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Disclaimer: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on REtipster.com. All opinions are my own. The information contained herein neither constitutes an offer for nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering document, and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. No money or other consideration is hereby being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Fundrise Platform neither constitutes an indication of interest in any offering nor involves any obligation or commitment of any kind. The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.
I made a video and blog post six years ago explaining how Fundrise works.
As part of the review back in 2017, I decided to invest $1,000 of my own money with the company, so people could see exactly how it worked, and we could check in on that investment each year to see the results.
Since then, I’ve been tracking the progress and returns from that investment by putting together an annual video update showing what the dividends have been and how much the money has grown.
My goal with these annual reviews isn’t to convince anyone to invest with Fundrise. My goal is to make you aware of this investment strategy and that you don’t need to be an accredited investor to participate, which is somewhat unique in this space.
The First Year With Zero Principal Left
This is the first year I've seen how the money grows (or shrinks) after yanking out my original $1,000 investment.
Whatever happens with the remaining money is just gravy because my original principal isn't at risk. Of course, I'm completely ignoring the time value of money and the fact that my original $1,000 was tied up for five years in order to reach this point… but even so, it's a different perspective when my original dollars are back in my pocket.
It's a lot of fun to see the actual returns on this investment (not just a theoretical picture of what's supposed to happen).
Of course, my investment performance doesn’t determine what YOUR returns may look like. Every eREIT performs differently, and the performance will vary from year to year. Still, it offers some insights into how Fundrise performs as a company, specifically in comparison with other investment options like the stock market, mutual funds, or similar websites.
Fundrise Performance Update for 2023
When I first invested my $1,000 six years ago, I told Fundrise to automatically reinvest all of my dividends (rather than sending them to my bank account). This is a big part of why $864.37 of “value” is left in the account. This number would be substantially lower if I didn't reinvest these dividends.
As of April 20, 2023, the leftover funds after withdrawing my original $1,000 investment (with all dividends automatically reinvested) haven't done particularly well.
Runaway inflation, followed by the fastest interest rate hike in US history, has taken its toll on the US real estate market, and it shows in its performance over the past year. This is the first year I've ever seen any of these numbers go into the negative, and I wouldn't be surprised if this trend continues in the short term.
2021 was the best year at 20.4%, and 2022 was the worst at 4.1%. So far, 2023 is shaping up to be even worse… though we won't know until the year ends.
This screenshot above was taken on April 20, 2023 (a few days after I recorded the video above).
April 20 isn't even a full four months into the 12-month calendar, which is part of why the 2023 year-to-date earnings look disproportionately smaller compared to the previous years.
Here's a quick snapshot of EVERY dividend I've received since I started six years ago.
Is 12.7% a decent return over the past six years?
Considering I spent no time or energy stressing over property managers, tenants, contractors, lenders, or anything, for that matter, I think it's pretty good.
Could I make a better ROI with other investments? Absolutely.
The appeal of Fundrise isn't in how high the returns are. The appeal is the passive nature of this investment and the fact that it doesn't require anything besides the initial dollars I put into it.
Significance of the Six-Year Milestone
This is a unique year because it's the first time I've seen how this investment performs AFTER the original principal has been withdrawn.
I can't say it's done particularly well, but that's primarily because of where we're at in the economic cycle and how the Fed's interest rate increases have impacted the national real estate market.
Higher interest rates make it more expensive to borrow money, which means developers have less incentive to develop, and investors have higher costs when borrowing money to buy properties.
The Biggest Drawbacks to Fundrise
As many people have mentioned in the YouTube comments over the years (and I would have to agree), the biggest drawback to investing with Fundrise is the fact that I can't quickly or easily cash in my shares before the five-year holding period unless I want to pay the penalty for redeeming the shares early.
This five-year penalty also applies every time I automatically reinvest my quarterly dividends. For example, if I reinvest a dividend in year three, I have to wait five years from the date of that investment before I can redeem those shares. So, it creates this constant five-year waiting period every time new dollars go into their system.
When you compare this lack of liquidity with the stock market, Fundrise looks less appealing.
On the same coin, there is something to be said for diversifying your investments into the real estate sector instead of staying strictly with the stock market, as most “normal” investors do. Even if the returns aren't substantially higher, there is value in simply having your dollars spread out among different asset classes.
The Starter Plan and Easier Accessibility for Smaller Investors
Another significant benefit of Fundrise is that investors can start with tiny amounts of money.
When I started in 2017, the minimum investment was $1,000, but these days, investors can start with as little as $10, and they don't have to wait five years to get their money back. Both of these things are a big deal because there are a lot of investors who don't have $1,000 to get started with and/or don't want to wait for five years like I had to. This should provide a solution if you have either of those objections.
If you have more money to throw in at the beginning, you'll potentially get access to more investment options and better bonuses for anyone you invite… but if I look at it through the eyes of someone with limited capital, those things don't strike me as huge drawbacks.
What's Next for My Fundrise Investment?
Now that I've taken the wind out of my sails by withdrawing $1,000 from my portfolio, it will be interesting to see how much this impacts my investment growth.