What They Don’t Tell You – Fundrise

For those of you who are considering investing in Fundrise or just want some other thoughts about it, I’ll give you a snapshot of my experience. First off, I like Fundrise. I’ve been a member and active investor with them since mid-2016. I have a good amount invested in Income eREIT, Growth eREIT, East Coast eREIT, Heartland eREIT, West Coast eREIT, Los Angeles eFund, National eFund, Income eREIT II, Growth eREIT II, Income eREIT III funds. The great thing is, I’m invested in commercial real estate projects via eRIETs and I really don’t keep up with it all too much. Every quarter or so, I receive a nice divident payment.

What about performance?

 

Performance over the past 3 Years

Long story short, my current annual returns over the past three years have averaged 8.6% per year. Not terrible, but considering that the HPR for the SPY over the same period was 12% and even the CAGR was 9.82%, I think that I might have been able to do a bit been better. Fortunately, this was net of the 1.0% management fee.

What the problem. What are they not telling us?

 

How do You Get Your Money Back?

At first, redeeming your shares seems impossible. You will not find a link on this site that will let you get your money back. They make it nearly impossible to find this link. Luckily, it is really not that difficult and I will show you exactly where to find the link to Redeem Your Shares on Fundrise.

 

  • First

Go to your name, bring down the dropdown box, and click on the settings link.

 

  • Then

Click on the Advanced Options link under Account Settings.

 

  • Finally

Scroll all the way near the bottom of the page until you find the ‘redemption request’ link.

If you were anything like me, you would have thought that you would have to contact them directly and request your funds back.

Well, that wasn’t too bad

No, but it doesn’t have to be that difficult either. It really should be easier to locate, especially considering that I just recieved an email stating that one of my investments from 2016 just paid back successfully. So, of course, I may be considering cashing out.

So what else

Ok, so you might be aware of the upfront management fees that you have to pay. Of course, this is pretty typical with any managed investment. But what about the final redemption fees?

The assumption is that once you are ready to redeem your shares that you should receive 100% of your final value. Well, thats not exactly the case. Each investment fund has a holding period fee structure.

 

Holding Period Fee
Less than 90 days: 0%
90 days until 3 years: 3%
3 years to 4 years: 2%
4 years to 5 years: 1%
More than 5 years: 0%

 

They all very slightly, but this is the jist of it.

So…

Of course, REITS are long term investments, so you shouldn’t really be surprised that there may be a penalty for pulling funds early, however, it would be nice to know this upfront. So, after about investing in Fundrise for a little over three years and having to pull some money out because of a home improvement project, I find out that my 8% returns are closer to 5%. A big shock/realization to me and further reason why you should really study the numbers for any investments that you make. The Up Front and Post Fees!