications and the risk as well as advantages involved.
Here is a recent review: http://www.investmentzen.com/fundrise-review
Investor junkie and the fool.com also have interesting reviews.

From what I understand, it is tempting, considering the low investment required, but it seems to be riskier than a straight home rental, you are buying a sliver of a big commercial project and hope it will bring you good returns.
I think an individual project may well pay better distributions than you might find with a Reit, but I think you stand to lose much more than you ever would with a Vanguard Reit bundle.

Fundrise started out with financing individual projects-crowd sourcing and have now morphed-expanded into offering a product similar to a mutual fund. I am a bit weary of privately funding vs an index fund, but if one is not risk-averse it might be a chance to diversify.

They've only been around since 2010 and have only added the eReits since 2017 - so they really are still a new kid on the block, offering a twist and maybe an opportunity to make better money at a higher risk/expense?
I find it kind of amazing that they started out with crowdsourcing as little as $500 from each investor.

OP, to answer your specific question, I don't think this is comparable to your own rentals in any way. You have no involvement and no say and if things are mismanaged you lose.
TBH, I considered fundrise a couple of years back, because of the low threshold and owning a piece of an asset other than stocks. Diversification is a big draw, but in the end, I decided the risk was too high, unless you have a bit of play money or deliberately consider a high-risk investment.

Like pantherchams stated - real estate is a game:) and it can be fun to have a little skin in the game.

arizonawildcats

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Re: Why use Fundrise vs buy your own rentals?
« Reply #4 on: March 28, 2018, 09:45:17 PM »
Iím definitely a fan.   I have always been interested in rental real estate but never pulled the trigger and bought a property because of the added work and headaches.  With Fundrise, I have a diversified portfolio of more than 50 properties with no late night calls from a tenant. 

Pro's   

(1) It provides diversification from the stock market
(2) It does not behave the same way as an ETF REIT like VNQ 
(3) The dividend payout ratio is very strong (+/- 7% right now)
(4) There is potential for capital appreciation on top of the dividend payouts
(5) Strong possibility the eREITs will receive the 20% REIT income credit with the new tax plan
(6) I believe crowd-funded real estate is a disrupter and will continue to gain traction in the future

Conís

(1) Limited liquidity compared to other investments (I am OK with this)
(2) You need to understand the risk characteristics of the capital stack (senior debt, preferred equity, etc.)
(3)  No track record yet of how the investments will perform in a real estate downturn

I have Fundrise as a part of a well diversified portfolio.   


« Last Edit: May 31, 2018, 10:32:43 PM by arizonawildcats »

ePalmtrees

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Re: Why use Fundrise vs buy your own rentals?
« Reply #5 on: March 29, 2018, 09:11:40 AM »
A hands off investment would be the reason to invest rather than buying your own real estate investment. Learning about real estate, picking a strategy, finding a deal.. managing your property.. all of these are a huge amount of work that is going to take you months at the least and that you can totally screw up and lose your hat on.

Fundrise appears to be very legit as these things go. I have put 10k into it (and have my own rental property too). But keep your investments diverse and don't put like all your money into it.

CorpRaider

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Re: Why use Fundrise vs buy your own rentals?
« Reply #6 on: March 29, 2018, 10:04:57 AM »
Diversification is probably the best answer (not implying it is a good one).

But another question is, "Why buy either when publicly traded REITs with better management and better locations than most people could ever hope to acquire?"

I posted a question in the RE sub-forum, but got no traction.  I'm reading about people seeing private RE prices with cap rates which are equivalent or lower to passive REIT investments. 

« Last Edit: March 29, 2018, 12:24:05 PM by CorpRaider »