The Fundrise Experiment
- What is Fundrise? An online real estate company that let’s the average joe get in on real estate that historically have been only offered to accredited investors. They do this by pooling funds through the Fundrise platform.
- Fundrise recommends the money you hope to invest should not constitute more than 10% of your total investments–really it should be more like 5% or less.
- Why Fundrise and the income eREIT? Two fold:
- (1) For a live experiment with real money–Fundrise has not gone through a recession, nor an economy with high unemployment rates. So this money will cap-out at around 20-25k.
- (2) I’ve always wanted to try and develop my own personal endowment for a particular use–enter The Financial Bishop SBL Conference Fund!
- eREIT requires a minimum of $1,000, though they have a starter fund that only requires $500.
If you’re like me, you might have wanted to try your hand at Real Estate investing but after hearing too many horror stories you’ve been reluctant to pull the trigger on it.
Enter Fundrise. For the integrity of this long-term experiment I don’t have any affiliate links and I I’m not compensated in anyway from Fundrise. So what is Fundrise? It’s an online real estate company that let’s the average Joe get in on real estate that historically have been only offered to accredited investors. They do this by pooling funds through the Fundrise platform.
I first heard about Fundrise from a good friend. Over the years I’d check in with my friend to see how his Fundrise experiment was going. He finally convinced me that I should give it a try. I read up on it and thought it would be a great experiment to share on the blog.
Why Fundrise? Two fold:
(1) For a live experiment with real money in the real world with real tax implications. Also, Fundrise has not gone through a recession, nor an economy with high unemployment rates. So this money will cap-out at around 20-25k and act as an experiment for all to see.
(2) I’ve always wanted to try and develop my own personal endowment for a particular use–enter The Financial Bishop SBL Conference Fund! The hope is to have the Fundrise investments spit out enough dividends in a given year to pay for my trip to the annual SBL Conference.
Since I need annual cash-flow I decided the Supplemental Income eREIT was right for me. Fundrise estimates a solid 8.3%–9.1% dividend yield, plus a 0.7%–1.5% appreciation for a total of 8.9%-10.6% annual return (net of fees!). Now this could all be sunshine up the ol’ kilt, but that’s what this experiment is for. Let’s see if it can deliver.
Some things to keep in mind: we need to assume that inflation will eat up ~3% of that return annually on average over the long haul. So we’re down to 5.9%–7.6%. Since all that dividend income shows up on an annual Form 1099-DIV, you’re paying normal income taxes on that money. So your milage may vary depending on your tax bracket. Lucky (or unlucky?) we’re in the 12% tax bracket range.
The back of the envelope math on this is as follows: if we had 20k pulling in say 6% yield that’s $1,200 before taxes. Let’s assume worst case scenario of paying an actual 12% on the $1,200 income. Thus, we subtract out 12% which leaves us with $1,056 for the SBL Conference. If Fundrise can produce this kind of cash-flow for me, at the same time addressing inflation, I’ll have the SBL Conference Endowment that I’ve always wanted!
How long will it take?
Well, at $1,000 per month at ~6% annual yield it will take me about 1.58 years to reach $20,000 and 1.91 years to reach $25,000. I’ll keep y’all posted as we take this journey together.
Signing up took minutes–I literally did it on my 15 minute break at work. Fundrise recommends the money you hope to invest should not constitute more than 10% of your total investments–really I recommend 5% or less. This all could go belly up in the next recession so you don’t want to hurt your future financial self by taking undue risk.
Again, I chose the Supplemental Income eREIT because I need cash-flow in the form of quarterly dividends.
After linking my bank account and agreeing to the minimum of $1,000 to start the eREIT, I was done:
After the funds post I’ll set up automatic monthly investment of $1,000 to come out the same day as the rest of my investments.
As the SBL Conference Endowment grows I’ll post updates to keep the blog updated.
Let the experiment begin!