Fundrise advertises access
to a private market real estate portfolio. Through its website investors can choose
from plans that place funds in “eREITs,” real estate investment trusts that are
qualified under SEC Regulation A. There is a starter portfolio with a 500
dollar minimum investment, and other plans have 1,000 dollar minimums.
The
shares are illiquid. If they are redeemed within 5 years of purchase there is a
1-3% penalty. Even then, withdrawals are on a quarterly basis and can be
limited based on management’s discretion. Currently individual requests are limited to 50,000 dollars, and all requests can be no more than 1.25% of a fund’s assets,
as described on page 23 of one of funds offering circulars.
The website
advertises 8.7-12.4% historical annual returns through 2019. This is based on
dividend payments and the appreciation of the value of the real estate.
Fundrise’s Supplemental Growth, Balanced Investing, and Long Term Growth plans
intend to vary the source of returns by investing in different mixes of income
versus growth eREITs. Income eREITs intend to pay higher dividends, while
growth funds focus on the appreciation of the real estate. Below is a list of the
older eREITs and the dividends they have paid:
Fund
|
Time Period
|
Dividend
|
Offering Location
|
East Coast eREIT
|
11/1/16 – 4/30/19
|
7.64%
|
|
Heartland eREIT
|
1/1/17 – 4/30/19
|
6.66%
|
|
West Coast eREIT
|
11/1/16 – 4/30/19
|
7.29%
|
|
Income eREIT
|
1/1/16 – 5/31/19
|
9.04%
|
|
Growth eREIT
|
4/1/16 – 4/30/19
|
6.81%
|
|
Income eREIT II
|
9/16/18 – 4/30/19
|
7.07%
|
The dividends plus some appreciation of the underlying real estate would seem to support the advertised returns. There are other funds which are still starting operations and have not reported dividends in the offering circulars: Growth eREIT II, Income eREIT III, Income eREIT 2019, Growth eREIT 2019.
Fundrise gets a 1% annual fee from investments through its plans. The fee is broken down so that .85% is for management of an individual
eREIT, and .15% is for the platform and advisory services.
Fundrise
could be a reasonable choice for a long duration investment with a potentially good
return. The downsides include limited liquidity and the opportunity cost of
potentially higher returns from the stock market or other private investment
vehicle.
Scam
|
Unsafe Investment
|
Very Risky Investment
|
Disclosure: The author
has invested in a Fundrise plan but does not have any other financial or affiliate
marking relationship with the company.
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