Fundrise has been essential to our overall investment strategy. We wanted to allocate a meaningful portion of capital to real estate opportunities, so having the ability to invest directly in a number of properties through Fundrise was a perfect fit given our long term approach to private investments. In a little over a year we’ve invested in 17 deals.
Diversification is an absolute necessity. That doesn’t just mean making multiple investments. Spreading your capital out is part of the equation, but the location, structure, and tenant type should also vary across your portfolio. For example, an equity investment in a Seattle single family home and a bridge loan for a commercial building in downtown Brooklyn are sufficiently different to provide true diversification.
Our investment strategy is focused on generating income, so deals structured as debt that pay quarterly are attractive to us. Figure out what’s important to you and create a strategy around it.
Sometimes we get asked, “why invest through a marketplace with private opportunities versus a publicly traded REIT?” Specifically, our preference for private real estate investments is defined by the following:
- Using a marketplace like Fundrise provides direct access allowing us to construct the exact portfolio exposures that our right for us and our goals.
- Leveraging technology & direct access cuts out a lot of the fees that typically exist in a REIT, boosting our potential returns without increasing risk.
- The values of publicly traded REITs fluctuate with the market. This is an additional risk that we feel isn’t adequately compensated for compared to private options.
- Most REITs use leverage to increase returns, which greatly magnifies the risk of permanent capital loss. We believe investing success is achieved by limiting our downside exposure.
- Sometimes the interests of REIT management aren’t perfectly aligned with those of its investors, resulting in sub-optimal capital allocations. With Fundrise, we are the managers, so a similar conflict of interest is impossible.
Mesh Lakhani is a family office investor who focuses on private investments, and has been active on Fundrise since January 2013. He also runs Future Investor, a free how-to course for investors using emerging online platforms.