Have you ever wanted to invest in real estate but never had funds in the bank significant enough to purchase investment properties?
The good news is your prayers have been answered. With the establishment of Fundrise, you can now access real estate’s historically-consistent exceptional returns at a fraction of the cost.
Find out if Fundrise is a good fit for you as we take a look at what this investment platform has to offer.
Fundrise Review: Quick Highlights
Established in 2010 as a financial technology startup company, Fundrise developed into the first investment platform that has paved the way for affordable access to real estate investments by allowing nonqualified investors to pool their assets.
Fundrise has four investment portfolios to choose from with an investment minimum of $1,000 for three of the plans and $500 for the starter portfolio. These portfolios hold a variety of seven e-REITs and three e-Funds options.
Fundrise reported an average of 11.44% return on investments net of fees in 2017. These fees include, but are not limited to, an asset management fee (0.85%) and an advisory fee (0.15%).
Who Should Use Fundrise?
Many investors want to include real estate in their investment portfolio.
However, there are many ways to do so, including managing your rental properties, buying a commercial property, or holding Real Estate Investment Trusts (REITs) in your portfolio.
But there are other ways to invest in real estate, including using a crowdfunding real estate investing platform such as Fundrise or one of its competitors.
If you fall into any of these categories, then you should take Fundrise into serious consideration.
Investors who don’t want to risk choosing or managing their properties – If you don’t want to take on the risk of selecting the wrong property, then Fundrise is an ideal choice.
They find the properties, do the underwriting themselves, and determine which of them are in each of their investment products.
Long-term Investors – You cannot quickly turn these investments into cash; in other words, they are illiquid and not traded on a public exchange.
If you’re looking to invest short term, then this is not for you. Ideally, you should hold on to the investments for at least five years.
Investors looking to diversify their portfolio outside of the stock and bond market – Since Funrise products are not publicly traded, they do not rely on the performance of the stock market.
And because these investments are focused on real estate, they are in a different asset class than stocks and bonds, which can help to diversify your investment portfolio.
Investors who are willing to invest in an untested model – It is important to note that Fundrise came into being after the housing bubble of 2008.
Since then, there hasn’t been a significant downturn in real estate to show if this model would remain viable in a housing crisis.
How Fundrise Works
Usually, online real estate platforms are only open to accredited investors.
U.S. Securities law defines accredited investors as individuals having a net worth of over a million dollars, not including the value of his or her own home. You can also be considered an accredited home investor if you have an annual income of at least $200,000.
If you’re married, you and your spouse need only $300,000 in combined annual income to qualify as accredited investors.
What makes Fundrise unique is that most of their products are available to nonaccredited investors.
This opens the floodgates for individuals to invest in their main products which come in the form of real estate investment trusts (REITs).
REITs are used to invest in income-producing real estate such as holding mortgages or by purchasing and managing different properties, such as commercial or residential buildings.
Due to being an online platform, Fundrise calls its products e-REITs. Another product is eFunds, which allows investors to pool their money.
It is then used to purchase land, develop housing, and to sell the properties to interested home buyers.
Fundrise has four portfolio options to choose from, depending on the investment goal you have in mind.
They are the following:
- Starter Portfolio
- Supplemental Income
- Balanced Investing
- Long-Term Growth
These different plans invest in the different e-REITs and e-Funds that Funrise offers, and these include:
Growth e-REITs I & II – These are investments that focus primarily on commercial properties such as multifamily commercial real estate.
Income e-REITs I & II – These investments focus on debt or mortgages on commercial real estate.
Regional e-REITs – These revolve around equity and debt investments on properties in three separate regions in the United States including the East Coast, West Coast, and Heartland e-REITs
Fundrise has three major e-Funds to offer. They all focus on the purchase of land, development, and sale of residential properties.
One plan focuses on the city of Washington, D.C., another focuses on Los Angeles, CA, and the third e-fund is for developments in major cities throughout the United States.
These funds primarily aim to answer the shortage of urban housing created by the demand of the aging millennial population.
Fundrise Fees and Minimums
As mentioned previously, Fundrise has four investment portfolios to choose from:
- the Starter Portfolio
- the Supplemental Income Portfolio
- the Balanced Investing Portfolio, and
- the Long-Term Growth Portfolio
Each of these portfolios has different investments into the different e-REITs and e-Funds we’ve described.
The starter portfolio has a minimum investment of $500, while the other three plans have a minimum investment of $1,000.
Fundrise charges two main fees for their services, a management fee of 0.85% and an advisory fee of 0.15% totaling 1%.
Advantages and Disadvantages of Fundrise
Simple and Straightforward Investment Platform
If you’re a beginner investor, which is the primary market of Fundrise, you’ll find that the platform is incredibly easy to use and straightforward. Signing up doesn’t take much time at all.
You only need to provide details such as your address, phone number, and Social Security number.
You can fund your account via a wire transfer or an ACH transfer (bank-to-bank transfer).
While sign-up is quick and easy, we do advise that you take the time to read the available investor disclosures.
Budget-friendly Investment Minimums
As we mentioned previously, the road to becoming an accredited investor is pretty steep.
Being able to invest in private real estate for as low as $1,000 (or $500 on the starter portfolio) is an excellent opportunity for anyone who doesn’t have a lot of money to invest, or simply wants to test a smaller investment to start with.
90-Day Satisfaction Period
If you’re an investor, newbie, or otherwise, you always want the ability to test out the waters and see if an investment platform is the right fit.
Fundrise allows you to do just that with their 90-Day satisfaction period.
If you feel dissatisfied with their service within the first 90 days of your investment, you can request a redemption, and the company will purchase your investment at the original amount.
There are restrictions to these, so it’s a good idea to read through their offering circulars before registering for an account.
Additional Fees and Transparency
Fundrise is straightforward when it comes to revealing their advisory and asset management fees.
However, you need to read through their offering circulars to determine other costs you need to consider when making investments with the company.
We want to note that this isn’t a dealbreaker in the sense that nearly every online real estate investing company buries these fees in hundreds of pages worth of circulars.
Knowledge is power, so reading through these documents will be worth your time to ensure that you are not surprised by fees and costs down the road.
Overall, Fundrise is an excellent opportunity for those looking to access the consistent returns of real estate investments on a budget.
It can help you limit mistakes in real estate investing by simplifying the process for you.
While they offer investments that are exclusive to accredited investors, with just $500 to $1000, you can begin investing in the different e-REITs and e-Funds available through four of their portfolios.