Updated September 2021. Here is my (nearly) 4-year update on my experiment comparing a
Fundrise Starter Portfolio background. When I bought in, the
Vanguard REIT ETF background. The
Expenses. The Fundrise Starter Portfolio has an 0.85% annual asset management fee and a 0.15% annual investment advisory fee (1% “all-in” total). The Vanguard REIT ETF has an expense ratio of 0.12% on top, but each public REIT also has their own internal costs to manage their properties. In each case, investors are paying for real estate management, office space for those employees, etc. REITs may also use debt to increase their real estate exposure (leverage). Is the technology offered by Fundrise a more efficient way to invest in real estate?
Fundrise Portfolio updates.
- October 2017. $1,000 initial investment – 50 shares @ $10.00/share Income eREIT and 48.78 shares @ $10.25/share Growth eREIT.
- 2018. Total of $83.63 in dividend and capital gains distributions received in 2018. Based on balance of $1,117 on 12/31/18, this was a trailing 12-month yield of 7.48%.
- 2019. Total of $82.62 in dividend and capital gains distributions received in 2019. Based on balance of $1,276 on 12/31/19, this was a trailing 12-month yield of 6.47%.
- 2020. Total of $66.16 in dividend and capital gains distributions received in 2020. Based on closing price on 12/31/2020, this was a trailing 12-month yield of 5.59%.
- September 2021. Total of $40.82 in dividend and capital gains distributions received in 2021 YTD as of 7/31/2021.
- Final balance on 8/31/2021 was $1,494. (includes reinvested dividends).
Vanguard REIT ETF performance updates. I own VNQ and the mutual fund equivalent
- October 2017. $1,000 initial investment – 11.9545 shares at $83.65/share.
- 2018. Total of $3.53 in dividend and capital gains distributions per share received in 2018. Based on closing price of $74.57 on 12/31/18, this was a trailing 12-month yield of 4.73%.
- 2019. Total of $3.14 in dividend and capital gains distributions per share received in 2019. Based on closing price of $92.79 on 12/31/19, this was a trailing 12-month yield of 3.38%.
- 2020. Total of $3.33 in dividend and capital gains distributions per share received in 2020. Based on closing price of $84.94 on 12/31/20, this was a trailing 12-month yield of 3.92%.
- September 2021. Total of $1.26 in dividend and capital gains distributions received in 2021 YTD as of 7/31/2021.
- Final balance on 8/31/2021 was $1,532. (includes reinvested dividends).
Five-year time horizon. Both Fundrise and VNQ usually announce dividend distributions on a quarterly basis. Vanguard updates the NAV daily, but Fundrise only updates their NAV quarterly. Fundrise NAVs are only estimates as there is no daily market value available since they hold entire apartment complexes, office buildings, and so on (similar to your house, but with even fewer comps). Your liquidity from Fundrise is limited to quarterly windows that are not guaranteed. These are meant to be long-term investments so that they can sell at the desired time and avoid forced sales. Therefore, I plan on holding onto this investment for 5 years at the minimum. This will allow the investments to “play out” and also avoid any early redemption fees.
Commentary. After nearly 4 years, the final balances are basically tied at a 50% gain! Both turned $10,000 into $15,000 if you reinvested dividends and all other distributions. The Vanguard REIT has made a comeback after falling behind at the beginning of the pandemic. You could argue that really the Fundrise NAV simply didn’t account for what the actual pricing would be if they really had to liquidate in early or mid-2020. It could also be that VNQ will do better in good times, but worse in bad times.
This makes Fundrise similar to a rental property that looks more stable over time because you don’t get daily price quotes on your rental property. You’re really just guessing until something actually sells. Meanwhile, that physical piece of property is something you can visit and see people using (and paying rent). Here is a recent
Bottom line. I’m nearly 4 years in my buy-and-hold-and-watch experiment where I compare investing in real estate via Fundrise direct investment and the largest REIT index ETF from Vanguard. At this point, both have created roughly a 50% gain, i.e. every $10,000 invested 4 years ago would be roughly $15,000 today. I will continue to make occasional updates, but won’t make any hard conclusions until after 5+ years.
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