I have over 50K with both fundrise.com and realtymogul.com and would consider investing more with both of them.
I also like peerstreet.com as an alternative to lendingclub. I have been slowly draining all my money from lendingclub over the last few years. Returns are simply too low for the risk you take on. Also, with peerstreet your P2P loans are backed by real assets which can be seized and sold to recover your principal if the borrower defaults.
Better than all of these are stock market index funds, which are over 50% of my portfolio.
Any questions? Ask me anything.
If you prefer a book The Simple Path to Wealth by JL Collins is pretty good.
Who handles this, and who is responsible for the legal bills?
Only after they go through a full credit cycle from boom to bust will you know how well they have managed risk and leverage. If they are transparent enough for you to be able to do the due diligence on their assets and leverage (and you have the expertise) you should probably wait and see how they do during the next recession.
I would also suggest you ask the question why would you would invest in them as opposed to using more traditional REIT or investing in real estate yourself if you are so inclined. Is it because you are expecting a greater long term return and you think they might be able to provide it? Again, I would wait and see how they do in the next recession (or credit crisis) to get more realistic view of their long term return profile.
Once my money is paid back, or whatever, I will not put any money into them again, or for that matter, any other realty fund either.
Like baccredited said about RealtyShares, there is a big problem of total lack of transparency. Another problem is that the majority of loans get extended. So, in my case, where I put in 50k, thinking the loan matures in 12 months, so I should get it back then. Well, after those 12 months pass, suddenly the loan was extended for another 12 months.
Furthermore, I actually talked to them about borrowing money for property I wanted to buy. The interest rates they wanted were ridiculous and I'm not really sure how anyone can make a profit borrowing through them.
If I wanted to put it into real estate, and couldn't buy my own, I would put money into the Vanguard REIT funds, because, while there are issues there too, at least your money is liquid, and it's Vanguard. (or Fidelity or Schwab would be fine too).
Lastly, the real place to put funds is into balanced index funds. That's where most of my savings are anyways. This was a trial that I personally wasn't very happy with.
Where to start? I'll just fire off some thoughts as they come to mind. Real estate is a long term asset. It is complicated and everyone is different, like your apps, but long term. For example, you could make returns look better by using short term loans (where interest rates could rise). A rise in rates would expose this term structure imbalance/risk. On the other hand, single family production compared to population growth looks good (opposite of when real estate crashed in 2007 or so), so housing looks good generally (every market is different). Retail is getting crushed by Amazon, etc. Office is hard to analyze as it is expensive to replace tenants. Industrial can be made to look good by building more office space in it, but then getting crushed if that tenant leaves. Oh, and winning buyers of commercial real estate have to make the most aggressive assumptions in their models. Every buyer has basically the same information.
Good luck out there people!
Some gambling is fun as long as you don't bet the family savings.
Agree with @baccredited re LendingClub — returns have shriveled to nothing for me; I've also been draining funds from them. FWIW got lucky this year with great YTD returns on emerging markets and international mutual funds.
https://www.financialsamurai.com/realtyshares-review-real-es...
http://nomadcapitalist.com/2015/11/04/my-review-of-realtysha...
Would that have happened to individual investments at Realtyshares/Fundrise/Realtymogul had they been around at the time? Doubtful.
This is not possible with Realtyshares at least. You have no way to sell your holding. You just have to wait it out.
In no way could I imagine you would have had the option to liquidated those shares for pre-recession prices. Without that option, you were probably stuck holding the shares or selling for a similar loss. So what's the advantage again?
I didn't say there was one. I invest in real estate because it has historically strong returns and is not 100% correlated with the stock market. That is very different from an 'advantage'.
Hang on. Are you claiming the real estate market's collapse wouldn't have affected stuff like Realtyshares? How so?
REITs got crushed because the underlying real estate got crushed. As did the rest of the economy.
Some impact sure, but let's take an average Fundrise investment. They buy an apartment complex for $20 million and it is at 90% occupancy. They plan to sell it after holding for 10 yrs. If the market was terrible at that time they could hold it a bit longer, and in the interim it is still at 90% occupancy and generating income.
The big difference is you get to choose to sell or not with a REIT but not with Fundrise.
(not to mention occupancy and rental rates are affected during a housing crash)
Yes, VGSIX dropped to a third of its original value in six months in 2008. But, those same shares have increased 40% in the past 10 years.
If you had used a vehicle like Realtyshares/Fundrise/Realtymogul there is a good chance that the specific property you invested in would have gone belly up. Your investment today would be zero.
The diversification that a product like VGSIX provides insulates you from the specific risk of an individual investment.
With REITs, there is typically no leverage and the dividends are taxed as ordinary income. If you invest in real estate directly, you can borrow at low rates and the tax treatment is better through deductions, depreciation, 1031 exchange, etc.
Often with a strong commercial real estate project you can show taxable losses but still get positive cash flow. Why? Because of generous IRS depreciation treatment of the improvements. Then, when you get to the end of the investment and you can sell it, you can just defer the capital gains taxes indefinitely by using a 1031 exchange. This can be done until you die, when your heirs will get your property with a "Stepped up basis", effectively eliminating the capital gains tax altogether.
You can't get this with REITS. Doesn't matter if they are publicly traded, non-traded, private, or the new fad eREITS.
The question wasn't "why is investing directly in real estate better than REITs?" it was not "why are eREITs better than a diversified REIT mutual fund or ETF?"
However, the tax angle is interesting.
How easy is it to diversify with real estate syndication? Or so called real estate crowdfunding - which I assume are more or less the same thing?
you split it up over 10 loans and as long as there isn't a systematic problem like 2008-2009 just have a lower return.
if you have enough to do 10 rentals on your own well good for you. most people don't.
The Dow Jones US Residential REIT index is up 7.3% YTD and 12.20% over 1 year.
https://www.marketwatch.com/investing/index/djusrn?countryco...
I see these guys have been in business since 2012/13. The shoeshiner is one of the oft used analogy on HN. Using the same bar if these guys are getting enough traction now it means every one wants in on the sky rocketing realty prices. Though it is difficult to predict when the issues, if any, might happen.
The best and easiest thing to do is to invest in index funds.
If you really want, invest what you can afford to lose.