Thinking about investing in private equity real estate? Real estate is a great way to diversify your portfolio and add a solid long term asset to your portfolio allocation. Most investors choose REITs as a simple way to earn passive income from residential and commercial properties.
In fact, REITs have outperformed every single asset class over the long term due to the fact that there is a fixed amount of land on earth and real estate becomes more valuable over time.
Here's a chart from 1996 to 2005 showing how REITs led all other asset classes including stocks, bonds & gold:
Real estate has several advantages over stocks in the long term:
- Lower volatility due to less liquidity
- Land is finite while stocks can become diluted due to poor management or too many shares outstanding
- People always need a place to work and live so demand remains strong no matter what's going on in the economy
- Real Estate favors a long term outlook that normally outperforms short term behavior
I own a few REIT stocks like Realty Income (NYSE: O) and Washington Prime Group (NYSE: WPG) but I wanted to gain exposure to the private real estate sector through the power of crowdfunding.
In the past, only accredited and high net worth investors gained access to profitable real estate deals. You needed lots of capital & financing to take advantage of real estate selling at a discount.
That's until real estate crowdfunding changed the game forever. Instead of personally raising millions of dollars to purchase an apartment complex, I can pool my resources with thousands of other investors and own a small slice of the property. Now, anybody with a couple hundred dollars can build a private equity real estate portfolio over time.
Fundrise: My Favorite Real Estate Crowdfunding Platform
Enter Fundrise. Fundrise allows non-accredited investors to buy private owned real estate with just $500.
The company was founded in 2012 and currently has over 500,000 members on their platform.
I personally know the CEO of Fundrise, Ben Miller, because I went to elementary school with his younger brother. He is a talented, driven individual who created a fantastic solution to the lack of real estate investment opportunities for the average joe.
Being able to invest in private equity real estate is extremely empowering and financially intelligent strategy.
Since launching in 2012, Fundrise has returned over $60 million dollars to its investors. Notice the exponential growth of the graph below as more people sign up:
If you're an income investor, Fundrise is a smart alternative to owning publicly traded real estate ETFs due to the higher yield and lower cost.
How Does Fundrise Work?
First, you create a Fundrise account then choose between 3 different plans:
- Starter Plan: Get started with only $500
- Core Plan: INvest between $1,000 and $10,000
- Advanced Plan: Invest $10,000 to unlock the most REITs and highest returns
I got started with the $500 plan but quickly upgraded to the core account by adding an additional $500 less than 1 week later. My total initial investment was $1,000.
Next, you choose between 3 investment strategies:
- Supplemental income: Focuses more on dividends and less on capital gains
- Balanced: a balanced mix of dividends and capital gains
- Aggressive Growth: Focuses more on capital gains and less on dividends.
I choose the balanced investment portfolio and so far the results are pretty good.
Fundrise Portfolio Performance after 4 Months
So far, my portfolio has returned $19.34. I'm up almost 2% since I joined.
One of the nice things about Fundrise is the slow, steady approach to investing. I don't have to constantly check my portfolio or worry about fluctuating stock tickers.
Sometimes, owning stocks can be stressful when prices are falling quickly.
Fundrise removes a lot of worry and anxiety from my life. It's a simpler, more passive way to invest in real estate.
I'm happy to be up 2% and plan to add more money to my portfolio heading into 2020. After 4 months using the platform, I can safely recommend them as a good real estate crowdfunding platform.
Sign up for Fundrise Now (aff link)