I've been getting asked a lot lately about a real estate investing opportunity called Fundrise. It seems to be picking up a lot of steam and gaining interest, not just with traditional real estate investors, but opportunity seekers who may not have had the capital to invest in traditional real estate. Scroll down to find out through my detailed Fundrise review if this is a great opportunity for you…
DISCLAIMER: I am in no way affiliated with Fundrise. I am also not qualified to give real estate investing advice… this review is totally unbiased and the opinions expressed are my own.
Table of Contents
- How Does Fundrise Work?
- Types of Accounts
- Possible Investments
- Fundraising Expenses and Fees
- The Benefits of Crowdfunding
- Downsides of Crowdfunding
- My Fundrise Review Verdict
Real estate investing has long been a reliable way to build wealth, and now with Fundrise, it's available to everyone. With properties that generate income and development projects with future appreciation potential, you can tailor your portfolio to exactly what you're looking for. And with over 150,000 already signed up, there's clearly something getting people excited about Fundrise.
Fundrise was created “to assist knowledgeable investors in investing smarter.” You can invest in a wide portfolio of high-quality real estate through the organization. Fundrise claims to be able to lower expenses and optimize your return on investment over time by utilizing cutting-edge technology and a devoted team of in-house experts. Ordinary folks can now invest like real estate pros.
Fundrise claims to help you invest smarter by using technology and in-house experts. With them, you can lower your expenses while earning a higher return on investment from a wide portfolio of real estate options – all without being a pro yourself.
How Does Fundrise Work?
Fundrise is an online real estate investing platform. They pool the funds of numerous small investors to construct private property portfolios (REITs).
When you sign up for a Fundrise account, you are asked to select a real estate investing strategy from a menu of alternatives that address your risk, income, and long-term growth preferences:
Types of Accounts
There are a total of five account tiers available on the Fundrise platform, each with its own set of investing opportunities and required minimum deposit.
Starter: You can get started by investing a minimum of $10 in the company's flagship fund right now.
Basic: Choose how you want to invest your money and open an individual retirement account (IRA).
Investors can select their own investment objectives and start an IRA with a minimum commitment of only $1,000.
Core: With an initial investment of at least $5,000, you can build a customized portfolio.
Advanced: With a Premium investment of $10,000, you have access to all available fund alternatives.
Premium: The starting point for a $100,000 investment from qualified investors is $100,000.
Just remember, when you sign up for Fundrise's free “Starter” plan, you don't get access to any of the company's other investing options, including its retirement savings plans (IRA). You may open an IRA with any account type starting with Core. You have additional investment options and may tailor your investing plan to meet your individual needs, such as selecting income-generating real estate funds.
An important fact for prospective customers to know about Fundrise is that all account tiers let you invest in the company's REIT investment funds, however, your menu of funds differs based on your account tier.
All of the private REITs on Fundrise are managed by the company itself. They are not like real estate investment trusts, which may be bought and sold whenever you please using a public stock exchange through a brokerage account. Instead, you'll need to use Fundrise for all share purchases and redemptions.
Keep in mind, the company's permission is required for each redemption request. There may be withdrawal limits imposed amid a real estate market crisis, the business says.
It is vital to know that Fundrise is a private REIT, not a publicly listed REIT, because private REITs are less liquid which makes them a little riskier.
Fundrise is the only company that will acquire your investment. It may be necessary to leave funds on the platform if the firm experiences financial difficulties or decides to place restrictions on withdrawals.
Non-registered investments are available in higher-tier accounts as well. These offer more investment diversification and perhaps higher returns than private REITs, at the expense of possibly lower liquidity. These funds are classified as e-REITs by Fundrise and are not eligible for early withdrawal.
Fundraising Expenses and Fees
Depending on the size of your portfolio, Fundrise will deduct two yearly fees. At the outset, there is an annual advisory fee of 0.15%. On their site, they mention that there are circumstances where this charge could be dropped. The asset under management fee that Fundrise can collect is 0.85%. Every type of account has the same yearly cost structure.
Fundrise may tack on extra charges for development or liquidation services for a given property. After deducting these expenses, the fund's remaining revenue would be distributed as dividends to investors. Although, Fundrise does not tack on any hidden transaction or commission fees.
Flagship Real Estate Fund and Income Real Estate Fund
Investors can make withdrawals at any time without incurring any fees. Early withdrawal from private eREITs and the Fundrise eFund results in a 1% penalty on the value of your shares.
The Benefits of Crowdfunding
Open to any and all financiers. There is no minimum investment required to join, and anybody with $10 may get started investing. Some real estate crowdfunding sites, like CrowdStreet, restrict membership to “accredited investors,” defined as those who have either earned over $200,000 per year for the past two years ($300,000 per year when married) or have a net worth of over $1 million (not counting the value of their principal property).
When you sign up with Fundrise, you may begin investing in as little as three minutes. The steps involved include providing your contact details, funding the account, and selecting an investing approach. Afterward, the system will automatically manage the selected money. If you use their platform to set and monitor investing objectives, such as saving enough money for retirement, their platform will automatically alert you if you're falling short of your goal and offer steps you may take to catch up.
Sufficient options for investors
The investment options available via Fundrise range from low-risk income funds to high-risk growth real estate funds. As your savings increase, you'll have greater room to diversify into nonregistered funds.
Great earning and profit possibilities
Investing in real estate is a great way to diversify your holdings and potentially increase your income, profits, and decrease your overall portfolio risk compared to sticking only to equities and bonds.
Real estate investment data
You may browse their current real estate investments, view images, and monitor progress on the Fundrise website. The tool provides a clear picture of how your contributions are being used and what kinds of initiatives are receiving funding.
Downsides of Crowdfunding
Costs are reasonable
Fundrise charges an annual fee of 1%, comprised of a 1% advisory fee and a 1% management fee. They have a flat rate regardless of account size. One of the greatest real estate ETFs offered by Vanguard costs only 0.12% per year in contrast.
There may be a shortage of cash
Although Fundrise requires an investment horizon of at least five years, investors have access to their money whenever they want it. However, they may limit redemptions if the housing market takes a turn for the worse. This was in the year 2020, during the beginnings of the Covid-19 epidemic.
Some funds have a redemption fee
If you try to withdraw your money from the eREITs or Fundrise eFunds before the five-year mark, you will be subject to a one percent redemption penalty.
Finding comprehensive cost details might be challenging
Fundrise warns that you may owe additional fees for projects, such as development or liquidation fees, but does not make these costs explicitly evident. To find out how much each project will cost, look through its offering circular.
Poor support for customers
In case you need assistance, you may contact Fundrise by email or browse the knowledge base of articles available in their support section. They do not, however, offer a phone number for customers to call if they need help.
Insights into Fundrise
Fundrise, established in 2012 by brothers Ben and Dan Miller, was one of the earliest crowdfunding real estate investment platforms in the United States. Initially, the platform welcomed direct property investments from investors; but, by 2015, the firm has begun to shift its focus to real estate investment trusts (REITs) rather than single-property crowdfunding.
As of June 2021, Fundrise has $1.7 billion in AUM, 171,000 investor accounts, and 948,000 users, all of whom were reflected in the company's most recent filing with the Securities and Exchange Commission (SEC).
My Fundrise Review Verdict
While Fundrise does seem to be a good investment opportunity, the question still remains… how are you going to earn the extra money to invest into the opportunity. In theory, you could get started for as little as $10 – but you and I both know you're going to be waiting a loooonnnng time to see any return on such a small investment.
Add a new revenue stream so you can build up the seed money for investments like Fundrise. No need to live like a pauper while your money is working for you, amiright?
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