What is Fundrise?

Fundrise provides the opportunity to invest in private market real estate through eREITs, which are proprietary non-traded Real Estate Investment Trusts. Investors can choose from different account types and get help building a portfolio that meets their needs.

How does Fundrise work? 

How does Fundrise work? 

Fundrise offers a choice of different account types ranging from Starter to Premium. 

  • The Starter Account requires just a $10 minimum investment and offers access to Registered Products, which are funds that invest in a diversified portfolio of private real estate. 
  • The Basic account level, which requires a $1,000 minimum investment, adds the opportunity to invest in an IRA. 
  • Core and Advanced investment options require a $5,000 and $10,000 minimum investment respectively and both add access to non-registered products. 
  • Premium requires a $100,000 minimum investment and adds the ability to invest in periodic accredited offerings, which are illiquid private equity funds. 

Upon opening an account investors choose from different portfolios based on their goals. These include fixed income, value-added, and opportunistic portfolios. Each portfolio can own close to 100 different properties including single family homes, multi-family homes, office buildings, and other commercial real estate. 

The properties that Fundrise purchases include high-quality real estate with durable demand as well as properties where Fundrise believes it can use focused asset management to unlock additional value. Fundrise's in-house team of real-estate professionals finds and underwrites each real estate deal, and the company accepts fewer than 1% of reviewed deals, so it's selective in which properties make their way into your portfolio. 

Who can invest with Fundrise? 

Any U.S. citizen or permanent resident can invest with Fundrise as long as they are 18 or over and are currently living in the United States.

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My Specific Fundrise Portfolio Allocations

I was most interested in long-term growth, so I invested in the Growth REIT. They also offer the East Coast, West Coast, and the Heartland (Midwest) REITs.

But in looking at the distribution on my pie chart, it says I have 36% invested in fixed income, 15% in Core Plus, 33% in Value Add (typically, renovation projects), and 15% in Opportunistic.

Not only do I always know what I’m investing in, but Fundrise even gives me pictures of what I’m invested in. For example, one holding is a $5.8 million construction project, Mosby University City. It’s a 300-unit apartment complex in Charlotte, North Carolina, and they’ve announced that it’s recently been completed.

Another example is the recent investment into a single-family rental development near Dallas, Texas. It gives you the strategy, which is Opportunistic, and a total value of $16.5 million. Others are projects in Atlanta, Los Angeles, and Austin, Texas. They even disclose some investments, located near where I live.

The point is, I know where my money is being invested at all times.

What Is a Fundrise eREIT?

To understand how Fundrise eREIT works, you have to first understand how a REIT works (pronounced “reet”).

According to Investopedia:

A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments — without having to buy, manage, or finance any properties themselves.

The main attraction of a REIT is its tax-friendly structure: A REIT isn’t taxed at the corporate level, as long as it passes at least 90% of its income through to its investors in the form of dividends.

An eREIT or eFund is a type of REIT, and a term that was coined and trademarked by Fundrise to describe their non-traded, crowdfunded REIT platform.

While there are many types of REITs, Fundrise’s eREIT is public (open to all investors) but not traded on a public exchange. Instead, individual investors deposit their funds directly with Fundrise, who then invests their money in a portfolio of real estate projects.

In 2019, Fundrise published an in-depth comparison of investing in publicly traded REITs vs. their own eREIT platform and they argued that Fundrise offers lower fees and higher return potential.

Put simply, an eREIT is a marketing term specific to Fundrise’s platform. It’s a public REIT that isn’t traded on the stock market and aims for higher levels of transparency, investor control, and return potential (partially through lower fees) than other, traditional REITs.

Explore Fundrise Properties & Start Investing Today (Starting at $10)

Who Is Fundrise Good For?

  • If you’re looking for portfolio diversification, safe exposure to a real estate portfolio, and steady, attractive, long-term returns, then Fundrise could be a great fit.
  • If you want to learn about real estate investing, Fundrise offers fantastic tools, resources, and education.
  • Fundrise is open to any U.S. citizen (or permanent resident) currently residing in the U.S. who is over 18 years old (non-accredited investors are welcome).
  • If you’re a sophisticated investor who wants to actively manage your real estate portfolio and maximize long-term returns, then Fundrise may feel a little too passive for your taste.
  • Fundrise is designed to be a long-term (5+ years) investment strategy. If you’re a short-term investor who values liquidity, then Fundrise (and a real estate investment in general) probably isn’t a fit for you.
  • If you want fast-paced, high-risk investments with huge upside, then Fundrise (and a real estate investment in general) probably isn’t a fit for you.

The Fundrise Solution

What you have with private REITs is a combination of high risk and a lack of transparency on the fees connected with the investment.

That’s exactly what Fundrise set out to remedy.  Fundrise investments have lower fees and full transparency in disclosing those fees.

What’s even more important is that you don’t need $100,000 or more to invest.

You can invest with as little as $500, which means almost anyone can participate. Even if you do take a loss on an investment that small, it’s probably not the kind that will wipe you out financially the way private REITs did to some investors in the last recession.

Fundrise does disclose the risks of commercial real estate investing. That includes the possibility you may not be able to liquidate your position.

Just before the COVID pandemic, I got a couple of notices from Fundrise making that point clear. The letters emphasized that if the market were to take a big dive, Fundrise might be forced to halt investment redemptions.

That’s just an inherent risk with commercial real estate investments, simply because real estate – and especially commercial real estate – is not a liquid investment.

Unlike a mutual fund, a private REIT can’t sell stock to raise cash to pay investors.

It’s also close to impossible to sell an office building or an apartment complex in a bad market where there are probably no buyers.

It’s unavoidable, but I give Fundrise credit for updating their investors about this possibility on a regular basis.

With Fundrise, there are no upfront fees, and you’ll know exactly what you’ll be getting into – including the fees you pay along the way.

Who can use Fundrise?

Currently, U.S. citizens or permanent residents currently residing in the U.S. and over the age of 18 can learn how to invest in real estate with Fundrise. You do not need to have a certain net worth or be an accredited investor to use the platform. With five different portfolios to choose from, there’s an option suitable for most everyone.

However, if you are an accredited investor or have a high net worth, it may be worth your time to consider Crowdstreet, which offers investment opportunities in commercial real estate without the fees of other platforms. You can see how Fundrise and Crowdstreet stack up and choose the platform best suited to your investment goals.

Fundrise pros and cons

Our Fundrise review found several advantages and disadvantages of using the platform. Take these into consideration before making an investment.

Fundrise Pros

  • Low minimum and fees. You only need $500 to start with Fundrise and it charges only 0.85% asset management fee annually. 
  • Accepts non-accredited investors. As mentioned, the platform is open to any investor living in the United States, regardless of their network and income. This sets them apart from competing firms that are available to accredited investors only. 
  • 90-Day Guarantee. If you’re not happy with your Fundrise investments, you can sell them back to the platform for the original investment amount. There are conditions to this claim, however. 
  • Diversification. Fundrise eREITs give you access to a pool of properties that could even out your returns – this sets them apart from other firms that offer private REITs. 
  • Passive investment. As opposed to owning a commercial real estate, Fundrise makes passive real estate investing a walk in the park. 
  • Access to commercial real estate. Before platforms like Fundrise, commercial real estate investing was exclusive to only those who had lots of money. With Fundrise, you can invest in commercial real estate at an affordable rate.
  • Potential for liquidity. While REITs are typically illiquid, Fundrise offers a quarterly redemption plan that offers periodic liquidity. Do note, however, that distributions are not guaranteed. 

Fundrise Cons

  • Taxes. All Fundrise distributions are taxed as though they are ordinary income, as opposed to the typical 15% tax rate on qualified dividends.
  • Liquidity. Once you make an investment in Fundrise, you’ll have to commit to it for the entire term. You won’t find a secondary market to sell the investments you made. However, this is padded by the platform’s quarterly redemption program that allows you to redeem your shares for a fee (with conditions). 

Why Most People Love Fundrise

I’ve spoken to numerous people who have invested in Fundrise, and they all rave about the experience. These are the three features that most real investors love.

Transparency – Fundrise makes it easy to understand what you’re investing in. It helps that you can look at a picture of the property, find where it is on a map. You can also dig into the financials of every single property. Have a question? Customer service will respond to emails and phone calls.

Lack of liquidity – Logically, most people want money easily accessible, but having money “locked” into an investment is a great way to keep your money growing. Fundrise has seen phenomenal returns, and part of their success comes from “forcing” their investors to stay the course. However, note, that during tough times (like a pandemic), Fundrise may prevent you from withdrawing your funds.

How Does Fundrise Work: Final Thoughts

Fundrise offers a relatively easy way to buy into real estate with a starting point of $10.

Fundrise will pool your money together with thousands of others and put it toward new construction projects or rehabilitations with potential. This will be completely passive investing requiring no time or energy on your part.

How successful has the Fundrise platform been so far? To date, Fundrise has acquired more than $5.1 billion in real estate and distributed over $100 million back to investors in the form of dividends.

If this is the type of investment you are searching for, follow the link below to sign up for Fundrise today!

Start Investing With Fundrise Today With $10 Minimum

Where Fundrise could do better

You may not be able to cash out on your schedule 

While Fundrise allows investors to request redemption of shares at any time if they need to, the platform is designed for investors looking to make a minimum five-year commitment. Fundrise has made clear that the platform cannot always guarantee redemption, which means that there is a chance you won't be able to access your cash if and when you need it. 

You'll have to pay multiple fees

 Fundrise's fee structure can be complicated. There's an annual advisory fee of 0.15%, as well as an annual asset management fee of up to 0.85%. These fees can eat away at your potential returns, making it more difficult for you to make a generous profit on your investment. Alternative ways of gaining exposure to real estate, such as real estate focused ETFs, may provide lower fees that are easier to understand. 

Recent returns are unimpressive 

In four of the past five years, Fundrise underperformed the S&P 500 based on the company's own posted returns. It provided a higher ROI for investors only in 2018.

Signing Up for Fundrise

The investment platform is easy to use and sign up for. Since they are focused on individual non-accredited investors, they’ve focused on keeping things simple.

Just visit the website and sign up to create an account through the ‘Invest Now’ option. You will need to provide necessary details like your full name, email address, and choose a password to create an account.

You will be asked to choose the type of account you want to create. There are two main options here. You can either create an individual account or go with a selection between joint/trust /entity account.

You will then be prompted to fill in personal details including your home address, SSN, date of birth, and phone number. After filling in this information, you will be asked about funding options. You can make an online payment through EFT, debit/credit card or wire the money. The Fundrise platform is secure and encrypted.

If you invest the $500 minimum required, Fundrise will put you in the Starter portfolio, which is merely a 50% income and 50% growth-oriented approach to commercial real estate investing.

If you invest $1,000 or more, you can invest in three goal-based plans:

Supplemental Income

The Supplemental Income plan is an income-oriented strategy. You are investing in cash flow, making returns primarily through dividends rather than the appreciation of the underlying asset.

So this could be a strict revenue approach. It’s very much like investing in dividend stocks which don’t have plenty of growth of the underlying asset, but they’re paying a consistent dividend and a high dividend yield.

Balanced Investing

Next, you’ve got the Balanced Investing plan that’s a blend of both growth and income, cash flow generating property, and they also are buying undervalued property in emerging areas and looking to earn money from the asset appreciation.

So Fundrise is purchasing properties, fixing them up, making repairs, and then selling them down the line. The yield is the gap between what they bought it for and the renovation costs and what they are selling that bit of property for later.

Long-Term Growth

Finally, there’s the Long-Term Growth program. This is a growth-oriented approach — investing in undervalued real estate, improving it, and selling it. The asset appreciation is where you’re making the majority of the money with a tiny bit of income from dividend payments or the cash flow from the real estate.

You can start with as little as $500 investment. After you have made the deposit, you will receive a confirmation about the fund transfer. You will almost always start with a starter portfolio, but you can choose and set a different type of investment portfolio based on your needs.

Key features

In comparing Fundrise with some other real estate investment providers, there are a few unique features that make Fundrise stand out.

For one thing, investors using Fundrise can go through the entire investment process online—they never need to meet with an advisor or attend a seminar.

Second, Fundrise actually offers investors the option of investing IRA assets, which many platforms don’t because of regulatory hurdles.

Lastly, though not necessarily a positive, Fundrise is unique as a REIT provider in that investors do not have the option of investing in its REITs through any other platforms. In order to invest with Fundrise, investors HAVE to go direct.

Make Sure You Understand The Risks

I learned about Fundrise more than two years ago. At the time, they still allowed individuals to invest in particular properties. At the time, investing online in properties I’ve never seen made me nervous. The introduction of the eREIT (and the added benefit of diversification) eased my fears, but there is still a risk.

My primary concern is the level of leverage that Fundrise considers sustainable. While most would consider a 78% leverage ratio conservative (and it is), many of the properties are development projects. If demand for housing in any major city falls, the leverage could doom the profitability of the investments.

Most of the properties purchased are not done with a buy and hold forever mentality. Rather, the eREITs want regular liquidity events to enable growth.

In my personal real estate investments, I only take on debt when I can profitability hold a rental property for the long haul. I’ve been trapped underwater once, and it is not a good time. Certainly, the 100% passive nature of Fundrise should assuage my concerns, but I can’t shake them.

However, the low entry price of just $10 does limit downside risk. I would recommend Fundrise as a great starter platform for getting started in real estate. As always, before committing large amounts of capital do your own due diligence first.

You might also want to check out these Fundrise alternatives.

What do you think of Fundrise? Have you ever tried it?

Fundrise Alternative Options

Fundrise is one of the first and oldest real estate crowdfunded investment businesses based online. However, it is not the only real estate investment platform for small investors. Several other investment firms have joined the market since 2012 and offer similar or better service.

If you are looking for a real estate investment alternative to Fundrise, look into these platforms.

RealtyMogul

One of the original real estate investment startups RealtyMogul also started in 2012 and is still in operation. With an estimated total asset portfolio of more than $250 million, it is one of the larger investment companies online.

Property managers can get funds for their projects in the form of both loans and equity capital. Investors have the option of either investing in property directly or going with a REIT. To use the REIT option, you can use their Income REIT which is very similar to Fundrise.

To directly invest in a property on your own, you must be an accredited investor. You get the option to select the property you want.

RealtyShares

This is another popular real estate investment platform with more than $300 million invested in different projects. RealtyShares allows a REIT funding option and offers a reasonable return on investment.

Real Estate developers and property managers can get funding for both residential and commercial properties. Funds can construct new properties and financing for a fix and flip project.

Patch of Land

Patch of Land focuses on debt-based investments where investors can choose projects with a term of one month to three years. You can adjust the riskiness of your portfolio by selecting between a variety of loan types including residential/commercial or new construction/fix and flip.

Real estate developers can use the website to apply for and get funding for their projects at the advertised interest rates. You can borrow from at least $100,000 to a maximum of $5,000,000.

Related: Real estate crowdfunding – Everything You Need to Know

If you want to invest in commercial real estate but you’d rather not work with a real estate crowdfunding platform, take a close look a Streitwise. It’s a public, non-traded real estate investment trust (REIT), that invests in income generating commercial real estate. You can invest with a minimum of $5,000, and you don’t need to be an accredited investor.

Because of the unique investment methodology used by Streitwise, the trust pays annual dividends of between 8% and 9%, net of investment expenses. And because it’s a REIT, there are certain tax advantages, including a 20% pass-through reduction of your income, as well as lower long-term capital gains taxes on capital appreciation earned and distributed.

Read more: Streitwise Review

Related: Crowdstreet vs Fundrise vs Streitwise

FAQs about Fundrise

Is Fundrise a safe investment?

Fundrise eREITs aren’t publicly traded on the stock exchange, so they might experience less fluctuation and are less correlated to the stock market. So if there’s a stock market downturn, your eREIT might not be as quick to follow suit. Keep in mind that Fundrise investments are fairly illiquid, so they may be best for investors seeking long-term growth. However, as with any investment, there’s always risk involved. It’s important to keep in mind that there’s no guarantee you’ll earn money — and there’s always the potential for loss.

Can you lose money on Fundrise?

Yes, so it’s important not to invest with funds you can’t afford to lose. While the goal with any investment is to make money, there’s no guarantee you won’t suffer any losses, either.

Does Fundrise pay dividends?

Fundrise pays quarterly dividends to investors. These are the payments of your share of the income that your investment generated during the prior quarter.

How is Fundrise taxed?

Depending on your portfolio, you may receive income from your eREIT or eFund investment (or both). REIT dividends are categorized either as ordinary dividends or qualified dividends (depending on the operations of your investment). Ordinary dividends are taxed as ordinary income, while qualified dividends are taxed at the capital gains tax rate. This is reported on tax form 1099-DIV each year. Income from eFund investments is taxed as ordinary income as well, as the underlying tax structure is a partnership. Any income you receive from your eFund investment will be reported on tax form K-1. Aside from dividends, if the net asset value of your investment appreciates, you’ll have to pay capital gains taxes as well. However, you won’t pay those taxes until you redeem your shares.

What is the minimum investment for Fundrise?

The Fundrise platform has five levels to choose from, and each has its own minimum requirement. Here are the account levels and initial investments required:Starter: $10Basic: $1,000Core: $5,000Advanced: $10,000Premium: $100,000

What are some alternatives to Fundrise?

If you’re interested in learning how to invest in real estate, you might want to consider Diversyfund as an alternative to Fundrise. Diversyfund lets you invest in REITs as well. Read our full DiversyFund review or compare  DiversyFund vs. Fundrise.

Redemption of Fundrise eREIT Shares

Here is another complicated one because there are a few variables at play here.

First, Fundrise will only redeem a certain amount of shares per quarter. Once they have redeemed those shares, you will get in line for the following quarter, and so on. Additionally, when you redeem the shares, you will incur a penalty of between 3 and 5% of the share price. Thirdly, Fundrise gets to calculate the value of the shares and it’s essentially impossible for us to determine that value on our own.

  • Less than 6 months – No Redemption Allowed
  • 6 Months to 2 Years – 95%
  • 2 to 3 Years – 96%
  • 3+ Years – 97%

The biggest unknown appears to be the unknown value that Fundrise will place on each share. Upon purchase, each share is worth $10, but that can easily go up or down based upon their valuation. On top of that, you can only get a portion of your money back when you redeem.

Checking the Fundrise Offerings

Fundrise is unique with the fact that you don’t actually choose specific projects to invest in. Instead, you choose an investment style and Fundrise helps choose a portfolio allocation across their investments. Below is the actual allocation of my investment money.

What is Fundrise and How Does it Work?

Fundrise an investment service that allows you to invest directly in commercial real estate.

Fundrise created a marketplace that is fairly transparent and their goal is to “make the process of investing in the highest quality commercial real estate from around the country simple, efficient, and transparent.” Essentially, they bridge the gap between the investor and the developer.

As I complained about above, real estate is traditionally very exclusive, and the only investors were those with direct access to the institutions that fund the deals. Fundrise (along with many others) is cutting out the middle-man and allowing us to directly invest. Also, by cutting out the institutions, it should hopefully reduce the overhead expenses and keep our fees low.

Fundrise currently has hundreds of thousands of members and they have invested in billions worth of real estate. They let you invest as little as $500 at a time into commercial real estate and you get to pick the allocation of the funds into different REITs.

Are you ready to see how they do it? Continue reading this Fundrise review to find out. But first.

What is Commercial Real Estate?

There are 4 primary types of real estate – land, industrial, residential, and commercial. Commercial real estate is the broadest type of real estate and there are a dozen or so sub-categories within the CRE category.

The most common types of real estate are multifamily apartment complexes, office buildings, and retail.

While multifamily is used for residential purposes, it is classified as commercial real estate because it’s primary purpose is to provide income for the owners. Residential real estate is 1-4 unit properties and the primary purpose is for the owner to live there.

Review of Fundrise – Why Invest in Commercial Real Estate?

One of the big things we need to cover in this Fundrise Review is why commercial real estate is a great place to invest your money and a great long term investment.

The biggest reason is income. Commercial real estate is bought for the primary purpose of providing income, and that’s what it does best. In CRE, even the price of the building is determined entirely on the income it provides, not on what other properties are selling for.

The second biggest reason to have commercial real estate as an investment is because of appreciation. Since price is determined by the income, anything that increases income will increase its value. In real estate, we call this ‘forced appreciation’ and it’s a great way to increase the value of your investment.

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Other Fundrise benefits

In addition to the Starter Portfolio, Fundrise also offers several other portfolios that you can invest in. Fundrise’s premium portfolios let you choose your own investment allocation or even individual deals (they also have higher minimum investments).

Fundrise also offers articles and resources to help people learn about crowdfunding and investing in real estate.

A final word on the Fundrise Starter Portfolio

If you’re new to the investing game and are looking for a way to dip your toe into the water, the Fundrise Starter Portfolio might be a good option for you.

The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations about any investment product or security. This information is provided strictly as a means of education regarding the financial industry.

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