← Jill on Money with Jill Schlesinger
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- [00:00]
Jill Schlesinger
For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been complex, time consuming and expensive. But imagine if real estate investing was suddenly easyall the benefits of owning real tangible assets without all the complexity and expense. That's the power of the Fundrise Flagship Real Estate Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as $10 4700 single family rental homes spread across the booming Sun Belt, 3.3 million square feet of highly sought after industrial facilities. Thanks to the e commerce wave, the Flagship fund is one of the largest of its kind, well diversified and managed by a team of professionals. And now it's available to you. Visit fundrise.com jillonmoney to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the Fund's prospectus@fundrise.com Flagship this is a paid advertisement. Hi, this is Jill Schlesinger. I used to own a small business and now I talk to a lot of business owners like you who know that having the right partners in place can help you take your business to the next level. Partners like American Express that give you access to world class business and travel benefits such so you can get more for your business wherever it takes you. With the Amex Business Platinum Card, you can earn one and a half times membership rewards points on select business purchases and you can get complimentary access to more than 1400 airport lounges worldwide, including the Centurion Lounge. So you can keep running your business while you're on the go. See how the Amex Business Platinum Card gives business owners like you the tools and rewards that can help move your business forward. Terms and points cap apply Learn more at american american express.com AmEx Business.
- [02:05]
Welcome to the Jill on Money Show. It's Friday, February 21st and we are here trying to help you make better, less bad, more considered financial decisions or just to be your guide along that journey. We is me. I'm Jill Schlesinger, CBS News Business Analyst, certified financial planner and the executive producer of this program is Mark Tularcio and he's running everything from behind a very important division which is a river and a few miles. Mark, how many miles do you think we are from one another as the crow flies?
- [02:36]
Ben Miller
I would say two and a half, three miles.
- [02:40]
Jill Schlesinger
I think it's a little more, but I'm excited to be able to talk to you today because I think we have a really fun guest. We're going to get to him in a second. But as everybody knows who listens to this program, all we like to do is to try to help you make the different kinds of choices as you're looking at your whole financial world. And whole is something that has to do with you. It doesn't have to do with anyone else. So if you've got a question, something's going on, a big decision that has to be made. Get in touch with us. Go to jillonmoney.com, click the contact us button. It's in the upper right hand corner. It's always there. And write us that note. That's the note we receive as a email. And if you'd like to join us live, check the box. Mark will do everything else. Hey, while you're on the website, sign up for the free weekly newsletter comes out every Friday. Mark does such a good job compiling all the stories you could have missed during the week.
- [03:32]
You're very busy.
- [03:33]
Of course, you could miss things during the week. And is this the big vacation week, Mark? Yeah. President's Day into this coming week. So, yeah, I mean, people are taking time off. And also on the website, don't forget to subscribe to our service. It's called Jill on Money Live. That is where you have access to quarterly live webinars, bonus audio and video content, the back catalog of all these interviews, as well as fun, exciting stuff that we might post up there, you know, like different kinds of resources, et cetera. It costs 45 bucks for the whole 12 months ahead. And get excited, our next webinar is coming up fast. Ed Slott, fan favorite Ed Slott. He is a cpa. He is an IRA expert. He is the man who, who convinced Mark to basically tattoo Roth all the time on his arm. Mark did not do that, but I think he would. Ed Slott will be joining us on Thursday, March 6th at 7 Eastern Time. You must be a member of Jill on Money Live to be able to participate. Okay, let's get to today. So today we have a special guest. And for those of you who are astute, you'll notice that he is a not just a guest on the show, but his company is a supporter of the show. They are an advertiser. So I had to do this whole preamble with this, which is this is just for general information. And Ben Miller, who is our guest, he is not telling you to go out and do anything he is talking about his company, which is called Fundrise. We're going to talk about the whole company. But all this is to say that this is not an infomercial for Ben and the company. I just thought that the company sounded kind of cool and they were doing interesting things. So we got him on the air to do an interview. So without further ado, we are welcoming to the airwaves of Jill on Money, co founder and CEO of Fundrise, Ben Miller. Okay. Hi, Ben, how are you?
- [05:36]
Ben Miller
Hey, Jill, how are you?
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Jill Schlesinger
Very good. What are you laughing at?
- [05:40]
Ben Miller
Oh, you just got a great energy.
- [05:44]
Jill Schlesinger
Yeah, that's right. I mean, because we're out here to do this. Come on now. So, Ben, you got this fancy company. It looks very nice. I'm on your website. It looks like you've got nice couches in your office and a nice open floor plan of your office. Where's your office? Washington, D.C. you can bring your dog to work there. I see a dog on the website.
- [06:06]
Ben Miller
Yeah.
- [06:07]
Jill Schlesinger
So, Ben, let's go back in time. This firm that you have created, which is now more than, I guess like a dozen years ago, right? In 2012, you started this, which it says on your website is fundrise, is one of the leading real estate investment platforms. So why don't you tell us a little bit about what fundrise is and then we're going to go into you. And before we got on the show, Ben's like, wait, you know, what are we doing here? And I'm like, we're going into a deep therapy session about you and your, your life. And he sort of chuckled and he has no idea that that's actually going to happen. So, Ben, first talk to us about Fundrise. This is how I warm you up and then get into the juicy stuff.
- [06:43]
Ben Miller
Okay? Okay. So fundrise is a tech platform and a real estate platform. It's both. I find real estate people find that confusing and tech people can find that confused, confusing. So we have something like 20,000 residential units, millions of square feet industrial. We have real estate people. We manage real estate, invest in real estate team. Whole companies, 250 people. That's sort of half our DNA. Other half our DNA is tech. We have a web platform, a mobile platform, APIs and data engineering. And. And I just, I don't know, I think the future of everything is this merger of tech and, and other things in the world. And so fundrise is mission is democratize investing into sort of the best investments. And so that's real estate. We recently launched a venture fund. So we can invest, anyone can invest in the best venture backed companies, like, I don't know if you know these companies, Anthropic and Canva and Databricks and, and so our mission has been to tear down the barrier that exists between the best investments and normal people who normally don't get access to these companies.
- [07:52]
Jill Schlesinger
So normally. Normal.
- [07:53]
Normal. If you want to be investing in private equity or venture or sometimes like, you know, essentially certain types of real estate deals, you have to be what is called an accredited investor. Right. So you have to meet some benchmark of how much money you make or have a net worth in your platform. That's, that's not what the case is. Right. Anybody can invest in any of these things on your platform, is that right?
- [08:20]
Ben Miller
Yes. The idea is to use technology to lower the barrier. So it's. Anyone can invest. The minimum investment is $10. We use software to make that really efficient.
- [08:32]
Jill Schlesinger
But why is it a tech firm? I mean it's just like, like to me it's like you're a real estate firm. You're just using tech to get the information and the access out there. How is, how has technology helped you like as you acquire real estate investments, does that, I mean, are you using tech for that?
- [08:47]
Ben Miller
So there's, there's two different ways we use tech. So why can't normal people invest in venture real estate or things like that is because of the regulations and also the efficiency. It's just not efficient to have someone put $1,000 into it. If you're going to go raise a venture fund or a real estate fund or buy a real estate deal, you need people who are writing checks, probably in the millions, tens of millions. It's not something you're going to. You can't practically gather up 100,000 people invest in a single real estate deal without technology. So to make it accessible and low cost, you need a technology to do that. So that's. We have millions of users and hundreds of thousands of investments, billions that process through the platform. And all of that has to be done with technology. Can't be done the normal way, which is with paper and accountants that process the transactions. That's how a normal real estate deal would, or venture fund would work. So that's been the first thing we've built. And people don't appreciate how much technology's in. I mean you can kind of imagine it like how much technology does Schwab have or Robinhood? There's a ton because there's just so much involved in that part of the Business. And then on the actual real estate analysis, that's something we've been working on probably the last two or three, probably maybe three or four years now. And that's been a new initiative. How can you use technology to, to do better real estate? And we have a lot of stuff on that that's, that's been so fun because it's, it's like a superpower being able to use technology to solve a problem that normally people solve, you know, manually.
- [10:32]
Jill Schlesinger
What is it that you do in the world of real estate that I couldn't get from. I don't know the. I'm just pulling. I pulled this up, the Vanguard Real Estate ETF, which cost 0.13%. That's the expense ratio. What's going on in your portfolio that's different than their portfolio?
- [10:49]
Ben Miller
Yeah, so there's a few differences. The public markets end up, especially over the last decade or two, ended up super correlated. And so a lot of times that the pricing of, you know, Vanguard REIT index is now core, highly highly correlated with S&P 500, even though they're very, very different. And so you're getting way more correlation than you might think on a fundamentals basis. So if you started looking at buying real estate, like just think of it this way, you can buy a house for $200 a square foot. On the public markets, that house may cost $300 a square foot because they're super correlated with what's happening in the stock market. So the correlation often means that the underlying real estate or underlying anything will mean that you're not always buying what you think you're buying.
- [11:37]
Jill Schlesinger
Right, that makes sense to me.
- [11:39]
Ben Miller
Yeah, that's one. And then, and then two. What's in the public markets generally is what's mature. So what's like late stage. So whether that's tech, you know, Google's mature business and OpenAI is an earlier stage business. In real estate, the same thing happens. There's these waves of change and when you have new real estate, those things happen in the private market and then they mature and scale up into public market. So examples of that, if you look at previous decades, it's like Tower REITs where people rolled up and created cell towers that became a public asset, but that didn't exist 20 years ago as a public asset. And then it became a public asset once it got to a certain scale. Single family homes weren't a public asset until 2019, 2018 when Invitation Homes went public. So you have these new real estate classes. I mean real Estate does have inventions that get matured or grown in the private markets and then go public. If you're looking for sort of the, sort of the dynamism, most dynamism is happening in the private markets. If you're starting a business, you're not doing that in public markets, you're doing that in the private markets.
- [12:49]
Jill Schlesinger
I got it, I got it. What is the difference, cost wise? That, you know, if I were to invest through your platform and I want to invest in real estate, you just heard me say, you know, 0.13% for this Vanguard ETF. What's it cost on your platform?
- [13:06]
Ben Miller
Well, Vanguard's not an apples to apples because you're also paying the REIT level fees. Right.
- [13:12]
Jill Schlesinger
So the thing is, explain that, explain that for everyone.
- [13:15]
Ben Miller
The thing about Vanguard is that they, they did you a solid and, and gathered up, you know, some number of stocks for you. 100 stocks, 500 stocks. But they don't actually like, run the business. They don't actually run Google. They don't run the real estate companies. They're just a wrapper that's like, it's not really apples to apples. You have to look at also the fees being paid to the management of the real estate companies. And that can vary as well. So you'd have to add up both Vanguard and the REIT index, the underlying REIT companies, real estate companies that it holds. Our total fees are 85 bips a year, which is probably about the same as the public markets. It's not once you add up the reit, the REIT costs. So it's very much, much. I mean, normally private markets, you'd be paying three to ten times that.
- [14:12]
Jill Schlesinger
Yeah, I mean, but like, even if, or, and yeah, I mean, I would say that like you have to pay a higher fee on an ongoing basis and give up portion of your upside. Right.
- [14:20]
Ben Miller
Yeah, you know, we.
- [14:21]
Jill Schlesinger
Right, right. So there's been so much reporting on how, you know, like hedge funds, private equity and venture. It's just, you know, it's kind of like a loser bet for the little guy. How was it not? How are you able to maintain these lower fees? Like, that's pretty remarkable to me that you can be in this business and you've, you know, kind of well below the sort of the normal or the customary cost to being investing in this way.
- [14:50]
Ben Miller
Yeah, I mean, it's, it's technology. Right. The cost of the system is just much less with software than with people. So the big, the biggest difference is, is technology. And then there's also Just a philosophy. I mean, typically when you talk to a financial person, they charge the highest fee they can get away with. That's sort of.
- [15:09]
Jill Schlesinger
Right, exactly.
- [15:11]
Ben Miller
And we took a more of a technology approach, which was, what's the lowest fee we can actually succeed on and hope that as we scale and have more technology and compounding growth, that becomes a benefit or an asset. So it's part of it's philosophical, part of it's technological.
- [15:31]
Jill Schlesinger
So what is it now? Let's get to you. Forget about the stupid company, which sounds very fabulous. All right, so Ben Miller, Fundrise. You have this company you started in 2012.
- [15:41]
What is your background?
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How did you get into this?
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Ben Miller
I started in real estate in late 90s and I worked for real estate, private equity fund. There I went. This is in 98, 99. I went to go work for a tech startup and in 1999. So you probably appreciate this, but people are like, well, that's ancient history. But 1999, like the tech bubble was crazy. Yeah.
- [16:06]
Jill Schlesinger
Good timing, dude.
- [16:07]
Ben Miller
Well, yeah, I learned a lot, I bet. And then blew up. And I went back to real estate in 2003, and then in real estate, 2003, guess what happens 2003, 4567. Then you have a real estate bubble.
- [16:20]
Jill Schlesinger
But you saw like the real bubble like you started. Because if you started in 2003, you're coming out of the tech ashes. Right. And now all of a sudden, you know, rates are low, and now we see the beginning of this, this boom.
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Ben Miller
This real estate boom. Yeah, because it goes from tech boom, boom, the bus, to real estate boom, the bust.
- [16:39]
Jill Schlesinger
But I want to know one thing, like, when you're in the boom period, talk about how you felt. Like, did you look at this and say, oh, my God, this is nuts. Did you feel it in the moment? Or is it sort of like, you know, we're frogs in the boiling water and we don't even notice it as it's happening.
- [16:56]
Ben Miller
This is like retrospect, but I feel like at the time, I'm so young, I just don't have perspective. Sure. So both times in my 20s. And so you just don't really. I didn't even know what normal was. Right.
- [17:10]
Jill Schlesinger
Yes, yes.
- [17:11]
Ben Miller
And so it's really hard to understand bubbles. I mean, it's hard. Even the best people. Like, there's this famous story. Stanley Druckenmiller, one of the best investors in the world, and he talks about how he lost $3 billion in 2001 betting on tech companies, even though he Knew better because he, he just. The power of, of social contagion in a perspective is just. It's really difficult. So I didn't understand what was normal either time really. I actually thought it was normal. It was normal for this type of craziness to happen.
- [17:45]
Jill Schlesinger
Right. You would not know otherwise. Do you come from an investing slash real estate type of family or do you have like, what's your, like going back in time? Like how did you get into this?
- [17:57]
Ben Miller
Yeah, well, my, My. My father was in real estate. Real estate developer. That gave me a long. Eventually I think it really helped give me a longer perspective. But I don't think I. I don't think I really started to get it until after the great financial crisis. Like so my whole. If you were like to do the armchair analysis of me, like my whole. My. So much of my worldview is just informed by living through these bubbles and the aftermath. And it created like a certain type of like paranoia and skepticism from 2008 and 1999. Right? Two bubbles, two different industries. Both, you know, had high, high extreme highs and bad behavior and then collapse. And so that's like. I started fundrise in 2012, sort of out of that ethos. Cause, you know, it's one thing to hear about this stuff, but you see it from the inside and you see like, what were people saying then? Why were they saying it? Why did it seem to make sense then or not make sense then? And then what happened afterwards? And that's what's happening. I mean, I really just think it's happening again. It just happens over and over again. And we're back here, we're back to the same thing.
- [19:07]
Jill Schlesinger
So how do you understand that today? Like today. Okay, so for someone, I'm really old, right? So I feel bubbles in my bones. Also. My very first job on Wall Street, I was a commodities trader. And so that's a very boom, boss cycle, right? And so, you know, I feel this. What you just said was quite accurate. Is that like in the middle of it you just think like, oh, no, no, no, no. You are really one of those idiots who says, no, this time is different, or you don't even know that it's a this time. And, and then as time went on for me in the tech bubble, you know, I think that was the time where I was like, oh, I recognize, like this. This seems very. I recognize this, this euphoria and this, you know, I was managing money at the time and I was a financial planner. And so for me, I also felt prey to that idea that, like, oh, I can actually time when to get out and when to get back in. So that's the other like, like, I just didn't have the, the wisdom to understand that, you know, you don't have to pick the top and the bottom. Right. That you can just sort of go along, make smart decisions when things get out of whack, that you trim them and all that. Right? But now, you know, I feel like even if I said, oh, there is a crypto bubble and this will end badly, and I try to warn people, I also say, like, okay, like, honestly, if you want to go to the casino and you want to throw some bets down on the table, if you don't, if it doesn't bother you to take that risk and lose that money, fine with me. Like, I'm not going to tell you not to, like, go out and have fun. But I think it starts to get scary when you see, like, Wall Street Journal articles that say, you know, oh, these people are investing their money for their kids college in crypto, like, which seems like a disaster.
- [20:50]
Ben Miller
Hold on, let me just give you a quick, quick aside because I will go back to your. So, you know, fundrise has hundreds of thousands of investors. And, and we offer quarterly liquidity. And, and when people come to redeem out their investment, they. We usually ask them, why, why are you redeeming? Why are you leaving?
- [21:06]
Jill Schlesinger
Right.
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Ben Miller
And we get lots of interesting feedback. And so I got this message last week from some person, seemed like a relatively young person. I don't know if they're in their late 20s, probably late 20s, I would bet. And they wrote, fundrise underperformed my crypto investments. I should have been in Bitcoin since 2019. I was mostly in crypto. I was at 80% crypto. But now I'm going to redeem my money out of FundRise and go 100% crypto.
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Jill Schlesinger
Oh, God.
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Ben Miller
And I'm like, oh, my Lord.
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Jill Schlesinger
But, you know, sometimes you can't, you can't protect people from themselves. You know, it's, it's, it's interesting. You know, we're talking here today and, you know, it's. We're in February and a lot of people are talking about how, oh, God, the Consumer Financial Protection Bureau is going to be, you know, gutted and this, that and the other thing I said, well, I just don't know how many more protections that we can put out there in the, in the universe that are going to be ignored. So in my mind, like, the big things that I'm Worried about, for people that they don't understand are kind of out there. And if people want to just ignore it, they're going to ignore it. You know, that's their choice. And I feel like crypto is like high on the list. So now you start this company. How'd you get the money to do it? Like, how did you do this?
- [22:16]
Ben Miller
We were small. I mean, we were, you know, I mean, quite literally three people and a dog. I was doing large scale real estate through the crisis. And so I had, I think we had a half a billion of real estate assets. And then my real, my big money real estate partners, I had a partner who had a quarter trillion dollars of assets go bankrupt. And so I watched actually the people who were supposed to be the smartest and the biggest and the wealthiest and most sophisticated have the most problems. Goldman, Harvard. I mean, every, every. I mean, if you behind the scenes, there was just so much distress. And so it made me think, well, why would I trust the system at all? Like, why can't, like, do things outside the system? It's actually similar to the ethos where crypto started to try to get away from the system. I just ended up with a real asset rather than a virtual asset and said, okay, well, why can't people just like, the world's crazy. Why can't people just own like a real thing? You can go see it, you can touch it, feel it. Like, I came with the idea of, like, why can't people invest in this? Like, it was a, it was a property that we were developing in a neighborhood and Washington D.C. it was one building, it was a growing neighborhood. And everybody I knew in that neighborhood was, oh, I wish I could invest in that. That's so cool. It's so cool. This neighborhood is growing so fast and this building is like, that's going to be such a cool. It was ends up being this like, restaurant that is now like one of the most famous restaurants in the city. And it just wasn't possible. I was just like, why isn't this possible? It's so strange that, like, it's such an intuitive thing to be able to do that you can invest in your own neighborhood. Your own. In a real.
- [23:53]
Jill Schlesinger
Yeah, right.
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Ben Miller
And it's because the regulations just never contemplated that idea. But I was in D.C. so I like actually ended up like, literally walking into the front door of the SEC with a lawyer and saying like, hey, I want to do this. And the SEC is like, oh, that's so funny. That's so cute.
- [24:09]
Jill Schlesinger
Like this so little Pat you on the head.
- [24:13]
Ben Miller
Yeah, because it's like, you know, like you're talking about like $250,000 or something and SEC, that's not the scale they're used to. You know, you don't deal with SEC till you're like, you know, probably 250 million.
- [24:24]
Jill Schlesinger
Right.
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Ben Miller
So I, but I, you know, I paid for out of my own pocket to sort of like figure out how to do it. It took like a year, two years of like working with the SEC and trying to build this, you know. You know, how does somebody buy a piece of a building, you know, right through a website. Like what do they sign and what do they have to read and how do they understand it? And it was like, you know, so we just started really small. We did one building, then we did another one and then we got third one and then we just, and now we've done tens of thousands. But it just, it was slow, compounding, like grindy work. You know, the first Investment had like 100 investors. It's like almost none.
- [25:04]
Jill Schlesinger
You could have like a pretty nice life being a real estate developer, making some money and probably a less complicated life. Oh yeah, because you've got all these employees, you have all these investors. So what is it about this? Like why do this? I mean, I know you're energetic and you're young. What's the passion for you?
- [25:26]
Ben Miller
Ooh. Well, I don't think I appreciated how hard it was going to be.
- [25:32]
Jill Schlesinger
No one does. It's like being in a relationship, you.
- [25:34]
Ben Miller
Know, like more like having a baby.
- [25:38]
Jill Schlesinger
Really? I mean, I wouldn't know. I only have four legged babies.
- [25:41]
Ben Miller
Uh huh. Oh, okay. Well, if you have a kid, you realize that's it's so, so hard. It's brutal. I mean it's just so hard. And so it's like that where you just, no one can explain to you how hard it's going to be.
- [25:53]
Jill Schlesinger
Right.
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Ben Miller
And then you have it. And the thing, once you have a business or a baby, you know, you can't really, you can't really finish it until it's like, goes off to college. It's like you have. So I, I, you know, we started the business, started the business, it started small, it grew and grew and grew and now it's like, well, you know, it's not, it's not grat until it graduates. Which is like, I can, we can sell it or we can go take it public or there's some, there's some like natural life cycle to the business. There's no choice anymore. Yeah, Like, I'm not. I'm not like, complaining. I'm just saying that that's just the fact. And so it's like, when. Why people say, like, why did you. Why did you choose to do this? Like, it's like, well, I chose to do it like 12 years ago when it was like a totally different thing.
- [26:36]
Jill Schlesinger
Right.
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Ben Miller
And now, you know, like, I mean, and the way forward is forward, but.
- [26:42]
Jill Schlesinger
You don't have to keep doing it. I mean, you have it, but, like.
- [26:45]
Ben Miller
So what in practice, I think I do. Like, I'm a steward to the business.
- [26:51]
Jill Schlesinger
Right. Okay, so what is. You didn't realize it was going to be so hard. So from where you are now, you have a ton of investors. You know, I go on the website, I see everyone looks very happy. There's. You're doing well. But, like, you know, you also invested. You basically came out of the gate in 2012, which was sort of like the bottom of residential housing meltdown. Right. That's the bottom of prices. And they start building up, building up. Then you have this complete cratering of, you know, commercial real estate with COVID So what is. Where's the value that you see in the real estate world right now?
- [27:32]
Ben Miller
Luckily, we don't really own office, so, yeah, office cratered. And it just is crazy. I mean, like, it's. It's actually a kind of a. Example of the kind of bubbles you talk about, because office. This is maybe a slight exaggeration, but only slightly, but every office building in the country's worth, like, is bankrupt, essentially, really.
- [27:53]
Jill Schlesinger
And it's just that it's. Because it's this large, illiquid asset and no one's really selling it en masse. Like, you know, we would sell stocks that we don't see it in the pricing right now.
- [28:01]
Ben Miller
And everybody's, like, in denial. It's like.
- [28:04]
Jill Schlesinger
Right.
- [28:04]
Ben Miller
If you ever see the movie the Big Short, of course, you know, the subprime mortgage, like, it's bankrupt in 2006, but takes years before it actually blows up.
- [28:13]
Jill Schlesinger
Yep.
- [28:14]
Ben Miller
That's how offices. But sort of like, in ways, like, it's bigger and more complicated.
- [28:18]
Jill Schlesinger
Right.
- [28:19]
Ben Miller
So anyways, but like, these things are just so slow and. And everybody involved will, like, kind of like, is willing to. I mean, not willing, like, wants to kick the can. And again, we don't have office. But the point is that, like, there's. That's different. That's. That's not a cyclical downturn. Like, office is. Is in a permanent decline, depending where.
- [28:43]
Jill Schlesinger
You are in other Words like, obviously there are some fancy buildings that continue to like be okay.
- [28:49]
Ben Miller
But overall I don't believe that either.
- [28:51]
Jill Schlesinger
No, no.
- [28:52]
Ben Miller
I mean, I love you.
- [28:53]
Jill Schlesinger
I love it. Look at that.
- [28:54]
Ben Miller
No, I mean, I mean, you know, my office friends tell me that story and I have really. I mean, their argument is not long term enough. Like, so sorry, I'm going to talk about office. Even though we don't. It's not really.
- [29:06]
Jill Schlesinger
That's okay. I like, I like getting your expertise. It's awesome.
- [29:09]
Ben Miller
So you sort of have to play. A lot of times it's the second and third order consequences that gets you. It's rarely the first order consequences, rarely like this thing happens. It's like the unexpected second order, second the sort of reverberations. And so with office here, I'm in Washington D.C. so take it as a microcosm. Okay. There's 40 million square feet of office, probably 10 million of it. 10 to 20 million of it is bankrupt. And then let's say 20 million square feet or half of it's like fine, doing fine. When half of it goes bankrupt, the price that people will be buying it at will be instead of $600 a square foot or $800 a square foot, they'll be buying it for $100 a square foot foot, $200 a square foot. So they're going to buy it for 70% less and then they're going to compete with the existing office buildings.
- [30:01]
Jill Schlesinger
Right.
- [30:01]
Ben Miller
And bankrupt them too. And that will take, you know, that process of, for foreclosing on the buildings and then somebody dying in them and then somebody renovating it so that it, so that it's attractive to new tenants and then competing on that and then the other building then going into like a downturn and losing their tenants. I mean tenants sign a 10 year lease and so it takes a long time for that lease to turn over. Like that's a decade process. It reminds me like if you, it seems like you're, you've seen the long view. Downtowns in the 1950s were where all the growth was. And then starting in the late 60s through the 70s, downtowns collapsed and cities went, New York and D.C. going bankrupt. In the 80s, like it took 25 years for the cities to actually collapse. It's a really, really slow process.
- [30:53]
Jill Schlesinger
Right.
- [30:53]
Ben Miller
And then they recovered starting in the late 90s, right. So they, and they came back. That's what's happening with office and that's how real estate's a long term business. You know, people in the stock market are looking at things day to day, minute to minute.
- [31:06]
Jill Schlesinger
Right.
- [31:06]
Ben Miller
And that's just. It's just opposite. It's. It's so opposite, it's even hard to appreciate how different it is.
- [31:12]
Jill Schlesinger
You know, it's so interesting because you're talking about like, real estate, and it is a massive category. I hear a lot from people and a lot of the folks who listen here, what they, they'll come on the show, they'll talk to us and they'll say, I want to buy real estate. I want to buy real estate. I want to, you know, I want to buy rental property, I want to do this, I want to do that. And I'm always like, listen, I'm so, to be clear, I'm lazy. There's no way that I would be able to do that. And what you're basically doing is saying, you don't have to do that. Like, you're saying, look, we know that real estate's a great category, but we have a different way of approaching it. What is the focus of, like, where you think there's value in the real estate market, where you guys are making investments?
- [31:56]
Ben Miller
I mean, I can tell you where we invest. We don't invest only in. I mean, there are things that are interesting. Real estate, we're not invested in. So. But. So you asked the question of what do I think is interesting and where we invested. So let me give you both mostly investing in residential. Residential since we started fundraise, gone through now three cycles. The first cycle in the 2010s, you wanted to be in residential, in cities. Cities were new neighborhoods were popping up. Kind of the growth of urban revival.
- [32:25]
Jill Schlesinger
Right.
- [32:25]
Ben Miller
And that for people who don't, you know, people aren't even old enough to realize that like some of these neighborhoods were just didn't exist before 2012. And so you want to invest in that change. And that was residential mostly. And then we shifted in the late 2010, maybe 2017, 18, to focus on the sun belt and affordability. And we invested in thousands of residential units across, you know, Texas and Florida and, you know, Atlanta and Charleston. And that was great, right, because. And what happened with COVID is people really moved to those type, types of cities and work remote, and we're in a third period with high interest rates. And it's super early, actually. It's not entirely clear how this is going to play out, but we've entered a new phase. And the types of dynamics that I'm still trying to figure out are how is AI going to affect this? Clearly, data centers is A good place to invest. How is high interest rates going to affect real estate? One of the things happening with high interest rates is it's shutting down new construction. If there's no new construction, that's going to have all sorts of effects on real estate. Or will interest rates come back down and we'll have construction again? And the Sunbelt's much less affordable than it was before. COVID There used to be this massive difference in cost in savings between San Francisco or LA and Austin, but that gap is closed, which makes it less attractive from a real estate point of view than it was before. So we're in this third turning, and it's actually still unclear to me, at least, kind of where the great opportunities are. And so much depends on what happens, I think, in this Trump administration with tariffs and taxes and immigration and things like. Because immigration population is the biggest driver of real estate population growth. And that's one of the reasons we went and bought in Texas. Texas had a million new people move there a year every year for 20 years, and new York had zero. And so Texas real estate did really well. I mean, sometimes it's that simple. But if we start having deportations and no immigration growth and no population growth because we don't have people aren't having kids anymore, that's really different. And so we're in a really. I mean, we're in a. This is the whole thing. You're older, so you've seen it. Like, we go through radically different eras, and we're entering a new era, and this era is still really fuzzy. The world is strange. It's a strange period where, you know, somebody's asked me a question about, should I be in the stock market? Should I be in real estate? And I'm like, real estate's gotten beaten down by high interest rates over the last two or three years, and the stock market's gotten really pricey. So you might say you might want to want to diversify. But it's possible that the stock market does even better, and real estate continues to get beaten down. So it's a period of a high uncertainty, and that makes it really difficult for so many kinds of decisions I have to make at work. You basically don't want to make a decision under uncertainty. That's the. So I've been delaying a lot of decisions.
- [35:37]
Jill Schlesinger
Well, listen, I think that you are doing something very interesting, and we are very grateful that you are an advertiser on the program, and we are more grateful that you joined us today. Ben Miller from Fundrise, you can check that out by the way and I'll do the same thing. There's all the disclosures at the website. Investing involves risk and all that fun stuff. But if you want to learn more you can go to fundrise.com and check that out. Oh I have this really great thing. Different types of investments involve varying degrees of risk and it should not be assumed that future performance of any specific investment or investment strategy or any non investment related discussion or content will be profitable. Be suitable for your portfolio or your individual situation. So you know the deal gang. Be careful and if you need some advice, go get some advice. But if you want to check out fundrise.com, do that and we are grateful to Ben Miller. So thank you so much for joining us today. Now for all of you who are thinking about real estate or doing anything else in your financial life, don't forget you can go to jillonmoney.com, you can click the Contact Us button. Send us that note and if you want to join us live, check the box. We'll be happy to get you on the air live. It's Friday so don't forget we do some business. Mark D'Alerisio is the co host, executive producer and king of all things web here at Jill on Money. We are distributed by Odyssey. In fact, you can subscribe to us on the Audacy app or wherever you find your favorite podcast podcasts. Oh listen to this. Our music is composed by Joel Goodman. Did I say that? I forgot to say that I always like to remind you to try to do something nice for someone else today. Please change your work, change your wealth, change your life. Thank you for listening. We'll talk to you next week.
- [37:26]
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- [38:34]
Mark Tularcio
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