Fundrise Co-Founder & CEO Ben Miller joins Yahoo Finance Live to discuss how the company is helping individuals invest in real estate.
JARED BLIKRE: Welcome back to Yahoo Finance Live. I’m Jared Blikre. Well, you’ve heard of fractional shares. How about a fractional house?
Fundrise is an online platform for individuals to collectively invest in real estate projects for as little as $500. We’ve got the co-founder and CEO of Fundrise, Ben Miller, here.
And so let me just ask you here, if anybody’s familiar with real estate investment trusts, these are public companies that people can invest in. They’ve been around for decades. What differentiates your platform?
BEN MILLER: So when you’re investing on Fundrise, you’re actually buying shares of real property, not a stock that trades publicly or any sort of stock trades day to day. If you own a real property, it’s a long-term investment and you get sort of the advantages of being in the private market.
– So, so walk me through how that works. I mean, who is actually investing?
BEN MILLER: So we started Fundrise because we thought, well, why can’t people buy real estate the way they buy stocks and bonds. So individuals can buy– what– apartment buildings, housing, e-commerce industrial for as little as a $10 minimum.
And what it does basically is like a mutual fund of real property rather than what happens in the stock market, which has a lot of volatility and a premium for being so liquid.
JARED BLIKRE: Well, let me ask you then. So if I’m getting this straight, I can pick out individual properties that I’d like to invest in all around the country and for as little as $500 apiece. And then that gives me a diversified portfolio then of these individual properties, or am I buying into funds of properties here?
BEN MILLER: You’re buying into pools of properties, so a lot more diversified. But the idea is that the stock market might be a bubble. I don’t know what’s going on with crypto. So if you’re trying to get into some real assets at real prices basically, which is the cost of construction, and Fundrise made that possible for anybody, where before it was only possible for institutional investors.
– So $5.7 billion transacted so far through Fundrise. Where are you seeing the biggest returns?
BEN MILLER: The hottest market right now is single family rental. So single family rental is where we buy 50, 100, 200 homes in clusters, and then pool them into sort of this large pool, which we recently got a credit facility from Goldman Sachs to do. And single family rental’s now growing 10% a year, if not more. There’s a huge demand for housing. And that’s driving demand to rent there.
JARED BLIKRE: Well. Let me ask you about your liquidity gate here. I believe it’s three months. So if I invest and I hold for a period of time, I want to get out, I have to wait for that gate.
I understand this is a long-term investment, but we’ve seen with COVID that things can change very quickly. Suddenly, you’re in a bear market in 10 years. I’m just wondering how the liquidity gates you came to arrive at your current threshold of three months?
BEN MILLER: Yeah, I mean, real estate’s a long-term investment. This is real property. It’s not a stock that trades day to day. So you can get liquid every three months.
There’s a mechanism that lets anybody request liquidity or get their shares bought back every three months. But you shouldn’t think of it that way. Shouldn’t invest in the short-term. You should only invest in real estate if you’re thinking of at least a five-year time horizon.
– Yeah, Ben, I’ve heard you say a few times that this is not the stock market. But we’ve got a lot of new investors who’ve either come into the market through stocks, through crypto, potentially interested in real estate as well over the last year. I wonder what your demographics looks like? What’s the breakdown here? And are you finding more and more newer investors who are coming into the market saying, I want to kind of dip my toe in real estate right now?
BEN MILLER: Well, we have a million users. So it can be diverse kind of investor. Some investors feel like there’s inflation coming and they’re looking for someplace to put their money in that’s got stability. It’s real, it’s long-term.
Other investors say, well, someday I’d like to buy a building myself. And here’s a good way for me to start to learn. Here’s a good way for me to like test real estate investing.
So it can be diverse. Some people investing a few million dollars and some people investing a few hundred dollars.
– Ben Miller, Fundrise co-founder and CEO. It’s good to talk to you today. I appreciate the time.