Fundrise is one of the leading real estate crowdfunding platforms today. Founded in 2012, they are my favorite real estate crowdfunding platform for non-accredited investors. Fundrise has consistently been a pioneer in the space with its eREIT products and Opportunity Funds.
In 2018, Fundrise returned 9.11% net of fees, a significant 14% outperformance over the Vanguard Total Stock Market ETF, and a 15% outperformance versus the Vanguard Real Estate ETF.
Fundrise also outperformed the S&P 500 index in 2018, which was down 6.4%. All-in, Fundrise had a banner year, and they’ve once again shown the power of their platform as they carefully vet only the best deals with rigorous underwriting standards for investors to consider.
Fundrise Returns Vs. Public Index Funds And Public REITs
The stock market was extremely volatile in 2018, correcting by almost 20% in the fourth quarter alone after a 10% correction in February. It’s a curious case where stocks tend to take the stairs up, but the elevator down.
In comparison, Fundrise investments are much more stable because they are based off a real asset that generates rental income.
During the 2009-2010 financial crisis, my property rents remained unchanged because my tenants signed a one year lease.
By the time the financial crisis was over, my tenants were on month-to-month contracts. Since they didn’t lose their jobs, my rental income continued as usual until I raised the rent by 5% – 8% in 2011.
Compare this steady comparison to a 35% – 40% correction in the S&P 500 and a massive cutting of dividends, my real estate portfolio provided a much more stable and stress free investment.
From the beginning, Fundrise has leveraged technology to enable investors to purchase real assets directly, at lower costs, closer to true intrinsic values, and as a result generate higher potential yields.
Fundrise Five-Year Net Returns
The Fundrise platform has achieved, on average, a 10.79% net annualized return over the past five years, more than 2.75% higher than either the Vanguard Total Stock Market ETF or the Vanguard Real Estate ETF during the same time period.
See the chart below for more details.
As you can see from the chart, Fundrise returns are much more stable than returns from public stocks and public REITs. If you want more peace of mind, investing in Fundrise over the past five years has helped.
As we all know, past performance is not indicative of future results. Real estate inventory is beginning to increase around the country. Further, there is still a lot of capital in the market chasing deals, which is propping up asset prices and driving down yields.
It will be up to the Fundrise asset management team to highlight and invest in properties at a reasonable price in a more difficult return situation. Here is another chart of Fundrise’s performance versus the stock market and Vanguard Real Estate ETF.
If we move to 2019 returns, Fundrise underperformed the S&P 500 because the S&P 500 went up a significant amount. However, Fundrise still returned a stable 9.47%. If you don’t like volatility, Fundrise is a good option. 2020 is likely going to turn out relatively well for Fundrise too.
By generating a strong 6-year return, Fundrise has taken a huge step forward in proving out what they have believed for so long: that a model of individuals diversifying into real estate through a direct, low-cost technology platform is a superior investment alternative to owning only publicly traded stocks and bonds.
Please note that publicly-traded REITs were MORE volatile (declined more) when stocks plummeted in March 2020. Getting real estate diversification through REITs doesn’t work, at least not recently.
Invest In Only High Quality Investments
I’m bullish on the heartland of America. I believe there will be a multi-decade migration trend towards the heartland due to the desire for both companies and employees to lower costs.
For example, Google announced on February 13, 2019 that the company is spending $13 billion to build new data centers and offices in Nevada, Ohio, Texas, and Nebraska.
This is the first time the company will have infrastructure locations in those states. The company is also doubling its workforce in Virginia, providing greater access to Washington, D.C., with a new office and more data center space, and expanding its New York campus at Hudson Square.
There is no reason that expensive cities such as San Francisco, Seattle, Los Angeles, and New York City should have a monopoly on tech innovation. When you’ve got to pay $4,500 a month to rent a two bedroom apartment, living in San Francisco and paying San Francisco wages becomes uncompetitive.
I personally sold my expensive San Francisco rental property for 30X annual rent ($2,740,000) in 2017 and reinvested $550,000 of the $1,800,000 in proceeds in real estate crowdfunding.
As a relatively new father, I don’t have the time or the patience to manage physical real estate anymore. I’d much rather earn rental income passively in a much more diverse portfolio instead.
With the Fed hiking rates and unloading their balance sheets, growth is expected to slow in the US economy. Therefore, I highly encourage investors to focus on real estate investments with low valuations and high net rental yields. Most of these investments I’ve found are in the heartland.
Fundrise Is One Of The Best
If you’re looking for alternative investments away from stocks, bonds and public REITs, it’s worth taking a look at Fundrise. It’s free to sign up and explore.
Fundrise has democratized access to commercial real estate that was once only accessible to ultra high net worth individuals or institutional investors. Take advantage of innovation and technology.