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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nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering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.
In 2017, I made a video and blog post explaining how Fundrise works.
As part of this review, 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 annual video updates showing the dividends 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 inform you of this investment strategy and the unique fact that you don’t need to be an accredited investor to participate.
What Is Fundrise?
Fundrise is a real estate investing platform that allows investors to invest smaller amounts of money into not a single property, but into “pools” of real estate.
It makes real estate investing accessible to a broader audience by allowing investors to contribute smaller amounts than traditional real estate investments.
People invest with Fundrise mainly for convenience, lower entry costs, and the potential to earn passive income through real estate. Real estate is often considered a stable investment compared to more volatile markets like stocks.
The First Year With Zero Principal Left
After withdrawing my original $1,000 principal investment in 2022, this is the second year I've seen how the remaining re-invested dividends continue to grow (or shrink) on their own.
Of course, my investment performance doesn’t determine YOUR returns if you decide to invest with Fundrise. Every eREIT performs differently, and the performance will vary each year.
Even so, this review will offer insights into how Fundrise performs as a company, specifically compared to other investment options like the stock market, mutual funds, or similar websites.
It's a lot of fun to see the actual returns on this investment and not just a theoretical picture of what's supposed to happen.
Fundrise Performance Update for 2024
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 $752.78 of “value” is left in the account. This number would be substantially lower if I didn't reinvest these dividends.
As of April 22, 2024, the leftover funds after withdrawing my original $1,000 investment (with all dividends automatically reinvested) haven't done particularly well.
Runaway inflation, followed by continued higher interest rates, has taken its toll on the U.S. real estate market, and it shows in its performance over the past year. This is the second year I've ever seen any of these numbers go backward, and I wouldn't be surprised if this trend continues in the short term.
2021 was the best year at 20.4%, and 2023 was the worst at (12.6%). So far, 2024 seems to be on a slightly better track. I doubt it will be a stellar year, but we won't know until the year ends.
The screenshots above were taken on April 22, 2024 (a few days after I recorded the video above). April 22 isn't even a full four months into the 12-month calendar, which is part of why the 2024 year-to-date earnings look disproportionately smaller compared to the previous years.
Is 71.3% a decent return over the past seven years?
Considering I spent no time or energy stressing over property managers, tenants, contractors, lenders, or anything else, I can't say I'm disappointed.
I certainly could have made much more money over this time if I had put this money into my land investing business, for instance, but the advantage of something like Fundrise is that it's passive.
The more lucrative real estate investments typically require much more thought, effort, and risk, whereas something like Fundrise. At the same time, it has its share of risk, too (as we saw in 2023 alone), and requires absolutely no time or energy from me, which is a nice advantage.
Fundrise's appeal isn't in the high returns. The appeal is the passive nature of this investment and the fact that it requires nothing besides the initial dollars I put into it.
RELATED: What Is “Passive Income” Exactly?
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.
Should You Invest With Fundrise?
I'm not here to give you investment advice; I'm here to share my Fundrise investment story so you can understand the real-world consequences (for better or worse) of investing in these kinds of eREITs.
If you're wondering whether this is a good time to start with Fundrise, I think there is something to be said for entering something like this during a down cycle, which we seem to be in the middle of and possibly coming out of. Again, it's difficult to say for sure at the time of this writing).
Fundrise seems well aware of where things are at and where they seem to be going. You can find this in their Newsfeed, where they regularly post their findings, research, and explain how things are going.
It's important to remember that while Fundrise offers an accessible and comparatively low-effort way to dip into real estate investing, it's not without its risks and limitations, particularly in liquidity and fluctuating returns.
Whether you invest with Fundrise or not, make sure it aligns with your financial goals and risk tolerance.
Stay curious, stay informed, and, as always, invest wisely.
