Author Topic: Investing in real estate crowdfunding?  (Read 2606 times)

FIREin2018

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Investing in real estate crowdfunding?
« on: November 14, 2019, 08:35:20 AM »
https://fundrise.com/
https://www.realtymogul.com/

Anyone do this?
what has been your experience?

Wrenchturner

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Re: Investing in real estate crowdfunding?
« Reply #1 on: November 14, 2019, 12:26:14 PM »
Tell us all about it.

Why not a reit?

MoneyMatrix

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Re: Investing in real estate crowdfunding?
« Reply #2 on: November 19, 2019, 03:34:56 PM »
Read the fine print. I was just listening to an investor talk about these.  Usually if you loan money for a real estate investment, you have a loan that allows you to foreclose on the property if they don't pay.

My understanding is that many of the crowdfunded real estate investments aren't backed by the property which means if they don't pay, you can't foreclose.  So getting your money back would be much harder.

So just be aware of that.

thejordanburnett

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Re: Investing in real estate crowdfunding?
« Reply #3 on: November 20, 2019, 09:50:08 AM »
I invest with Fundrise. The experience so far has been great.

They have been very transparent with what properties are acquired, how they are performing, and (in my opinion most importantly) when a property doesn't work out and when things go wrong.

One of my biggest fears going into it was that all properties would work out perfect (you know that's a lie) and that there would not be transparency about financing issues, contracting/licensing issues, etc. Thus far they have been very open about the process and it's cool to see what you're invested in. I've visited a few properties in Atlanta that are part of my portfolio.

It is a private REIT, therefore the volatility is low and your investments are not immediately liquid like public REITs. It can take up to three months or more to get your money out if you need it in a pinch. You are also penalized based on the holding period for the particular REIT (read more about it in this article: https://www.mymoneyblog.com/fundrise-ereit-liquidity-redemption-process.html )

The returns are what I would consider subpar compared to public REITs or index funds, but the correlation has also been low. It also requires zero work from me--which is what I was looking for.

It is definitely a longer-term investment and there are ramp-up periods for the particular REITs (for example, a particular REIT may stay in ramp-up stage for several months before entering the operating stage where it generates the maximum return). The other thing to be aware of is this:

"Fundrise does warn you that in an extreme event with depressed prices, this liquidity window may be closed for the benefit of long-term investors." AKA, they are tying your hands for the benefit of everyone invested in the REIT.

Given that, as with everything, it is a longer term (5+yr) investment (truly think of it as investing in REAL ESTATE). If you bought a house and the market was garbage, you wouldn't want to sell when prices plummet (but, outside of this platform--you still could).

timmorrow

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Re: Investing in real estate crowdfunding?
« Reply #4 on: December 21, 2019, 11:57:23 AM »
Disclaimer - I only have a very small amount of $$ committed (a bit more than $1,500) to Fundrise to get a feel for what it's like.

To respond to the question of "why not a REIT", Fundrise does have an article that goes into some detail about how they view the difference between their private eREIT platform and public REITs and specifically VNQ.
https://fundrise.com/education/blog-posts/vanguard-vs-fundrise-which-is-the-better-investment-option

I'm no expert, but my distillation of their argument is:
* Vanguard ETF invests in public traded REITs which invest in property management companies which invest in real estate and while Vanguard's fees might be low, ultimately there are higher costs that result in lower performance to ordinary investors due to all these layers
* Fundrise invests in their own private REITs which directly invest in properties allowing ordinary investors to get into real estate investments higher in the value chain resulting in quote "better returns at lower costs" by eliminating various middlemen

A downside of these non-publicly-traded private eREITs is that there is a limited liquidity, but Fundrise would tout that as a benefit  to keeping costs low by avoiding the "premiums" of public markets.

I suppose the only score that matters is the performance of the investments.  Fundrise publish some data present some high level stats here:
https://fundrise.com/historical-performance
with what appears to be a decent average annualized return, however if you click on "Learn more about the assumptions" it quickly becomes clear that computing performance of these funds is complicated, quite frankly beyond my understanding - which of course may be good reason to steer clear.  On the other hand, I'm not sure a public REIT would be less complicated, but perhaps it is far more established.

Scrolling down they also present a higher annualized dividend year than VNQ, although that is of their "Supplemental Income" portfolio which if I understand correctly is optimized to return the most dividends to investors.

Personally, I don't have the time or wisdom to invest in individual properties, and I enjoy the frequent updates from Fundrise describing (with pictures) the individual properties my $$ are being invested in, even if only tiny amounts.

I'm debating on whether to move beyond toy money to at least a small % of the portfolio going here, my inclination is to do so.
« Last Edit: December 21, 2019, 12:00:24 PM by timmorrow »