Fundrise is a real estate crowdfunding platform that strives to offer a diversified portfolio of residential and commercial properties with strong returns to the non-accredited or the accredited investor.
In my Fundrise review, I will explain how Fundrise’s real estate investments follow a “value investing” strategy of purchasing undervalued real estate properties, then renovating them to raise rents and property value to generate steady dividend income
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Who is Fundrise?
Founded in 2012 and headquartered in Washington, DC, Fundrise purchases both residential real estate investments, or single-family homes, and commercial real estate investments, such as office buildings. They rely on an internal team of analysts to find, research, conduct due diligence, and underwrite real estate deals to secure the best possible assets for their investors and secure the best cash flow.
Users can get started making real estate investments with as little as $10 in Fundrise’s Starter Portfolio.
Fundrise’s past performance competes well when compared to the stock market and any public Real Estate Investment Trust. They have had zero negative quarters and 21 positive quarters, offering steady, attractive, long term growth in their returns.
Fundrise investments are a 100% passive investment, because investors are indirectly investing in real estate rather than putting time towards purchasing and maintaining properties themselves.
Why choose Fundrise?
Real estate investing has performed better than the stock market over the past 30 years. While real estate investing typically requires an accredited investor and a large cash buy-in, real estate crowdfunding platforms have created more affordable ways for the average investor to invest in real estate.
Fundrise opens investing up to anyone, with an extremely low minimum investment compared to other services.
- Low Minimum Investment of $10
- Allows non-accredited investors to invest
- Highly diversified portfolio
- Low Liquidity
- Complex fee structure
- Users can’t invest in individual eREITs or property deals
Fundrise Investment Options
Fundrise will balance an investors specific portfolio allocation based on their personal needs and investment goals. The real estate crowdfunding platform chooses how to mix different real estate projects for investment strategy in an individual’s portfolio.
The Fundrise platform offers eREITs, which are available to high level accounts. eREITs are most similar to non-traded REITs, except eREITs don’t charge up front fees or commissions, because purchases are made directly to Fundrise and not via a broker.
Properties in each eREIT are either in a specific geographic area or aim to fulfill a specific investment goal. Investors at the Core account level or higher can pick and choose specific eREITs to invest in. Fundrise also offers eFunds, which work differently from eREITs, and may be easier to cash out. Their Interval Fund is used to purchase properties flexibly based on particular needs. Targeted eFunds are available to a real estate investor at the Advanced level.
Fundrise Accounts Available
Fundrise makes it easy and efficient for investors to create an account and begin investing. They offer 5 different account levels available, depending on how much a real estate investor is willing to put down as an initial investment.
1. Starter – The Starter Portfolio gives access to Fundrise’s flagship fund. An investment of $10 is required.
2. Basic – The Basic Portfolio allows users to choose their individual investing goals and open a self-directed IRA. The minimum investment is $1000.
3. Core – The Core account supports a more customizable investment plans. Investors can choose from 3 goal-based auto-investment plans designed to suit their individual needs. To access the Core account tier, the minimum investment is $5000. They can pick from Supplemental Income, Balanced Investing, and Long-Term Growth.
- The Supplemental Income plan is designed to produce cash flow as immediate dividend income, aiming towards more real estate debt deals with lower long-term returns at a lower risk.
- Fundrise’s Balanced Investing plan is a blend of growth and income strategies, and aims for steady dividend income with a modest potential for growth.
- The Long-Term Growth plan is aimed to generate long term growth and capital appreciation, while sacrificing some dividend income. The plan is focused towards real estate equity projects, so the risk is higher but so are the returns in the long run.
4. Advanced – The Advanced account level grants investors access to all fund options. To invest in the Advanced Portfolio, users must invest at least $10,000.
5. Premium – The Premium Portfolio is available for accredited investors, with access to funds with superior returns and priority access to Fundrise’s investment team. The minimum investment amount is $100,000.
Fundrise has many offerings that are eligible for IRA contributions. Real Estate can be a valuable addition to an IRA, due to the ability to reinvest cash dividends and accelerate the compound growth of a retirement account. Fundrise offers both Traditional IRAs and Roth IRAs. IRA fees can be waived by either investing $3000 annually, or having a total investment amount upwards of $25,000.
Fundrise investors earn money in two different ways, through dividends or capital appreciation. Quarterly dividends, or rental income generated from rental properties, can either be directly deposited into the investor’s bank account or automatically reinvested into their Fundrise account. Investors also receive an appreciation in share value. Proceeds are dispersed when a property is sold, which may take a few years.
Fundrise Fees and Pricing
Fundrise makes it easy for investors to save on broker commissions. They skip the middleman, and only charge 1% in overall management fees. This charge is made up of an annual asset management fee of 0.85% going towards their projects’ operating costs, and an additional 0.15% advisory fee.
Fundrise fees are fairly straightforward. However, Fundrise also charges hidden fees for certain circumstances. The Self-Directed IRA charges a $125 annual asset management fee, but is waived for the next year with an annual investment of at least $3000. There’s also an early redemption fee if investors redeem shares within 5 years of investing, ranging from 1-3%. Lastly, Fundrise charges an acquisition fee of 0-2% when they buy a new asset.
Real estate is an illiquid, long-term investment. Investors should only invest money they plan to leave invested for at least 5 years, to avoid paying the early redemption fee and to maximize their returns.
Fundrise Review – Mobile App
Fundrise’s mobile app is available for both Apple and Android users. The app gives investors a clean, simple mobile dashboard allowing them to access the status of their current investments, view new offerings, and add funds to their investment account. The mobile app does a great job of supporting all actions of the desktop platform.
Fundrise’s Education section is broken down into several topics, including Investing 101, Point of View, and Advanced Investing. Investing 101 is a blog offering notes about private investment options for investors.
Point of View is run by Fundrise analysts, providing market trends and advice on money management. Advanced Investing is more of an in-depth analysis of historic, present, and predicted future state of the real estate market and real estate investing.
There is also a Help Center providing a search bar for investors to easily find answers to their questions. The Help page offers articles explaining how to get started with Fundrise, account management, investments and investment strategy, and taxes.
Common questions I get asked about Fundrise
These are the most common questions I get asked about Fundrise, so I will try to answer these as best I can, to give you a better view on whether Fundrise is the right investment choice for you.
Can you really make money with Fundrise?
The average return for Fundrise investments was 9.47% in 2019 and 7.31% in 2020. This assumes you reinvest dividends back into Fundrise. As always, past results don’t guarantee future success. It’s important never to invest what you can’t afford to lose.
Is Fundrise Legit?
Fundrise is a legitimate real estate investment platform and is registered with the Securities and Exchange Commission (SEC) as an investment adviser under the Investment Advisers Act of 1940.
Is Fundrise Safe?
Fundrise utilizes bank level-security in order to insure investors’ information is safe. However, there’s no guarantee that investors will earn money through Fundrise, but Fundrise does a good job of making this clear when creating an account.
Less-liquid real estate investments tend to offer better protection from broader market downturns than securities such as stocks and mutual funds. Fundrise’s real estate team consistently seeks out high-quality investments which can safeguard against losses and potentially earn income.
Is Fundrise a wise investment?
Overall, Fundrise is a well-rounded and beginner-friendly option for real estate investing. And the fact you can choose investing goals with its Basic Plan is a plus. But don’t be afraid to look at some alternatives if you want more investment selection or dividend income.
Is Fundrise good for passive income?
If you’re into real estate but not into repairs, maintenance, or tenants, investing in a REIT like the ones offered through Fundrise is a fantastic way to generate passive income through real estate. You’ll earn quarterly dividend payments, which you can keep or reinvest as you choose.
How often do you get paid with Fundrise?
Investors can expect a quarterly dividend payment from the Fundrise eREITs and whatever appreciation has accrued when the assets investment term has expired. There are currently 9 different eREITs that they have, some of which are stabilized and no longer accepting new investors.
What are eFunds?
An eFund invests in commercial real estate and is exclusive to Fundrise. It’s similar in design to a professionally managed mutual fund, but like the eREITs not publicly traded. eFunds are set up as partnerships and not corporations, so they are taxed differently — saving on double taxation, also, like eREITs Fundrise offers these eFunds to investors without any brokers or commissions. Unlike an eREIT which is typically used for income, Fundrise’s eFunds are set up for growth.
How stable is Fundrise?
The Fundrise platform, utilizing residential and commercial real estate investing, has achieved a past performance of on average, a 8.15% net annualized return over the past 5+ years. Not bad, given how stable the returns have been. When the S&P 500 was tanking in 2018 and again during March 2020, the Fundrise real estate portfolio actually went up.
How much money can you make off Fundrise?
There are significant risks to investing in non-traded Real Estate Investment Trusts, but there can be rewards, too. Fundrise says its average annualized platform returns were between 7.31% and 16.11%between 2017 and the third quarter of 2021. Alternatively, you can invest in publicly traded REITs, which trade on an exchange like a stock.
How is Fundrise taxed?
The dividends you receive from Fundrise will be non-qualified dividends. That means they’re taxed at regular income tax rates rather than at the 15% rate used for qualified dividends. Fundrise’s plans are like a real estate ETF that you could get from Vanguard, Wealthfront or Betterment.
Does Fundrise automatically invest?
You can schedule automatically recurring investments to your Fundrise real estate portfolio at any time from your account settings for a minimum of $10. Auto-investments are allocated according to an individual investor’s chosen plan, offering exposure to new funds over time.
Are there any costs associated with liquidating shares?
There may be penalties associated with liquidating your shares depending on the type of fund. The Flagship Fund and Income Fund will offer quarterly liquidity and there is zero penalty or cost associated with liquidating these shares. There may be penalties associated with liquidating your eREIT/eFund shares depending on when the request is made. The following liquidation penalties apply to eREIT and eFund shares.
What is the difference between debt and equity investments?
Our investments in real estate projects are typically structured as either debt or equity. Debt represents loans to the owner of a property. Debt investments are generally considered to be lower risk with a lower return potential since the project’s sponsor must pay us a fixed rate of return before they can earn a return for themselves, and their equity provides us with a cushion against losses. Equity represents ownership of the property. Equity investments generate returns through rental income if the property is occupied, and the potential for long-term upside by selling the property for more than we bought it.
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