This College Grad Found an Affordable Way to Start Investing in Real Estate

33,447 Views
Magnifying glass in front of an open newspaper with paper houses.
SvetaZi/Getty Images
Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.


Buy land. They’re not making it anymore.Mark Twain

Katie Smith had always been a saver. Even at a young age, she’d managed to save thousands of dollars.

But she was tired of watching her savings just sit in the bank, doing absolutely nothing. She needed a way to make her money grow.

“I had it all sitting in a savings account, getting something like 0.01% interest. You can only take that for so long,” says the 21-year-old, who just graduated from Georgetown University in Washington, D.C.

Ah, but there was a problem.

She didn’t want to invest in the stock market, which had been climbing for nearly nine years in a row. Smith didn’t trust it to keep climbing much longer. She’s not alone there.

“I think everything is a little overvalued right now,” Smith says.

She had always liked the idea of owning real estate. She’s familiar with the old folk saying about land being a good investment — they’re not making any more of it.

“It’s pretty limited in supply,” she says. “I like the idea that it’s super tangible.”

Ah, but there was another problem.

To start investing in real estate, you generally need a lot of money. Houses or land can cost thousands — or hundreds of thousands — of dollars. And once you buy some rental property, you’ll have to play landlord, which can be a pain.

Smith had saved herself a few thousand dollars, but it wasn’t “buy a house” kind of money. Not yet. After all, the college senior was just starting out in life, studying accounting and finance at Georgetown.

Real Estate Investing for Beginners

She wasn’t liking her investment options — savings account or stock market? — but then she heard about Fundrise.

The Fundrise Starter Portfolio would invest her money into two portfolios that support private real estate around the United States. It would do all the heavy lifting for her — and play landlord on her behalf.

She didn’t need to have hundreds of thousands of dollars stashed away, either. She could get started with a minimum investment of just $500.

“It’s a pretty low barrier to entry in terms of the amount of money you need,” Smith says. “I invested a couple grand, and I’ve been really pleased with the results.”

Through Fundrise’s online dashboard, investors can see exactly which properties are included in their portfolios — like a set of townhomes in Snoqualmie, Washington, or an apartment building in Charlotte, North Carolina.

“I can go into my Fundrise account and see what I actually own,” Smith says. “I own a piece of an apartment complex in Ann Arbor, Michigan. Property on the West Coast. Bits and pieces of apartment complexes in Texas and Denver, a construction loan, a mixed-use property.”

Many Happy Returns

More than a year after buying in, Smith has been pleased with her Fundrise experience.

Fundrise lists an average annualized return of 11.44% in 2017. Investors pay 1% in annual fees — a 0.85% asset-management fee and a 0.15% investment advisory fee.

Investors can earn money through quarterly dividend payments and potential appreciation in the value of their shares, just like a stock. Cash flow typically comes from interest payments and property income (e.g. rent).

Keeping It Rolling

A busy person, Smith likes the simplicity of the online dashboard.

“It shows your earnings to date,” she explains. “It tells you when your next dividend is. It shows you the breakdown of where your money is invested. It has a risk scale that makes it pretty easy, visually, to see how much risk you’re taking on.”

Today, having earned a bachelor’s degree in finance from Georgetown, she has a job lined up at an investment bank. Any money she makes from Fundrise just gets rolled right back into real estate.

“They give out dividends every quarter, and they have an option where I can reinvest all my dividends into their portfolios,” Smith says. “That way, I can make sure it keeps going. I don’t have to actively put more money in it unless I want to.”

The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He likes real estate.

Do you think this article might help you put more money in your pocket?Thumbs UpThumbs Down