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This Fundrise review has everything you need to know about the Fundrise platform.
So if you’re an investor looking for a simple, low-cost way to gain exposure to a diversified portfolio of real estate investments, you’ve come to the right place.
Keep reading to learn more.
What Is Fundrise?
Fundrise is a real estate investment company that was founded in 2012, and is based in Washington, DC. This platform uses crowdfunding to raise funds for its real estate investment properties.
What’s most attractive about this company is that it offers investment opportunities for new to average investors, who might not have access to real estate investment opportunities due to bigger upfront capital requirements.
It also allows investors the opportunity to invest in real estate without having to be a landlord, buy property, or work with a property management company.
Here’s an Instagram post from the company that speaks to this point.
The investment options are open to US residents 18 years of age and older. The minimum amount one can invest is $500.
The company introduced eREITs (electronic Real Estate Investment Trusts) in 2015, which works the same way as a mutual fund or ETF. eREITs have made it possible for the ordinary investor to participate in the real estate sector with just a few hundred dollars.
Who Is Behind Fundrise?
The company was co-founded by Ben Miller and his brother Daniel Miller. While Ben Miller looks after the day-to-day functions of the company as CEO, Daniel Miller is associated with the company only as an investor.
Ben has over 19 years of experience in the real estate investment sector, during which he financed and developed real estate projects worth $500 million.
How Does Fundrise Work?
The funds collected through individual investors are then used by Fundrise to invest in real estate projects. With this capital, the company builds, acquires, and manages real estate assets.
These investment properties include single-family homes, apartment complexes, office buildings, hotels, industrial properties, and shopping centers.
There are several ways through which Fundrise earns returns:
- It buys undervalued properties and renovates them before renting them out or selling for higher returns.
- Earns rental income on real estate properties.
- Collects interest on mortgages held.
- Acquires properties with high potential of value appreciation.
Profits earned through these channels are distributed among the shareholders.
There are 2 main products with Fundrise: eREITs and eFunds.
1) eREITs
eREITs are non-traded REITs with a focus on income rather than growth. For average investors, it’s a real estate investment tool that works in the same way as mutual funds.
But while mutual funds can be traded on the stock market, eREITs are not and because of this, eREITs are not as liquid as mutual funds or traditional REITS.
Through eREITs, investment in the real estate sector can be made without the help of a middleman.
2) eFunds
This is a professionally managed private fund that invests in a diversified portfolio of residential and commercial properties. Unlike eREITs, eFunds focus more on growth than on income.
As an investor with Fundrise, you have 2 options in which you can invest and expect to see returns: debt investment and equity investment.
Debt Investing
In this form of investment, you become a lender to someone who purchases the property. When the owner makes the payment for the mortgage, you get your investment back with interest.
Equity Investing
This means you become an equity holder in the property. You earn a return in rental fees and appreciation in the value of the property.
When the property is sold, you get your investment back along with a share of the profit.
Fundrise investors get paid in 2 ways:
1) Quarterly dividends
Rental income generated on your investment is shared with the investors in the form of a quarterly dividend. Depending on what option you choose, your dividend can be deposited directly into your bank account or reinvested in Fundrise.
2) Equity appreciation
You get your investment back along with a share of the profit when the property you have invested in is sold, and it may take 2 to 10 years.
Investment in commercial real estate
Investments in commercial real estate can be much higher risk. But, data has shown that the commercial sector has outperformed the capital market in average returns over the past 35 years.
Typically, investments in this sector were limited to investors with access to huge capital. But Fundrise has made it possible for the everyday investor to invest in the commercial real estate and earn bigger profits.
How To Join Fundrise
You can get started by signing up on the Fundrise website.
There are two types of investment plans available for average investors. The Starter Portfolio with low-minimum and the Core Portfolio plans.
There are two instruments through which you can invest – eREITs and eFunds. Each has a different plan for returns.
Whichever plan you choose, your money will be invested in private real estate assets across the US. Based on your investment needs, Fundrise will find suitable assets for you.
Getting started with Fundrise is very easy and can be done in a few simple steps.
- Visit the website and enter your email.
- Read the details of each of the three plans available: Starter, Core, and Advanced. Pick a plan that fits your goals.
- This leads you to sign up with your details such as: name, phone number, address, and social security number are required to be fed into the system.
- You can link a bank account or wire transfer to fund your Fundrise account and start investing.
- You are paid a quarterly dividend on your investment or your investment plus profit when a property is sold. The money is deposited directly into your bank account linked with your Fundrise account.
Fundrise App
The Fundrise platform does have an app, which is available on the Apple and Android platforms. It can be downloaded in the both Play Store and App Store.
In the App Store the app is rated 4.8 out of 5 stars with over 5,000 ratings. In the Play store the app is 4.5 rating out of 5, with 51 ratings. Most reviewers praise the apps simplicity, responsiveness and intuitiveness.
Fundrise Fees
For facilitating your investment, Fundrise charges a management fee of 1% as per the following break-up:
- 0.85% as yearly asset management charges
- 0.15% yearly advisory charges
While the flat asset management fees are quite competitive, Fundrise has other fees for its products and services.
However, when you invest through Fundrise, there are no middlemen involved. You invest through the Fundrise platform either in eREITs or eFunds.
In either case, you pay only the asset management fees and no commission to any broker.
Origination Fee
When Fundrise acquires a new asset with your investment, it charges 0% to 2% as the origination fee.
IRA Fees
Fundrise charges you a yearly asset fee of $125 to be paid to Millennium Trust Company.
Specific eREITs
A variety of additional fees are charged for specific eREITs. These may include acquisitions, servicing, and asset management, among others.
The complete detailed overview of their fees is available in the handbook provided with each investment.
Early Exit or Redemption Fee
When you choose to exit from a deal within the first 5 years of your investment, Fundrise charges a fee of 1% to 3%. However, there is no fee if you exit in the first 90 days of the investment.
Fundrise Account Types
Fundrise gives its investors three different types of investment opportunities.
1) Starter Portfolio
This investment option starts with a minimum investment of $500 and it offers you a diversified portfolio of up to 10 real estate properties across the US. This investment option carries a 90-day money-back guarantee.
If you are not satisfied with the Starter Portfolio for any reason, Fundrise will buy your investment back from you so long as you refund within the first 90 days.
2) Core Plans
There are three different core plans that you can choose from, which gets you the basic plan with a minimum investment of $1,000. Subsequently, you can upgrade to any other plan for free.
Under this investment plan, you enjoy a much larger diversification of over 40 properties.
Supplemental Income
The core plan focuses on real estate assets that promise regular cash flow, such as through rental income or interest. You earn a higher dividend on this type of investment.
Balanced Investing
This option of investment tries to strike a balance between growth and income. You earn a dividend as well as see appreciation in the value of the properties. You are given diversified investment opportunities so that you can have both growth and income.
Long-Term Growth
This plan includes investment opportunities that are expected to deliver a high rate of appreciation in the long-term. However, such investments bring in very little by way of dividends.
3) Advanced Portfolio
This is the highest tier of investment, where a minimum of $10,000 is required. This offers a more diversified portfolio of over 80 real estate assets.
Your investment is backed by a more sophisticated strategy for higher returns.
No matter which investment plan you have chosen, you can always change or upgrade the plan. You are not stuck with any particular plan.
What Type of Investor Is Fundrise Right For?
Fundrise has revolutionized the investment scene by bringing in eREITs that make it possible for small investors to access real estate investments. A small investment in a large number of properties is what the company is targeting.
The Fundrise business model is good for both average investors as well as accredited big-ticket investors.
Does Fundrise Pay Dividends?
Yes, Fundrise pays dividends every quarter that get deposited directly into your account or automatically reinvested if you choose to do so.
Can You Make Money With Fundrise?
Investors have earned solid gains over the past several years since the company has made it possible for small investors to make investments in real estate through the platform.
The historical annual returns that Fundrise has paid to its investors range from 8.7% to 12.4%.
Over the past six years, the company has paid a handsome return to its investors. However, investments are subject to market risks and past returns are only an indication that the company has been on the right track and profitable.
There is no guarantee that the company will keep making huge profits and paying out rich dividends to its investors. Investing calls for calculated risks and discretion.
Our review does view the company’s consistently high rate of return on investment as a positive. What seems clear is that the company is not a fly-by-night operator and has long-term vision and strategy for this sector.
Can You Lose Money On Fundrise?
The banking and financial transactions that you perform on Fundrise’s website and the personal information you feed into the Fundrise system are secured by bank-grade security mechanisms. These security measures include Transport Layer Security, AES symmetric encryption, and 2-factor authentication.
The investment portfolios made available by Fundrise are all in accordance with regulations laid down by the Securities and Exchange Commission (SEC). They are bound by a strict reporting requirement as is the case with other publicly listed companies. This ensures complete transparency in reporting financial details.
But all investments are subject to risk. Fundrise has done very well since its inception and is expected to perform in the same manner, but nothing can be said with certainty. It depends on a number of factors including the investment decisions of Fundrise and the overall market conditions.
Is It Good To Invest In Fundrise?
Based on our research, Fundrise has a good track record. It’s been paying out handsome dividends and returns, and is a credible organization.
However, an investment decision depends on many factors including the financial goals and available investment options. A wise investment portfolio selection is the key.
How Do You Get Your Money Out of Fundrise?
Fundrise investments are long-term, typically for five years or more. This is in line with most real estate investments.
Since eREITs are not traded on the stock exchange, you cannot cash out immediately by selling your shares.
There is a bit of complication when it comes to cashing out. Your investments are put into particular real estate assets and they stay invested for years.
During the investment period, their value may appreciate. You are not able to cash out from your investment until the asset you have invested in is sold.
However, Fundrise has solved this problem by introducing a redemption plan to cash out from a deal. The option is available during a fixed period of time every quarter.
So, in effect, a Fundrise investor now has four windows in a year to cash out from a deal, rather than waiting until the property is actually sold.
Subject to how long you have held the investment, you may be charged up to 3% for cashing out from your investment.
How To Redeem Your investment With Fundrise
To redeem your investment, you are required to submit a redemption request through Fundrise’s website. You can find this request form in your Accounts Settings.
You can redeem your shares after 5 years without having to pay any fees.
The fees for redeeming shares are as follow:
- 0% for shares held for up to 90 days
- 3% for shares held for 3 year or less
- 2% for shares held for 3 to 4 years
- 1% for shares held for 4 to 5 years
- 0% for shares held for 5 years or more
How Are Fundrise Dividends Taxed?
For tax assessment, your earnings from Fundrise investments are treated as ordinary income. The company reports all its payments towards dividend and distribution each year on a 1099-DIV tax form.
Fundrise Competitors
1) PeerStreet
PeerStreet is a real estate investment company that uses crowdfunding to raise capital for its business. But compared to Fundrise, PeerStreet targets huge funds from high-net-worth (HNWI) individuals.
Only accredited investors can invest in PeerStreet, while with Fundrise any individual can invest. PeerStreet makes bi-monthly distributions, while Fundrise makes quarterly payments.
2) RealtyMogul
RealtyMogul is yet another real estate investment platform that uses crowdfunding to raise capital for its business.
It offers investment opportunities in REITs to both accredited and average investors. The minimum investment threshold is $1,000.
3) Rich Uncles
The focus of Rich Uncles is on the collection of rent though it has investment options in growth properties. It pays monthly dividends and the minimum investment size for its REIT plan is $500.
However, investors need to have a minimum net worth of $70,000 and should have an annual income of at least $70,000.
It also has a student housing investment plan where one can start investing with $5 with no minimum net worth requirement.
While Rich Uncles invests only in commercial real estate assets with big-name tenants and 50 equity plans, Fundrise investments are diversified and more in developing projects.
Is Fundrise A Good Investment?
Fundrise is a good investment option for all those looking to enter the real estate investment arena with a limited budget. For big-time investors, it is a successful model with robust financials and business assets.
There is no denying that they make it possible for small investors to get involved in big real estate projects. Which in the past has been limited to only big investors with investable assets of a certain figure.
Is Fundrise Safe?
Investments in Fundrise, like all investments, are subject to market risks. Not only is the company being run by efficient and competent management, but its fundamentals are strong.
At the time of this review, the company manages or owns approximately $4.3 billion in total real estate investments nationwide. But its future success and security of the investors’ assets, all depend on how the market behaves in the future.
Is Fundrise Legit?
Based on our research, we were able to conclude that Fundrise is a legitimate platform that allows investors an opportunity to diversify into private real estate investments. Below is information from review sites that share what others are saying about the platform.
Trustpilot
As far as customer reviews, Fundrise has an excellent rating on the TrustPilot review platform. To date, the company is rated 4.5 out of 5 stars from 282 reviews.
Better Business Bureau
The Better Business Bureau gave Fundrise an A+ rating and the company has been accredited since 2016, with 5-stars for customer reviews.
Awards
Fundrise was named by Forbes in 2019 as one of the 50 most innovative fintech companies in the United States. And the company was ranked as the #1 fastest-growing fintech company on the 2018 Inc. 5000.
Conclusion
As I mentioned, investing doesn’t come without risk. Therefore, it’s important that you do your due diligence before getting started with any investment platform.
Fundrise simplifies the process by making real estate investing more attainable for the average investor. Now anyone looking to diversify their portfolio can invest in real estate like the pros.
If you like what you’ve just heard in this Fundrise review, you might want to give the platform a try. Just remember, real estate investing does require a long-term commitment.
>> Click here to learn more about Fundrise
Fundrise FAQ
Can you make money with Fundrise?
Yes, you can. Here is a look at the annualized return on investments that Funrise has paid to its investors over the last 6 years: 2014 (12.25%), 2015 (12.42%), 2016 (8.76%), 2017 (11.44%0, 2018 (9.11%), and 2019 (9.47%). Just remember, no investment vehicle is without risk and returns are guaranteed.
Is Fundrise a good investment?
Fundrise is a good investment option for all those who seek to enter the real estate investment arena with a limited budget. For big-time investors, it is a successful model with robust financials and business.
What is the average return on Fundrise?
The historical annual returns that Fundrise has paid to its investors range from 8.7% to 12.4%.
How do I withdraw money from Fundrise?
Fundrise investments are long-term, typically for five years or more. This is in line with any real estate investment. Since eREITs are not traded on the stock exchange, you cannot cash out immediately by selling your shares. Fundrise solved this problem by introducing a redemption plan to cash out from a deal. The option is available during a fixed period of time every quarter. Subject to how long you have held the investment, you may be charged up to 3% for cashing out from your investment.
