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As part of the tutorial, 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 what the results were.
Ever since then, I’ve been tracking the progress and returns from that investment by putting together an annual blog post and video that shows what the dividends have been and how much the money has grown.
My goal with this review isn’t to convenience anyone to invest with Fundrise. My goal is to make you aware of this investment strategy, and the fact that you don’t need to be an accredited investor to participate.
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 necessarily dictate what YOUR returns may look like. Every eREIT performs differently, and the performance will almost certainly vary from one year to the next, but it does offer some insights on how Fundrise performs as a company, specifically in comparison with other investment options like the stock market, mutual funds, or some of the other real estate crowdfunding websites out there.
Disclaimer: 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nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering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.
Fundrise Performance Update for 2022
When I first invested my $1,000 five years ago, I told Fundrise to automatically reinvest all of my dividends (rather than sending them to my bank account), which is why the portfolio value has grown as it has.
As of April 12, 2022, my original $1,000 investment (with all dividends automatically reinvested) has earned a pretty decent return on average over the past five years. Just looking at the first quarter of 2022, the dividend payment was the lowest it's ever been, but the appreciation was simultaneously the highest it's ever been.
2021 was the best year at 20.4% and 2020 was the worst year at 9.7%.
This screenshot above was taken on April 12, 2022 – the same day my Q1 dividend for 2022 was automatically reinvested.
April 12 isn't even a full 4 months into the 12-month calendar, so the 2022 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 got started five years ago.
Is 14% a decent return over the past five 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 from me aside from the initial dollars I put into it.
Reaching the Five-Year Milestone!
This is probably the most important annual review I've done since I first invested these dollars with Fundrise.
Why? Because when I put that money in, Fundrise made it very clear that I wouldn't be able to get the money back without some kind of penalty for five years.
As of April 2022, we've officially hit that five-year milestone!
Now that we're here, I've decided to redeem $1,000 of my original investment… not because I need the money for anything, but just to test the system and see if I'm actually able to get the money back. This is the moment of truth!
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 a penalty for redeeming the shares early.
This five-year penalty also applies every time I automatically reinvest my dividend payments. For example, if I reinvest a dividend at year three, I have to wait five years from the date that those dollars went in to redeem those shares. So it creates this constant five-year waiting period every time new dollars go into their system.
As I found, when trying to redeem my original shares (see the video above), even when I had waited for the entire five-year holding period, it still wasn't a fast or guaranteed payout. I still had to wait three months for them to even review my request, let alone wire me the funds.
At the time of this writing, I'm still not sure if/when I'll actually get my $1,000 request back in my bank account, but I'm hoping to see it sometime in July or August of 2022.
When you compare this lack of liquidity with the stock market, Fundrise starts to look a little 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, like 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
Now that I'm done complaining about this five-year holding period and getting my money back, it's worth noting that Fundrise has added a new type of investor plan called the “Starter.”
Why is this noteworthy? Because with this new account type, 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 kind of a big deal because there are a lot of investors who don't have $1,000 to get started with and/or they don't wait to wait for five years like I had to. If you have either of those objections, this new plan should provide a good solution to that.
Of course, there are some limitations and drawbacks to the Starter plan as well, as explained here.
If you do 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 the growth of my investment.