As a supporter of Fundrise since 2017, here is the latest Fundrise performance review for 2021. This post will go into detail highlighting Fundrise returns, latest assets under management, and their real estate outlook for 2022 and beyond.
Fundrise is one of the leading real estate investing platforms today. It is vertically integrated and began in 2012 when the 2012 JOBS Act passed.
Fundrise Performance Review 2021: Conversation With The CEO
I had an hour-long video chat with Ben Miller, CEO, and Co-Founder of Fundrise about their 2021 results and outlook for 2022. During our conversation we reviewed the overall performance for 2021.
2021 was an outstanding year for Fundrise investors. Below are the Fundrise 2021 returns of client accounts by investment plan objective.
Income: +17.98%
Balanced: 23.18%
Growth: 25.12%
Overall: 22.99%
Further, their new Flagship Interval Fund was up 28.1% after not even a full year of operation. If the Fundrise Interval Fund was in operation all of 2021, it would have returned slightly over 40%!
Why Was Fundrise 2021 Performance So Strong?
Ben Miller attributed the strength of Fundrise’s 2021 performance to the following four reasons:
1) Making strategic investments in multi-family, single-family, and build-to-rent properties in 2020
2) Net migration to lower-cost Sunbelt metro areas
3) The home replaced the traditional office
4) Inflation driving outsized rent growth vs. pre-pandemic
Inflation came in at 7% in 2021, which acted as a big tailwind for rent and property price increases. Further, more people are staying at home due to the pandemic. As a result, more people want to buy homes and larger homes with offices and more space.
Finally, the migration trend towards the Sunbelt/Heartland is something I’ve written about since 2016. The pandemic served to accelerated the migration to lower-cost areas of the country where workers can work from home.
Below is a case study of what happened to one of Fundrise’s properties in 2021. Fundrise acquired a 376-unit luxury apartment in Las Vegas before 2021. It saw its average market rent rise by 19.8% and its value rise by 24.9%.
Fundrise Assets Under Management And Number Of Investors
For 2021, Fundrise had its best year of operation in its history. At the end of 2021, Fundrise managed over $2.1 billion in assets under management. Fundrise also ended the year with over 210,000 investors on the platform.
Back in 1Q2021, when Fundrise was featured by the Wall Street Journal for investing in a Texas housing division, it had around $1 billion in AUM and 150,000 clients. In other words, Fundrise’s growth really accelerated.
With continue real estate appreciation and awareness, I wouldn’t be surprised to see Fundrise grow their assets under management to over $2.5 billion by 2023.
Fundrise Real Estate Outlook For 2022
Ben and I discussed at length a high inflation, low-interest rate environment, which is the goldilocks scenario for real estate. Inflation helps push real estate values and rents higher, while low-interest rates act as a tailwind for demand. Even though mortgage rates have come up, the real rates are still negative.
Where Ben’s view differs from consensus is that he believes inflation will remain elevated in 2022 at 6% or higher. Whereas consensus believes inflation will roll over by the second half of the year closer to around 3-4%.
If inflation does indeed remain elevated, then rate hikes will continue aggressively all year, eventually, slowing down demand for housing. But this mainly happens if the bond market agrees and sells off, pushing the 10-year bond much higher than 2%.
Let’s say inflation comes in at 8% for 2022 up from 7% in 2021 and the average 30-year fixed mortgage rate climbs to 4.25% from 3.5% currently. Is this bad or good? If corporate earnings continue to grow and the labor market stays strong, this is probably a net positive since borrowers still can borrow at a negative real mortgage rate of 3.75%.
Staying Positive On Real Estate In 2022
Ben continues to be very measured in his outlook. He’s constantly thinking about what could go wrong, which is exactly how people with great responsibility should think. I prefer this demeanor than a CEO who is always bullish and super optimistic. Having a more cautious mindset helps with pre-mortem planning – to preserve capital on the downside and take advantage of upside opportunities.
I think Ben’s views come from the experience he has with his father, Herb Miller. Herb and his company, Western Development Corp, developed over 20 million square feet of retail, commercial, and residential space since the 1980s. Therefore, he’s seen it all.
The tug-of-war between inflation and interest rates is interesting to observe. My assumption is that real estate appreciation will slow to 8% – 10% in 2022 from 16% – 19% in 2021. But 8% – 10% is still much higher than the historical average of ~4%.
With stocks off to a rock start in 2022, real estate is one of the most attractive asset classes today. More people will and should focus on capital preservation after a huge bull market since 2009. Real estate is an attractive asset class because it’s more stable, provides utility, and generates income.
Here are the latest Fundrise returns. Notice the strong outperformance during stock bear markets.
Fundrise Should Continue To Gain Ground In 2022 And Beyond
What I really like about Fundrise is that 2022 marks 10 years of operating experience. Further, Fundrise is a vertically integrated real estate investment platform. As a result, Fundrise is more efficient and can afford to charge only a 1% management fee total.
I’m thankful Ben spent an hour of his time going through 2021 results and sharing his views for 2022 and beyond. As someone with a lot of real estate holdings in expensive San Francisco, Fundrise is a great solution for me to diversify my real estate assets and earn more money passively.
If you’re interested in investing in private real estate, you can check out Fundrise here. The longer the track record and the larger Fundrise grows, usually the better deals it can procure for its clients.
