Feedback on real estate investment platform

[kmt1972]

A friend of my suggested looking into something like fundrise.com which seems to allow one to buy into a cluster of real estate assets. His idea is that bond yields are too low and stocks too volatile. Any feedback on pros and cons of such an idea ?

 

[Senator]

A friend of my suggested looking into something like fundrise.com which seems to allow one to buy into a cluster of real estate assets. His idea is that bond yields are too low and stocks too volatile. Any feedback on pros and cons of such an idea ?

Why not a REIT like O? I know nothing about Fundrise. It is interesting, although new.

 

[OldShooter]

Personally, I don't give deals like this a second look. If it really was a good deal, they wouldn't need all the hype. But, giving it a slight look, it is a REIT. One of the things they do is to originate loans on real estate. No magic there. It does look like the promoters have some real estate experience, so that's good.

The ironclad rule applies: No reward without risk. So if they are claiming superior returns, they are taking unknowns amounts of risk.There is no magic. Here is a graphic I use in my investment class:

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So I am with @Senator; if you want to buy a REIT, buy one that is proven in the market and be satisfied with the returns you are able to get. You can identify the guys who were out front investing in new things. They are the ones with arrows in their chests.

Check back with these guys after the next recession and see how things look.

 

[kmt1972]

Why not a REIT like O? I know nothing about Fundrise. It is interesting, although new.

Thanks. I guess argument is that REITs are volatile and this one is not. Of course I am suspicious that this is not the case

 

[pjigar]

I have two words for you: Don't do it.

I have been burned twice. What they project will never materialize because these kind of hyper leveraged deals are structured to make middle men rich.

 

[COcheesehead]

REITS bounce around too. The dividend helps, but they are no safe haven.

I personally think if you're going to own real estate, own real estate not a pool thereof.

There are many fixed income assets that are throwing off interest in the 4% - 9% range depending on how much risk you want to take: bond ladders, multi sector bond funds, closed end funds to name a few. Exploring those is a whole other thread. My point being that saying bond yields are low is too broad. Some bond yields are low.

 

[Another Reader]

Good deals get funded by banks or astute private investors with a lot of cash. Bad deals come to the public through these entities. I would not touch these investments.

 

[pjigar]

I do have investments in single-family and multi-family real estate but those were found personally and are profitable by far compared to the crowd-sourced deals i invested which were pie in the sky.

 

[jazz4cash]

Many say to stay away without much direct experience. It’s smart to anticipate unknown risk. I think there are some members with direct experience that will hopefully chime in. There are some old threads on here too if you can find them. I would rely on my own due diligence and tread lightly. I did look briefly into one that was a college housing project. I could’ve maybe earned 6-8% (maybe a lot more) but chose a boring muni with rock solid 4% coupon. TANSTAAFL.

 

[OldShooter]

... I think there are some members with direct experience that will hopefully chime in. ...

We already have. Posts #3, 5, 8 ... I owned residential rentals for 20+ years, have been an "accredited investor" for 30-40 years, and have looked at many of these packaged deals. IIRC I snapped on only one and it didn't turn out to be anything remarkable.

It is only stinky deals that need to be marketed the way this one is being marketed. The odds of finding a diamond are so small that due diligence is pretty much a waste of time.

 

[Another Reader]

We already have. Posts #3, 5, 8 ... I owned residential rentals for 20+ years, have been an "accredited investor" for 30-40 years, and have looked at many of these packaged deals. IIRC I snapped on only one and it didn't turn out to be anything remarkable.

It is only stinky deals that need to be marketed the way this one is being marketed. The odds of finding a diamond are so small that due diligence is pretty much a waste of time.

Yep.

I have owned residential rentals for 23 years, and was professionally involved with commercial real estate valuation for over 30 years. I have looked at a number of these deals passed on to me by others and after investigation of the properties and the numbers, was unable to recommend a single one.