We’re so impressed with Fundrise that we needed to make this article review. Fundrise is a revolutionary platform that makes real estate investing (even commercial real estate) accessible to everyone.
Get Started with Fundrise here.
Disclosure: If you sign up with my Fundrise link, I earn a commission at no extra cost to you. This just helps to support my channel! All opinions are my own.
Overview Of Fundrise Real Estate Investing
What do names like Grant Cardone, Sam Zell, Donald Bren, and Donald Trump have in common? They are all celebrity real estate investors (and a few of them developers) who have made, among them, billions from real estate. Many smaller investors, however, have no idea where to start with real estate. If you’ve wanted to invest in real estate but have been put off by the complexity, real estate Crowdfunding platform Fundrise could be a solution.
The platform opens up investing opportunities that were once closed off to non-accredited investors. Furthermore, it does so in a simple way that does not require you to be highly knowledgeable about managing real estate.
Fundrise Review: Commercial Real Estate Investing for Everyone
Why Invest On Fundrise
Fundrise, and real estate crowdfunding generally, broadens market access to a lucrative investment space. Significant changes in the laws around crowdfunding in recent years mean that for the first time, small investors can participate.
On this front, the JOBS Act a few years ago was the real catalyst. In the past, it was necessary to be an accredited investor in order to take part in real estate crowdfunding offers. The minimum threshold for an accredited investor is $1 million in net worth or $200,000 annual income for the preceding two years.
Investing on Fundrise gives you access to this space even if all you have to invest is $500. In addition, you get investment performance underpinned by world class real estate experts. Fundrise gives you enormous potential for diversification. A single investment you make could have underlying equity in literally dozens of commercial, high value properties in the market.
As we all know, diversification is great for protecting your investment returns. With Fundrise, diversification is the norm, and you don’t need to pay an expensive financial advisor to get it.
What I especially like about Fundrise’s approach is their value investing approach. They will buy underpriced real estate to ensure safer, and potentially greater, returns over time. If you know the investment philosophy of Warren Buffet, one of the best investors, this should sound familiar. Buffet is one of the most famous value investors in the world. Now, you get to apply some of his concepts in real estate.
Fundrise Vs Alternatives: REITs And Mutual Funds
REITs and mutual funds are popular investment vehicles that compete in the same space as Fundrise. To determine if Fundrise is the best option for you, you will want to acquaint yourself with these other investment vehicles.
REITs have been traded going back all the way to the 1960s and have only grown in popularity since then. A REIT is a real estate investment trust that invests almost all of its money in owning and managing real estate. With a REIT, there’s the potential to gain good, regular passive income and cash flow through dividends. However, some REITs have sizable fees that can run up to 10% or more of the trust’s annual revenue.
Mutual funds, on the other hand, tend to focus on stocks and bonds. The typical mutual fund pools your money with that of many others then invests in assets such as equity. Just like with REITs, you can get regular dividends. Mutual funds also offer a good chance of capital gains. A potential drawback here is that fees can eat up some of your gains.
Portfolio Types Available On Fundrise
There are two primary asset types you can invest in on Fundrise. The first is the eREIT, while the other is the eFund. With Fundrise eREITs, you get access to property investments designed to maximize your income and cash flow. This is great if you are looking for regular cash flow from your investments and don’t care so much about appreciation in the value of the investment.
In contrast to eREITs, eFunds are focused on real estate with potential for appreciation in market value. Fundrise will typically purchase a property that fits this profile, then renovate it and make other improvements before selling it. This process takes considerable skill and knowledge of the real estate market. Fortunately, by investing on Fundrise, you don’t need to manage all these details for yourself as they are done for you by the professionals.
In practice, access to asset types depends on your account level. The Starter Account on Fundrise, for example, does not allow you to select the specific funds you invest in. A step up from that, the Core Account gives you a wider variety of eREITs to invest in. With an upgrade to the Advanced Account level, you get access to high growth eFunds not available on other levels.
Historical Returns On Fundrise
One of the key attractions of Fundrise is the platform’s ability to generate good returns year after year. You get the stability of real estate returns engineered by a team of expert investors who know the market better than you might ever do. This saves you time and spares you going through the learning curve, but it also keeps your capital safe.
Over the last several years, here are the annualized returns posted by Fundrise each year:
- 2019 – 9.47%
- 2018 – 9.11%
- 2017 – 11.44%
- 2016 – 8.76%
- 2015 – 12.42%
- 2014 – 12.25%
You can get access to these levels of return even if all you are investing is a few thousand dollars. As with all investments, prior performance is no guarantee of outperformance in the future. The neat thing, though, is that you stand a chance to get returns comparable to the S&P 500 without the much higher volatility of the stock market.
Rather than park your money in a savings account or money market instruments that might be paying you near-zero interest rates, Fundrise can boost your returns. In addition, you dispense with picking out properties and renovating them yourself as others do in the real estate market.
Getting Started With Fundrise Real Estate Investing
Getting started with Fundrise is straightforward, and there are no high setup fees to open your account. Instead, account opening is free and instant. Sign up on the Fundrise website and create your account. You will need to select an Account Level from these available options:
- Starter – $500 or more invested
- Core – $1,000 or more
- Advanced – $10,000 or more
Fundrise shows you performance projections based on your selected setup. This lets you easily gauge which of these account levels will best meet your investment objectives.
On account opening, you will also need to fund your account and agree to Fundrise’s terms of use so you can start investing. Pick a return profile to guide your investments. The first return profile is Supplemental Income, which optimizes for a stream of regular income.
At the other end of the scale is the Long Term Growth profile. This profile is ideal if you want higher long term returns than what the Supplemental Income profile gives you. A third return profile, Balanced Investing, falls somewhere between those two extremes, giving you regular income and asset growth.
If you want to try Fundrise with just $500, try the Starter plan:
How To Improve Your Fundrise Performance
The availability of different funds and asset types of Fundrise means that you can tailor investments to suit your goals. Rather than give uniform investments or a single fund to all participants, Fundrise makes it possible for you to pick. This opens up your opportunities so you can get even higher investment returns if you should choose.
In order to earn higher investment returns on Fundrise, you need to compare your goals to those of the different assets available. When it comes to eREITs, you get the option of picking eREITs or Growth eREITs. Which one you choose determines whether you earn substantial capital gains or not.
Income eREITs invest in debt in commercial properties. This makes them a great vehicle for providing consistent income.
Growth eREITs, on the other hand, invest in property ownership, typically in multi-family commercial properties with good prospects for appreciation. These properties are typically in cities around the country, and Fundrise looks for undervalued properties to maximize the potential upside.
You can also maximize your returns by taking part in the Fundrise Dividend Reinvestment Program (also known as DRIP). When you select to use DRIP, your dividends will automatically be reinvested into offerings on Fundrise. This compounds your returns, allowing you to earn higher overall returns.
Fundrise Fees
Fundrise prides itself on having some of the lowest fees in the investment management world. Investing on the platform comes with two specific fees you need to be aware of.
The first of these is the Annual Management Fee. Charged by Fundrise each year on all investor accounts, it is broken down into two components: asset management and portfolio management. The asset management component is levied at 0.85% of the investment. The fee covers the management of the actual real estate. Portfolio management carries another 0.15% annual cost. Together, these two components cost 1% of your investment annually.
In addition to the Annual Management Fee, there’s an Origination Fee. This fee costs between 0% and 2%, depending on the investment. The fee accounts for Fundrise’s work in origination, researching and acquiring real estate assets.
As you can see, Fundrise’s fees are significantly lower than those you might pay if you were hiring an investment advisor. You get experts managing your real estate investments for you for a very low fee.
Liquidity And Selling Your Investment Stakes
Fundrise is meant to be a platform for long term investments. This is different from the stock market, where you might reasonably expect to hold a stock for just a few months. With real estate investments, the underlying assets are illiquid, and therefore, divesting from your stake can incur additional costs.
To accommodate investors who might want to sell their stake before an investment matures, Fundrise offers quarterly liquidity. This means you can request a redemption on a quarterly basis. However, redemptions come with a fee, calculated based on the time you have held the investment, as follows:
- First 90 days – 0%
- Up to 3 years – 3%
- 3-4 years – 2%
- 4-5 years – 1%
- 5+ years – 0%
The first 90 days of your investment have a grace period for redemptions in case you get cold feet about your decision. Beyond that, quarterly liquidity opportunities are still an improvement over REIT investments that might not offer such liquidity.
Even though a Fundrise investment might have a term of 5 years, you can still divest out of the position entirely sooner than that if need be. True, by staying in the position you can earn a higher return per year, but having the flexibility can be helpful in case of financial emergencies.
Frequently Asked Questions About Fundrise
As a relatively new area of investing, real estate crowdfunding, and Fundrise in particular, still seems mysterious to many investors. These are some of the most important and frequently asked questions about Fundrise.
Q. Who can invest on Fundrise?
A. Investing on Fundrise is open to all US residents. You have to be at least 18 years old. Whether accredited or unaccredited, you can invest on Fundrise.
Q. What are the downsides of investing in real estate via Fundrise?
There is limited liquidity, potentially available quarterly, but this is a feature of real estate investing generally. Investing in real estate tends to be more illiquid than other assets such as stocks or bonds. Another potential downside is that if you take the quarterly liquidity, it’s taxed as regular income and not capital gains.
Q. Is it possible to add to my investment at any time?
Yes, you can add to your investment at any time. You can click “Add Funds” in the Fundrise dashboard and add a minimum of $100 and up.
Fundrise An Entry Path Into Real Estate
For the small investor who has limited real estate expertise, Fundrise is a compelling entry way into real estate investing. Thanks to its real estate crowdfunding model and lack of need for accreditation, Fundrise genuinely expands investors’ opportunities.
You can get started on this platform for just $500. Fundrise allows you to earn annual returns in the 8% to 12% range and improve the diversification of your investing. Fees are minimal, and you can opt for higher growth funds or the DRIP program to accelerate the growth of your investment. All told, this is a great opportunity whose time, for many would-be real estate investors, has come.
If you want to try Fundrise with just $500, get started here:
