Analyzing an offer to invest in Fundrise itself

We first invested in Fundrise in 2019. We have invested in a wide variety of their private real estate funds. At various times, it has been among our largest single holdings when it comes to private real estate. Overall, the returns from Fundrise have been very good both in terms of appreciation and, to lesser extent, cash-on-cash returns. That's especially been true over the past year (2022) when the stock and bond markets have done very poorly--it has been an excellent source of diversification for us. And in fairness regarding cash-on-cash returns: we have always opted for their longest-term options and we believe Fundrise has been thoughtful about maintaining a conservative cash position over time. All to the good in our book.

Fundrise, and its CEO Ben Miller, also have the hallmark of being quite transparent about their returns. In our judgment, Fundrise is among the very best companies from the perspective of making their returns--and one's own individual returns--transparent.

We have also been invited to invest in the company that owns Fundrise itself. So, pause here for the distinction: Fundrise offers a range of funds that invest in real estate equity, debt, and so forth. That's the bulk of what they offer. (They have incidentally started a private venture capital fund that is available for investment as well). But what we are talking about in this post is the offer Fundrise has made to many people to invest in the company itself.

You can read about it in their own words here:

The Fundrise iPO is the first–of–its–kind internet Public Offering, which gives investors the opportunity to buy an ownership stake in Fundrise, the company, itself. When you invest in the Fundrise iPO, you are purchasing shares of Rise Companies Corp., the parent company and owner of Fundrise.

The offer (for us anyway) has hit our inbox every couple of years or so. This one reads: "We are happy to let you know that we plan on opening a window for certain existing investors to purchase additional iPO shares beginning next week."

We made our first investment in 2019 in the iPO for Fundrise. That investment was made at just over $8 per share. We invested again in 2021 at a few dollars more per share. The 2023 offering is priced at $15.90 per share. We are permitted to invest a certain amount based on our existing investments in Fundrise funds and our current iPO investments; the point is, there's a limit per investor.

Fundrise offers this language about the current offering:

What is the price per share of the Fundrise iPO?

The current price per share is $15.90. This represents a 5% increase from the last time we updated the price ($15.15 in June of 2022) and we believe is a reasonable reflection of our growth through an incredibly turbulent economic period.

Investments can only be made into the iPO in the form of whole shares (no partial or fractional shares can be purchased), which is why you’ll notice your minimum investment is not a round number.

Our analysis is that this investment for us has been a sound one in a fast-growing company. We see it as a venture capital-type investment rather than a real estate investment, however, as the funds are invested in the parent company that owns Fundrise. So, when we think about our current allocation to private real estate, which is set at a percentage of overall net worth, this particular investment falls under our category of angel investing. We have separately invested over the years in private technology start-ups, of which Fundrise is a fine example. They have continued to grow and perform over the years we have been invested--and we will continue to accept the company's offer to invest in the iPO as those offers come along, presuming they remain on their current trajectory.

For another viewpoint: The Financial Samurai has his analysis here. Financial Samurai calls Fundrise his "favorite private real estate investing platform." We also think highly of Fundrise.

(As ever, this website is not a source of recommendations--we are merely reflecting on our own experiences and offer this resource for entertainment and informational purpose. We are not professional investors or real estate professionals or anything of the sort.)