Fundrise: Why I’m Investing $100 Monthly in Fundrise

I am determined as ever to put this cash to work. Sitting on the sideline is not an option for this investor. Therefore, in addition to researching individual stocks to buy using our Dividend Stock Screener and Vangaurd ETFs, I will also review my Fundrise investment to determine if I should add to my current investment. We will leave no stone unturned in our journey to financial freedom.

In 2019, I opened an account at Fundrise. Throughout 2019, I added to my investment. However, I have not added to my position in the current calendar year. The booming stock market and lack of undervalued dividend stocks has energized me to once again revist the online real estate crowdfunding platform for a potential investment opportunity. Is now the time to add to invest in Fundrise?

The remainder of this article will discuss the following. By the end, hopefully you will understand the rationale behind my decision and stategy to help increase my passive income by investing in Fundrise.

The Current Stock Market Environment
Fundrise’s Performance During the Pandemic
The Performance of my Current Fundrise Investment
My Fundrise Investment Strategy for 2020 & Beyond

The Record Setting Stock Market

Finding an undervalued dividend stock is becoming increasingly difficult. In fact, this is a trend have covered extensively on our website. Despite a pandemic, high unemployment, and other economic indicators, the stock market continues to soar. The stock market continues to climb, setting new records on a daily basis. Headlines like the one below are the norm nowadays.

Or even Tweets like this one:

ANOTHER Record High in the stock market. 4 Days this week. 4 Days of new heights.

Just, incredible.

— Dividend Diplomats (@DvdndDiplomats) August 28, 2020

To demonstrate the S&P 500’s crazy valuation, look no further than the stock market’s P/E Ratio. Lanny stated in a recent article that the S&P 500’s P/E Ratio is currently near 30X. That is an INSANE level. The table below is from the Wall Street Journal. Look at a difference a year makes.

Despite the climbing stock market, we continue to work as hard as ever to find investment opportunities. We continue to publish undervalued dividend stock watch lists. Heck, we are even investing in Vanguard ETFs on a regular basis. The additional investments address one key theme: we are trying to put our capital to work and purchase income producing assets. Our cash is losing value in our savings accounts in this low interest rate environment. Still, it just sucks that there aren’t that many great investment opportunties out there in the stock market at this moment.

Read: Why I’m Investing $500 Weekly in Vanguard ETFs

Read: Cash is Dead – Why the Cash in Your Savings Account is Losing Value

(adsbygoogle = window.adsbygoogle || []).push({}); Fundrise’s Performance During Pandemic

The pandemic has turned the economy upside down and shaken certain sectors of the economy to their core. Retail giants and household brands continue to file bankruptcy (i.e. J.C. Penney, J.Crew, and Lucky Brands to name a few). Once safe investments are causing major headaches to investors. The reason we invest in Dividend Aristocrats, Dividend Kings, and other dividend growth stocks due to their long term dividend growth history. Specially, we look for companies that have maintained and grown their dividend through various economic downturns.

For example, Dividend Aristocrats prove this point simply by earning their title. If a company has increased their dividend for 25+ years, they have increased their dividend through the dot com bubble, Great Recession, and now, the pandemic. What better way to demonstrate strong performance over time than consitently increasing your dividend for 25+ consecutive years.

Therefore, before I make an investment decision regardling Fundrise, I will review Fundrise’s performance during the pandemic. When times got tough, I want to see how the company performed. Fundrise was founded in 2012. Since their founding, the online crowd-sourcing platform has grown exponentially. Now, Fundrise owns close to $5 billion in real estate holdings. That is an incredibly impressive growth rate. The growth occured towards the beginning of a decade long bull market. How will the company perform during their first period of uncertainty? That’s the million dollar question.

Actions Take by Fundrise’s Management During the Pandemic & The Results

At the onset of the pandemic, Fundrise took serveral measures to preserve capital and their investment portfolio. First, the company suspended redemptions from investors. Second, the company reduced their dividend in the short-term.

Interestingly, I was comfortable with the dividend reduction. One of our favorite aspects of Fundrise is the company’s transparency. Management does a fantastic job of updating investors on the performance of their portfolio. The transparency has actually increased during the pandemic. The company has done a great job disclosing their plan to weather the pandemic with investors. Per management, the dividend reduction was done out of an abundance of caution based on the belief that rental income may decrease.

The moves appeared to have worked. The chart below was provided by Fundrise. It shows the performance of their investment portfolio against the market and a Vanguard ETF. As you can see, the company’s Net Asset Value (NAV) increased slowly and steadily in the first half of 2020. I’m very happy about this performance and that is exactly why I invested in Fundrise. The investment will act as a nice compliment to my equity portfolio and allow me to build another passive income stream.

Despite the short-term dividend reduction, the company’s dividend yield is still average 3.63% across all their funds (per management). Their platform’s average dividend yield is trailing Realty Income’s and Vanguard REIT ETFs (VNQ) dividend yield of ~4.5% and ~3.8%, respectively. As a teaser for later, I must say, since I am invested into the company’s income focused fund, I am actully achieving a dividend yield higher than Realty Income. How much higher? Well, you’ll have to continue reading to find out!

Personally, my thesis and expectation is that the dividend will increase once again in the near-term. The company actually realized rent growth in May 2020 and their portfolio delinquency has only increased slightly. The influx of cash from PPP loans surely helped their tenants continue paying their rent. The July and August rent growth and delinquency will tell us a lot about the company’s potential to increase their dividend in the short-term.

Fundrise: My current investment’s Performance

My Fundrise journey started in 2019. Since inception, I have invested $2,405.55 in the platform. My investment has grown to over $2,515.14 (This does not include my pending $200 transaction in the next section).

My investments fall into two categories. First, the core real estate holdings. This includes funds consisting of investment in properties that produce dividend income. This is the investment that produces dividend income. The second investment was in Fundrise’s IPO. The company offers investors the opportunity to invest in an Internet Public Offering (Read more about the Fundrise IPO). I love the company and their products. Heck, I wouldn’t be writing about my strategy to invest in more if I didn’t believe in their mission and products. Therefore, we decided to invest in the company iteself. The following table summarizes the cost basis and market value of the investment. Please note that Fundrise has not provided an updated Market value for my shares.

Now, I’m a dividend investor through and through, right? Don’t forget, the Real Estate portfolio also produces dividends as well. Over the course of my investment, I have received $95.29 in dividend income. I included my transaction history below. The table shows my dividend income increasing along with my investment. Prior to the dividend cut, I was receiving over $25 per quarter in the investment. The annualized Q1 dividend resulted in an ~6.9% dividend yield ([$25.89 * 4] / $1,509.59).

Earlier in the article, I mentioned that the company wide dividend yield is ~3.8%. The company offers funds ranging from focusing on growth only with no dividend income to funds focusing on dividend income. They also offer blended portfolio. Since I invest in the income focused fund, my dividend yield is higher than the company average. Therefore, my annualized dividend yield is closer to 4.7% using the Q2 dividend received. Now, I have demostrated that my investment’s dividend is in fact higher than Realty Income’s current dividend yield.

I am very happy with the performance of my current investments in Fundrise. The market value has not increased significantly; however, I knew that going into my investment. I selected my investment as an alternative to equities that allows me to invest in real estate without the headaches and hassle of being a landlord. My dividend yield is close to 5% (factoring in a dividend reduction) and my investment’s NAV continues to increase slightly. We always say that our investments in Fundrise are slow, steady, and predictable. I can happily confirm that is the case and is why I am excited to begin increasing my stake in the company once again.

(adsbygoogle = window.adsbygoogle || []).push({}); My Fundrise Investment Strategy for 2020 & Beyond

Our portfolio continues to grow. In the near future, our combined portfolios will cross $500,000. Right now, we are closer to $475,000. In the grand scheme of things, my Fundrise position is relatively small. In fact, our $2,515 Fundrise portfolio only represents ~.5% of my total investments. Therefore, this investment class has room to grow in my overall financial picture.

With a booming stock market with very few undervalued investments, I am looking to put our hard earned, saved capital to work in high quality assets that generate passive income. Throughout the article, I have demonstrated why I am pleased with my Fundrise investment’s performance since inception and during the pandemic. We have capital to invest. Therefore, my wife and I have developed a plan to invest additional funds in Fundrise for the rest of 2020 and beyond. The plan has two components. An initial, one-time investment followed by automated monthly investments.

Invest $200 in August 2020

Frustrated with the lack of investment opportunities, we decided to invest an extra $200 in August. The $200 will grow our investment in the Real Estate fund substantially, growing our market value from $1,509 to $1,709. That is a 13% increase in our position right there!

Further, this investment will add a nice amount of dividend income. An additional investment in Fundrise should add an extra $9.40 in dividend income annually. That is, until the company returns their dividend to its pre-pandemic levels.

Invest $100 Monthly Going Forward

The second part of our Fundrise approach is to set up a recurring investment plan. My investments into Fundrise have been random over the years. For example, we invested $150, $100, and $150, in September, October, and December, 2019. Then, suddenly, I stopped investing in Fundrise.

We need to start treating our Fundrise investment like our regular investment portfolio. We have investing goals each month for equities. Thus, we should also have investment goals for our real estate portfolio as well.

I don’t want Fundrise to suddenly represent a large percentage of our investment portfolio. We aren’t planning on suddenly throwing the sink at Fundrise at watching it grow to 10% of our investment portfolio. Rather, our position will incresae slowly and steadily. Just like how the asset continues to perform for us.

Therefore, we decided to put together a plan. Going forward, we will invest $100 per month into Fundrise. This will result in an investment of $300 quarterly and $1,200 annually.

With this plan in place, we will invest another $400 in Fundrise by the year. Overall, we should end 2020 with a Fundrise investment exceeding $3,000. At a minimum, the additional investments will add $18.80 in annual dividend income to our portfolio.

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In total, this plan will result in me adding $600 to my Fundrise account by the end of the year. Is this a lot of cash? No. However, it will help increase my Fundrise investment signficantly. My allocation to the crowdsourcing platform will grow with the investments in the remainder of my portfolio. Further, whether the stock market continues to climb or if it falls, I will continue investing $100 monthly. The automated investing will be great. Hopefully, soon, I’ll forget this investment is occurring and won’t think twice about it. That is the true benefit of automation and how you can see your passive income stream begin to take off!

Do you invest in Fundrise? What do you think of my approach in this record setting stock market? Are you having difficulty finding undervalued dividend stocks to buy? If so, what are you doing about it?

Bert

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