Today is the 54th edition of our periodic guest post series called 10 Questions. I have a list of 17 questions we pose to fellow financial bloggers, and they are free to pick and choose 10 or answer all of them. Let me know if you would like to be featured in a future edition of 10 Questions.
I love investing in real estate, but I’ve been wildly unsuccessful in my home state of Colorado. In my three years of living in the Rocky Mountain State, I’ve done exactly zero deals. Zip. Nada. Nothing. The real estate market is red hot and investors are paying Bluefin tuna prices for Chicken of the Sea returns. No thank you.
I’d been looking for other ways to invest in real estate and REITs (real estate investment trust) have been at the top of my list. A REIT is a company that owns or finances income producing real estate. By U.S. law, a REIT must pay out at least 90% of its income to shareholders.
If you have any doubt about REITs as an investment, know that they have been performing very, very well:
Going back to the year 2000, REITs are the best performing asset class in the market, according to JP Morgan, up 12% on an average annual basis. Compare this with the runner-up, high-yield bonds, at just under 8% and large cap US stocks at just over 4% and it’s weird that people generally don’t focus on them. –Joshua Brown (Reformed Broker)
I recently learned of a new REIT offering through a company called Fundrise*. Fundrise’s Income eREIT intrigued me for several reasons:
- Only $1,000 minimum investment
- Accredited investor status isn’t required
- Investors only pay asset management fees if the REIT returns 15% annualized
The Fundrise eREIT is a little different from the REITs you may be familiar with:
I decided to throw some money at a Fundrise account as an experiment. So far, I like the results:
10% is wonderful, but the company is young. Please do your own research before investing money. Consider:
- This investment is less liquid than a typical REIT (quarterly with limitations) and you stand to lose money if a borrower defaults
- The current amount of holdings is small (less than 20), so one default could hurt
- I like to see how an investment does though both good and bad economic cycles. Fundrise hasn’t been around for long and while I like what I’ve seen so far, this is still very much an experiment.
I do like the idea of investing with experts though. The folks at Fundrise have the resources to thoroughly vet a property. I’m also very bullish on investing in real estate long term. If Fundrise continues its upward trajectory, I’ll consider throwing more money at them beyond my current $3,000.
Today’s 10 Questions come to us from Ben Miller, the CEO of Fundrise. I love his answer to the best investment tool question. Read on to learn more about Fundrise and Ben’s favorite beer (thanks for supporting the Boulder County economy!).
What do you do?
I run Fundrise, an online real estate investment platform that uses technology to allow the public to invest in diversified pools of commercial real estate in the most direct, low-cost way possible. Our mission is to realize the power of the Internet to revolutionize how investing works.
We believe our model is superior to any other publicly available real estate investment today but recognize that ultimately our performance will be the measure of whether or not that is true. Last year, Fundrise investors earned an average annual return of approximately 13%!
Tell me how Fundrise is going to change the world.
In ten years, I believe everyone I know will be investing in commercial real estate online — and own the buildings around them. Fundamentally, commercial real estate is a solid, long-term investment that has outperformed every other asset class for decades. However, high fees, middlemen, and fat inefficiencies reduce the returns to individuals. We believe we can use technology to create a real alternative to Wall Street, by allowing people to use the Internet to invest directly in the built environment.
1500 Days is about early retirement. Do you have early retirement dreams? At what age do you think you will retire?
Work is my passion. My retirement dreams entail privatizing a supercollider and building an open source software that makes government work again. Like my father before me, I am a solution looking for a problem.
When you are 90 and look back on your life, what do you hope you have accomplished?
The job of each generation is to push the envelope just a little further — which is about more than just work, investment, or technology. During the 20th Century, fascism and communism threatened to roll back 1,000 years of human progress. I hope to do my small part to push back the darkness.
What is the best money management or investment tool you have come across?
Failure. Once something has really gone wrong for you, then you learn the skeptical mindset of a value investor.
Did your parents teach you about money as a kid? How so?
Yes, I remember my mother crying the night of Black Monday in 1987. We lived alone with my sister and I’ll never forget when she turned to me, at age 12, for consideration and solace. It helped make me the sober investor I am now.
What is your favorite style of beer – and what is your favorite beer in that style?
I’ve always liked strong hops like Dale’s Pale Ale.
What is the best thing you’ve read lately.
Three Body Problem by Cixin Liu. It’s the most popular science fiction novel in China and President Obama read it over the winter holiday. There’s a lot in it.
What do you do for exercise?
I play 11v11 full field soccer. Half the team also works at Fundrise. Our goalie/real estate originator played for the Chicago Fire. Our CTO is the sweeper. Our COO is the centermid, of course.
What do you think about the current state of the overall economy?
I understand why the Federal Reserve and government had to step in to save the economy during the 2008 crisis. At that time, they explicitly chose a long-term balance sheet recession over collapse. However, sustained government intervention in markets will perpetuate greater and greater imbalances. I learned in the Great Recession that an overwhelming macroeconomic shock can swamp even the best micro strategies. Nassim Taleb has it spot on in the book Antifragile.
Thanks Ben for your answers today! No one is pulling for Fundrise more than I am (well, except for you). The idea of real estate investing without tenant screening, holes in drywall and silly excuses for late payments is very appealing…
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