Fundrise Review: Is It Worth It?

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No. I hated Fundrise.

Fundrise is an investing platform allowing small investments into real estate projects. Those projects can be debt financing or equity in a project (usually meaning they’ll sell it off after developing it).

When you invest, you select your investment style: aggressive long-term returns, safe cash returns (so more about dividends and not asset appreciation), or somewhere in between.

The spirit of the platform is to make it as easy for stock investors to understand and want to take part.

Why did I not like it? Weak returns.

Why did I move from not liking it to hating it? Investment lockup.

Disclaimer Before We Continue

I have no dog in this fight.

I’m not promoting any other investing platform with this post.

I don’t hate real estate.

I like alternative investments and unusual platforms.

This is simply my experience, my opinion, and not proper advice (or else you’d have paid me for this post).

And if anyone wants to sue me, please do. It would be excellent PR for this blog.

You Don’t Choose Your Investments

I invested $1,000 into the platform as a test. I say “into” and not “through” because while it positions itself as a platform, you’re not choosing any of your investments.

Some people love that. They want simple diversification and that’s it.

However, there’s no option to even choose between an assortment of projects. Maybe that’s good, because it means they’re selecting projects based on their expertise and the funds are merely coming from the hoi polloi and Fundrise is just a very nicely-branded wealth manager.

Even worse than that, when I saw huge opportunities in the stock market, I thought to myself “okay, this experiment was fine, 6% retrns isn’t terrible but I’m done. Time to use this money somewhere else.”

Except now I can’t withdraw the cash. For over half a YEAR.

(This is why you only experiment with small bets you can afford to lose).

You could submit in writing your request to withdraw. I think they were trying to be cool and let people who had lost their jobs or something withdraw their funds. Hold on—what if you just think it’s a bad service? Too bad. You’re boned.

Penalty For Withdrawal

There are also weren’t any clean “exit points” for the fund. I initially thought there were certain periods where you could withdraw (maybe after a year). Instead, they just straight-up penalized you if you withdrew it early.

If you didn’t want the penalty, you could put in a request to withdraw (except your money was invested in 20+ funds, all with different end dates, so penalties seemed unavoidable).

A penalty just for wanting your money back eventually? Hard pass.

For me, facing the prospect of having my paltry $1000 eked out to me over the next 5 years or just take a penalty and withdraw it all at once (so I can actually use it for something) the choice was clear.

This took a good chunk of my money and probably left me with a sub 4% annualized return.

Even if I was getting healthy returns (15% or so), penalties like this put an incredibly acrid taste in my mouth and disincentivized me from continuing with them. I suspect they added the penalty and early withdrawal as a way to monetize people leaving their service.

When someone charges you to NOT do businesses with them, they can go f*ck themselves.

What a miss.

(Sadly I may need to self-censor some words now for SEO purposes. Ain’t that a crock of shit.)

Fundrise is just a very nicely-branded wealth manager that only invests in real estate.

You Can Get Better Returns on the Stock Market

I only dropped in $1,000 because I’m always experimenting with something.

No regrets on the experiment, but the results were telling.

Fundrise Failed to Give Strong, Uncorrelated Returns

When I like something, I tell everyone about it.

After signing up, I sent invites to a bunch of friends and family. If they signed up, then fees were waived for the first 5k either of us invested.

I also included supporting literature they created showing portfolios performed better over 5, 10, and 20-year returns when they included a 20% real estate allocation.

I suspect they did two sketchy things with this data:

  • They talked about “real estate” which is so broad (renting? flipping? buy and hold? commercial development)
  • They included only projects that succeeded (no proof of this, it’s just a guess)
  • They did not include things like advisors fees

The advisors fees are small, but the returns are hella small (as a percentage).

All in all, I was up like 100 in a year and a half? Maybe that would be good in a down market, but the stock market had literally doubled from its trough in March 2020.

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Hell, even by dumping into Bitcoin you had multiple opportunities to double your money the last couple of years.

Fundrise Just Isn’t Worth it

Their highest investment tier is $100,000 of investment. If someone is going to invest 100k, why in the world wouldn’t they want to actively manage it themselves?

At that level, if you’re seeking diversification, are managing your funds yourself (because if not, you would already have an overall asset manager), then why would you put it here?

The problems I encountered:

  • Illiquidity + Opportunity Cost
  • Poor Returns
  • Lack of selection and personal ownership

If you want to be an active real estate investor, you have two better options:

  1. Buy REITs for iliquidity
  2. Buy an actual property and develop it or rent it out for income

Fundrise is the worst of both worlds—illiquid investments that you don’t actually choose yourself.

And all for sub-standard returns.

Pass.

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