People often ask me if I invest on Fundrise and the short answer is “Yes.”
As a real estate professional who has seen his fair share of deals, I understand that there are always risks involved in any investment and that things almost never go exactly as planned.
So, I try to stick to a few simple strategies that have helped me be successful in my investments over the long-term:
Diversification is Key: Follow the 20% Rule
No matter how smart you think are, no investor gets it right 100% of the time. By diversifying across a variety of asset classes, I can simultaneously decrease risk and increase the likelihood to earn better returns. While most investors tend to invest in only stocks and bonds, I follow the “20% rule” and allocate at least 20% of my portfolio to alternatives, primarily commercial real estate. Learn more about the 20% rule here.
Focus on Minimizing Downside, Not Chasing Upside
Finding investment opportunities that advertise big returns is easy. Finding investments that focus on minimizing risk is challenging. The promise of a 20% return is great, but at what price? I worry first about whether an investment will be protected against all the potential downside scenarios before thinking about how much money I could make in the upside.
Look for Long-Term Value
Everyone looks like a genius when the market is hot. It’s when things cool down that you see who was really making the smart decisions. I look for investments that I believe have long-term value. In real estate this means investing in assets where there is true demand even when the economy slows down. This is how you hold onto properties during a downturn and come out on the other side ready to capitalize on new opportunities.
Stable Consistent Cash-Flow
Building streams of recurring income over the long-term is a key tenet of my investment strategy. Because of this, I tend to look for investments that have a higher probability of generating cash-flow rather than focusing on those that rely solely on big “pops” in value during a sale. Cash-flow gives you flexibility and can buy you time, two of the most valuable things for a real estate operator when things inevitably don’t go as planned.
Fees Have a Big Impact on Returns
Whether you’re investing in real estate or stocks, how much you pay in fees can have a huge impact on your overall returns. Consistently, diversified low-fee models have outperformed the high-fee active management approach.
This is one of the key reasons that I prefer Fundrise investments. As an investor, they give me diversification across a broad range of real estate assets through a single, low-fee, passive management approach.