**Readers! Be sure to check out our updated, new Fundrise Passive Income 12-Month Review**
After posting our 2016 vs. 2017 Passive Income Review, we received great feedback (thank you!). A reader also reached out for further details on our experience with Fundrise. In particular, our results with Fundrise for passive income.
As part of our monthly passive income and portfolio updates, we’ve been highlighting key changes as well as our progress. We initially mentioned Fundrise in our August 2017 recap when our first investment occurred. We also alluded to Fundrise as part of our post on how and why we use REITs in our portfolio.
Related: Land(less) Landlording: How and Why We Use REITs
Here we’ll provide an overview of our results with Fundrise, as well as thoughts on our experience with the platform since our initial investment six months ago. This is not meant to be an exhaustive review of the Fundrise, but we will highlight aspects of the service for context. As always, do your own thorough research and consult with a professional before deciding to invest.
Fundrise Overview
Fundrise is an online real estate crowdfunding service, which offers both accredited and non-accredited investors the opportunity to invest in various real estate assets. Investors access properties via the Fundrise platform. Investments are offered via two primary products:
(1) eREITs – composed of online Real Estate Investment Trusts (REITs) investments
(2) eFunds – composed of for-sale single-family homes as investment properties
Visit the Fundrise website for further details.
Overall, the mix of eREITs and eFunds offered tries to provide growth and/or income, as well as risk diversification, by offering properties or related assets across locations and different investment types.
Related: 5 Ways to Balance Account Types To Balance Life’s (Un)known Milestones
Our Investment Experience
We jumped into Fundrise via their Starter Portfolio option — a $500 minimum requirement to invest (vs. the usual $1,000). As we’re already heavily involved in traditional REITs, I wanted to gradually try it out.
I’ve been happy with the experience so far, and we’ve slowly brought our current investment up to $5,000 over the last few months:
- August 2017: $500 initial investment
- September 2017: $1,000 additional investment
- October 2017: $9.90 in dividends reinvested
- November 2017: $2,000 additional investment
- January 2018: $55.51 in dividends reinvested and ~$1,435 additional investment
We’ll evaluate further if we’re looking to add additional funds, but our attention may turn elsewhere as we continue to focus on 2018 investment goals.
Overall, Fundrise is a long-term investment.
Related: 2018 Goals Overview: What Do You Want To Do This Year?
Other Considerations
Things I’ve noticed with the Fundrise so far:
Desktop / Online Only
There isn’t an app. Not a must-have, but a nice-to-have.
Cumulative Earnings
Each time you log in, you see your cumulative earnings and what you’ve earned since last logging in. It’s addicting (don’t log in too frequently). Also, remember: It’s your cumulative earnings.
Timing of Investments
Withdrawals from your bank account take longer than I’d expect, but not too long.
Automatic Allocations
Based on the amount invested each time, the platform will automatically allocate across your various holdings.
Note: You’ll also see a separate debit in your bank account per allocation (e.g., if you invest $1,000 and gets allocated five ways, you’ll see five different withdrawals in your bank account).
Fees / Expenses
A bit higher than what I’m used to from investing in index funds and other publicly traded securities, but Fundrise still seems like a great deal based on what you get as an investor.
Visit the Fundrise site for further details.
Tax Implications
Most investors will receive 1099-DIV forms if invested in the eREITS.
I’ve never dealt with the 1065 K-1 forms related to the eFunds. But guess what? I will next year for 2018 taxes.
I actually waited until 2018 to invest in the eFunds for this reason.
Related: 3 Lessons Why “Assumption Is The Mother of All F*ck Ups”
Looking Back and — More Importantly — Ahead
I’ve enjoyed utilizing Fundrise. The user interface is terrific and the overall investment opportunities have met our personal needs and investment objectives so far.
We’re continuing to evaluate the next steps and monitor our exposure to real estate. Fundrise has given us diversification away from the traditional, publicly-traded REITs that form the bulk of our real estate exposure.
Overall, we’ll try to be mindful to find a balance between our various asset classes, as well as within our alternative holdings.
Readers, do you currently utilize Fundrise or any other online real estate investment platforms? What role does real estate play in your investment portfolio? Do you have any thoughts or recommendations to share for consideration?
Related:
Tax Reform & Your PFUI: Applying the 10 Heuristics
FTW! Is it Possible to Invest for Today AND Tomorrow?
A Retroactive Review: 2016 Passive Income & Portfolio Summary
How We Got To Averaging +$1,000 a Month In Passive Income
Our favorite free financial tool is Personal Capital. We use it to track our net worth, manage our spending & savings, and to monitor our investments. It’s simple and free to use.
Interesting opportunity Mike. Being slow to adopt new things, I will probably stick with REITs for now and our single family home for real estate exposure. With the new tax package on top of a growing economy, I think we will see inflation in coming years and I think real estate will be a good hedge. Tom
Thanks Tom. We’ll see what happens. Overall, Fundrise seems like a decent investment so far. We’re not throwing the kitchen sink at it, and it’s not going up/down hundreds/thousands of percent like crypto; I’m comfortable with our initial $5k investment. And good point re: Real Estate; I think many can benefit from having a slice of their portfolio in some type of RE exposure. – Mike
Pretty cool. What’s the expected return on this and is it taxed as income or CG? Asking due to reit classification. The UI seems quite nice, and crowdfunding small bits is a good way to diversify!
Hi Olivia – thanks for your comments!
The Fundrise site contains further details on expected returns, as it can vary depending on the type of product and/or allocations: https://fundrise.com/historical-performance
But they list 2017 as a 11.44% average annualized return net of fees. But this can vary significantly and is, of course, not guaranteed.
You also made a good point on the potential tax implications – my understanding is that the income will be assessed as ordinary income (similar to traditional REITs), as well as for the eFunds. This is why the vast majority of our traditional REIT holdings are held in a Roth IRA. Related: https://www.balanceddividends.com/landless-landlording-how-and-why-we-use-reits/
Reviewing the Fundrise FAQ, they also appear to now offer an IRA option via Millennium Trust Company, which enables access to the Fundrise platform in a potentially more tax-advantaged manner.
Thanks again for reading. – Mike
I currently don’t invest in REITs, but if and when I do, it would probably be through a Vanguard REIT index fund, such as VGSIX. Curious, what does Fundrise offer that differs from something more traditional such as Vanguard?
Hi Joe – thanks for your comments.
The Vanguard REIT index is a solid choice to consider. As mentioned, we hold the vast majority of our RE exposure via the fund version of the same.
On your question, I found this recent post by Fundrise exploring some of the differences for consideration: https://fundrise.com/education/blog-posts/vanguard-vs-fundrise-which-is-the-better-investment-option
As mentioned, we’ll continue to hold the Vanguard asset for the long-term, but might increase our current Fundrise allocation in the future. It ultimately depends on your unique needs, etc.
-Mike
Very cool and nice breakdowns. Will keep an eye on how it does for you. Seems good.
Cheers!
Thanks! Glad you enjoyed the post.
So far, so good with our experience using the service. Thanks again. – Mike
Thanks for sharing all of these platforms are really interesting. Peerstreet is another interesting one.
With how diversified you are in the funds now I wonder how much of a difference it will really bring in overall returns? I would be tempted to just buy vanguards REIT fund and call it a day.
Unless however you have a gut call on a more concentrated play. Then it adds a whole new layer of risk into the mix.
Regardless nice write up and thanks for sharing your experience.
Hey DM, thanks for your input.
Overall, agreed on you points; we’re going to stick with the majority of our real estate exposure in our Vanguard REIT holding via the Roth.
Fundrise gives us an opportunity to invest in some single, individual properties via their eFunds (but we do have some exposure in the eREITs).
It might give us some better returns in the long run, but it’s just another bucket to try and grow.
Thanks again.
Haven’t use it yet, but it looks like we should. Thanks for the review!
No worries, Tina! Thanks for reading.
First time here BD. Thanks for the write up on Fundrise. I actually haven’t heard of it before, although it sounds intriguing. I guess I would be concerned about the inefficiency of investing outside of an IRA, but I also realize that taxes aren’t the end all be all of investing. Definitely something to consider, for someone interesting in investing in real estate.
Hi Glen – thanks for your comment.
Good point regarding tax efficiency. Regardless of the platform or the type of real estate exposure one might consider investing in, I also agree account allocation is key. This is one of the reasons why the vast majority of our real estate holdings are in a tax advantaged account.
Thanks again for stopping by. – Mike
Hi Mike, I have never heard of fundrise, but really like the platforms some of these real estate crowdfunding have. I do invest in Canadian REITS that invest in the US (tax reasons) and will stick to those for my real estate exposure. Nice breakdown on Fundrise.
Hi Steve – thanks for your comments. I’ve looked at a few other investment platforms for real estate as well, and you’re right – they do have some nice things to like about them. Thanks again – Mike
Hi, Mike. How do you communicate to Fundrise the amount of investment risk you are willing to take? Does that occur one time when you set up a profile, or can you do this as each investment occurs? Thanks for sharing your experience with Fundrise.
Hi Engineering – these are great questions.
My understanding is Fundrise elects the future allocations based on which of the 3 investment goals you’ve selected (generally, from least to most aggressive: Supplemental Income, Balanced Investing, and Long-Term Growth), which correspond to your general investment objectives (including potential risk in terms of duration, etc.).
I haven’t recently changed my investment profile, but it does give you the option within in your account settings. But this doesn’t appear to be at the point of each new investment or additional contribution. For example, if I log in and pretend to add another $1,000, the platform automatically allocates the funds across various holdings (and those allocations appear to change based on the amount invested, like $2500 instead of the original $1,000).
Thanks again for reading. – Mike
Hi, im a little confused. In that picture it shows 5000 invested but its only worth 4000? Am i reading that right, have you had a loss?
Hi J –
Thanks for your comment.
To answer your question, at the time of the screenshot, we had triggered an additional $1000 investment. This brought our total amount invested at the time to about $5,000.
As the caption mentions, we had some investments (which was the $1,000) being processed. For additional reference, Fundrise also adds a description in the screenshot at the top of the table mentioning “You currently have pending investments. This information may not reflect your total share ownership or estimated value until these investments are complete.” The two values aligned to the $5000 shortly thereafter.
Hope this helps. Thanks again for reading.
– Mike