The ROI of Fundrise

by Mark Wellborn

The ROI of Fundrise: Figure 1
Inside Maketto. Courtesy of Maketto.

Fundrise launched in the summer of 2012 with a fairly focused mission. The online platform would allow the everyday man and woman to invest in local real estate projects for as little as $100, opportunities long limited to larger, institutional investors.

"There should be a model where neighborhoods come together and actually own commercial real estate," Founder Ben Miller told UrbanTurf shortly before Fundrise launched. "They need to pool capital and take power into their own hands. If they are right, they profit from it."

The first project open to Fundrise investors was Maketto, the now-open Asian market concept on DC's H Street Corridor (map) that combines retail, a coffeeshop, and a restaurant on three floors.

Since the Maketto offering, Fundrise has had little trouble attracting investors. In 2013, they raised over $500,000 for a project in Shaw in 24 hours. When Fundrise launched its million-dollar eREIT last year, it sold out within hours and a long waitlist quickly formed. Even UrbanTurf staff got in on the action: our former reporter invested $100 in a project.

The popularity of Fundrise bodes well for its future, but four years after launching, is it making money for investors?

Fundrise projects investors will receive an 8 percent return, distributed quarterly in the first five years of their investment. At the end of year five, the investment principal is projected to be returned to investors. We spoke with two Fundrise investors -- one small and one big -- to see how their investments have fared over the last few years.

The ROI of Fundrise: Figure 2
The Fundrise investment opportunity in Shaw.

Micah Lubens -- Washington, DC -- Three Investments

Lubens, a 28 year-old senior project manager, invested $100 in Maketto when Fundrise launched. He has been paid $6.50 in four distributions since his original investment. In 2013, he purchased six shares in 906 H Street NE at $100 a share, and has received three distributions for $12 apiece. Last December, he purchased one share in the eREIT.

While Lubens had doubts about whether Maketto would come to fruition and grew frustrated with the lack of communication from Fundrise as the project progressed, he is generally positive about his investment experience.

"I've continued to invest in Fundrise because I believe in the mission of leveling the playing field for real estate investment," Lubens wrote to UrbanTurf. "It's also allowed me to learn a lot more about real estate and investing. Before a month or two ago, I didn't even know what the acronym REIT stood for, so this has been a good opportunity to educate myself."

Mesh Lakhani -- New York -- 16 Investments

The founder of Future Investor, Lakhani has invested $249,000 in sixteen Fundrise deals. He invests between $10,000 and $25,000 depending on the deal, and prefers short-term debt deals that pay out quarterly. Lakhani has been paid out $16,500 so far, which includes five deals that have already returned principal having closed earlier than their anticipated maturity date.

"Some deals that are active don't pay out until maturity, so [my returns so far] don't reflect the actual percentage return on investments," Lakhani told UrbanTurf. "I've calculated annual return on my investments to be 11-12 percent."

Lakhani, who is 31 and handles his family's private investments, started investing with Fundrise in 2014. In addition to DC, he has invested in deals in Brooklyn, Seattle and Los Angeles.

"I wanted exposure to direct real estate," Lahkani said. "It made more sense to diversify across multiple assets, where due diligence was performed by experts versus buying one property myself and having to manage it."

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This article originally published at https://dc.urbanturf.com/articles/blog/the_roi_of_fundrise/10835

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