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CloseFundrise Review
Fundrise offers investors the potential to invest in crowdfunded real-estate through its eREITs.
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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
Looking to break into real estate investing? It can be a bit overwhelming, to say the least.
There’s usually a high upfront cost involved, a long-term commitment, you might have to be an accredited investor — and don’t forget about the high fees stolen (ok, taken) by middlemen.
Wouldn’t it be great if you could get around all of that? Good news — you can.
Fundrise is a leading real estate crowdfunding platform that simplifies the process of investing in REITs. While most crowdfunding platforms require you to be an accredited investor to participate, Fundrise lets non-accredited investors, too.
As smaller investors demonstrate an increased demand in real estate crowdfunding throughout COVID-19, with some platforms reporting a 50% increase, Fundrise will no doubt be on every investors list.
In this review, we take a look at what exactly Fundrise is, how it works, its features, fees, and everything else you need to know.
Fast Facts
- Account Minimum: $500
- Fees: 1% per annum
- Best for: Long-term investors
- Accredited Investor: No
- Highlight: High ROI
- Promotion: No promotion at this time
Ratings
- Commissions and Fees: 9/10
- Diversifications: 8.5/10
- Customer Service: 9.2/10
- Usability: 10/10
- Deals: 8/10
- Due Diligence: 9.5/10
- Overall: 8.5/10
What is Fundrise?
Fundrise is a leading and easy-to-use real estate crowdfunding platform, founded as recently as 2012 and headquartered in DC. It offers everyday investors the opportunity to profit from real estate, a core part of many of the most successful investors’ portfolios, for only a few hundred dollars. This has made Fundrise popular with younger investors and millennials alike.
The crowdfunding platform uses technology to make quality real estate more accessible to ordinary investors. Since its launch it has earned some of the first accomplishments in the space.
For example, in 2015, Fundrise introduced its first eREIT to the market, shaking the crowdfunding space. With its experience and competitive fee structure, Fundrise holds the #1 spot in our best real estate crowdfunding sites report.
Electronic real estate investment trusts (eREITs) is a Funrise invention that brings real estate to ordinary investors. Just like an ETF or mutual fund, investors can consider eREITs to create a diversified portfolio.
Over the past 8 years, Fundrise has grown to over 140,000 investors, managing $1.2 billion in assets, and in 2019, the company reported an overall net return of 9.47%. As the real estate crowdfunding market continues to escalate, with experts predicting it reaches USD Billion by 2027, Fundrise is in a key position for a bright future.
Overview & Summary
- Fundrise offers individual investors the opportunity to invest in real estate through an eREIT or eFund.
- The crowdfunding platform uses technology to make quality real estate more accessible to ordinary investors.
- Fundrise has developed a 3 phase investment strategy to help combat the current pandemic.
- Investors can get started by making an initial deposit of only $500.
- Once you sign up to Fundrise, you will invest your money in either the Starter Portfolio or in a Core Portfolio plan.
- Fundrise offers investors a few quality options. By far, the most popular option is its eREIT, though. Another is its eFund.
- To comply with the SEC, Fundrise can raise money in one of two ways: Crowdfunding with 506(c) for accredited investors only, and regulation A+ for non-accredited investors.
How Fundrise Plans to Invest Through a Crisis
| Phase | Objective | Target Investments |
|---|---|---|
| Phase I | Maximize near term flexibility | Public markets and structured debt |
| Phase II | Maintain stability and increase yield | Distressed debt and private market rescue/bridge loans |
| Phase III | Capitalize on opportunities for higher potential return | Undervalued properties that we intend to hold long-term |
Although no one is yet sure of the true long term impact of COVID-19 on the wider economy, Fundrise states in a recent newsletter that the potential for a harsher, longer recession will be much harsher than the stock market and its competitors are predicting.
While the peak of cases may have already hit its high, Fundrise believes that there is a probable risk of a second outbreak from an ongoing series of local outbreaks. These outbreaks are likely to result in more shutdowns which will in turn put downward pressure on the economy over a broadly sustained period.
The platform’s newsletter goes on to describe the ensuing increased unemployment rate, beleaguered businesses, and health dangers that might put a damper on demand, and slowing down recovery time.
Additionally, it mentions the pile-up of bills, for both businesses and individuals, before going into the complex chain of relationships within the market. One company’s costs are revenue for the other company; if customers are too afraid to go out and spend, businesses won’t make enough to pay landlords and suppliers, and so continues the chain.
The real estate market moves slowly, (generally lagging behind the stock market) so Fundrise believes that the downstream impact of COVID-19 will take several months to trickle down, in addition to the subsequent reaction to seep into the corners of the economy.
The Fundrise plan, at this point, is to build up an increasing cash reserve across the portfolio (almost $200 million in total across active funds) and establishing itself as a buyer with brokers and agents that channel future deal flows.
Ultimately, the platform thanks its conservative nature, in conjunction with its patience for its ability to acquire better opportunities to acquire assets that will potentially generate high returns over the long term.
As a result, Fundrise has created an investment strategy that will be implemented in three phases.
Phase 1: Maximize near term flexibility.
Fundrise believes that bonds, and their increased spreads, represent a thoughtful investment in the interim today. This will result in higher yields than that of the money market funds, while providing near term flexibility at the same time. The platform will use this to determine the best time to shift into more liquid acquisitions.
A key difference between bonds and stocks is that stocks offer you a part share in an asset or net worth, while bonds, on the other hand, are debt instruments in their own right, that could potentially accrue interest as payment for a loan.
Phase 2: Maintain midterm stability while seeking increased yields.
Fundrise will utilize its combination of case reserves and its experience as an investor and operator to recapitalize certain projects it believes has powerful fundamentals.
Phase 3: Capitalize on opportunities for higher potential return.
“We believe it is better to buy great real estate at a good price than bad real estate at a great price” – Warren Buffet
Fundrise takes inspiration from Warren Buffet in its third phase of its strategy. The platform believes that capitalizing on opportunities to directly acquire assets whose prices have decreased significantly where they were before will have a long lead time.
What This Means for Your Portfolio
In the medium term, Fundrise’s investment plans will focus on allocating newly launched funds, taking into consideration the impacts of the COVID-19 downturn and the timing of the private real estate market, at the same time.
With this, the company’s variety of growth and income focused plans will be less pronounced, as it looks to engage with assets that offer investors more flexibility and stability during phase 1 and 2. Phase 3 will result in more diverging plans to acquire what it believes to be distressed or undervalued assets.
Pros
- Wide range of investment options
- Low entry barrier
- High ROI of 8.7% – 12.4%
- High customer satisfaction rating
- No minimum income necessary
Cons
- Lack of fee transparency
- Low liquidity
- Distributions are taxed as ordinary income
What is the Fundrise Minimum Investment Requirement?
Because Fundrise is all about giving individual investors access to the real estate market, you can get started by making an initial deposit of only $500. This investment will allow you to use the platform’s starter portfolio, a wide and diverse range of eREITs and eFunds with underlying real estate projects across the U.S.
Does Fundrise Pay Dividends?
Investors will earn returns through quarterly dividends, plus appreciation in the value of the shares you hold.
Goal-Based Investing
An investment amount of $1,000 will get you an upgrade to a Core Portfolio. With this, you can take your pick of three plans, focusing on varying aspects. Here is a quick outline of each plan:
| Goal | Objective |
|---|---|
| Balanced Investing | This is a diverse portfolio created for building greater wealth. |
| Supplemental Income | This focuses on dividends and offers a stream of steady income. |
| Long-term Growth | This focuses on gaining superior returns in the long term. |
Investments with Fundrise will comprise of eREITs and eFunds. How these are allocated will depend on your financial goals; whether you’re after income, growth, or a mixture of both.
Investors can buy eREITs from Fundrise directly. This means you won’t need to pay commissions or related fees. Plus, you’ll be exposed to less volatility. That said, eREITs are low liquidity. You will be required to pay a fee for withdrawing money by the end of the contract.
With the launch of the Fundrise eREITs, the company offers an “accountability policy” that goes beyond the industry standard.
- Investors in their income eREITs will pay $0 in asset management fees. This does not apply to investors earning 15% or more annualized return within the first couple years of operation.
- With the Growth eREIT, Fundrise will pay up to $500,000 in penalty fees to investors earning less than 20% non compounded annual return.
If you look at these and don’t feel initially compelled towards one in particular, Fundrise provides a questionnaire with three quick steps to help you choose the best option for your investing style and financial goals.
How Fundrise Works
Once you sign up to Fundrise, you will invest your money in either the Starter Portfolio or in a Core Portfolio plan, as outlined above. No matter the one you choose, your money being invested in an allocated mix of eREITs, and eFunds made up of private real estate assets positioned throughout the U.S.
Your specific allocation will be tailored to take into consideration your personal investment needs. Although your plan will determine the results, overall, you will receive payouts either through:
- Quarterly dividends
- Asset value appreciation once the asset’s investment term has expired. Be aware with this, though, that Fundrise focuses on long-term investments, so don’t expect a quick return. Returns are also not 100% guaranteed.
Fundrise Compared
$500
$5,000
1%
(annually)
0.5% – 1%
8.7% – 12.4%
14% – 20% (Equity)
10% – 14% (Preferred Equity)
36 months
1-5 years depends on investment types
Long-term investors willing to conduct their own due dilligence
Accredited investors looking for high-quality, long-term deals
$5,000
N/A
0.5% – 1%
0.5%
(set up fee)
14% – 20% (Equity)
10% – 14% (Preferred Equity)
11% – 12%
1-5 years depends on investment types
N/A
Accredited investors looking for high-quality, long-term deals
Budget conscious investors looking to break into rental property ownership
Minimum investment
$500
$5,000
N/A
Fees
1%
(annually)
0.5% – 1%
0.5%
(set up fee)
Advertised returns
8.7% – 12.4%
14% – 20% (Equity)
10% – 14% (Preferred Equity)
11% – 12%
Investment length
36 months
1-5 years depends on investment types
N/A
Best for
Long-term investors willing to conduct their own due dilligence
Accredited investors looking for high-quality, long-term deals
Budget conscious investors looking to break into rental property ownership
Restricted to accredited investors?
What Can You Invest in with Fundrise?
Fundrise offers investors a few quality options. By far, the most popular option is its eREIT though. Another is its eFund. Below we’ve outlined its features clearly, so you can see exactly what’s on offer for you.
Self-Directed IRA
This is a new feature that allows Fundrise clients to invest with pre-tax money and put it in retirement planning.
eREIT
A non-traded REIT allows you to invest in a cluster of commercial real estates. In comparison to traditional REITs, you will save on commissions. Kind of like a mutual fund but for real estate, instead. You will have access to office buildings, shopping centers and apartments.
Goal-Based Investing
This will be available through the Fundrise 2.0 platform, and it enables you to invest in real estate with your goals in mind, as opposed to located or investment types.
eFund
This is a private fund that focuses on growth, not income. It invests in several commercial real estate properties.
Fundrise iPO
A public offering where the company is selling shares in its parent company as part of its plan to grow.
Fundrise Fees & Costs
Before getting into the nitty gritty, here is a wide view of the investment platform. Below this, we will show exactly what you can expect to pay in fees.
| Year Founded | Amount of Investors | Assets Managed | Fees | Minimum Balance | Accredited Investor Required | Asset Types |
|---|---|---|---|---|---|---|
| 2012 | 500,000+ | $2.5 billion | 0.85% annual management fee. Non-accredited investors will also pay a .15% annual fee. | $500 | No requirement | Real estate and debt equity |
Those with a Fundrise account will pay an asset management fee of 0.85%, annually. Unaccredited investors will pay an annual advisory fee of 0.15%. This means that you will pay $1.50 per annum for every $1,000 you invest. In comparison, Vanguard charges an industry low fee of 0.30%.
The advisory fee is charged to pay for the time and money that Fundrise invests in things like:
- Automated dividend distribution system
- Creating project-standard performance reports
- Customer support
- Fund administration and asset rebalancing
With both fees, you will pay 1% in fees per year. There can also be some other fees added that can result in your fees coming to 2%. Overall, be prepared to pay a 3% fee.
What is the Average Return on Fundrise?
According to Fundrise, the average annual return for investments in 2019 was 9.47%, net of fees, assuming dividend reinvestment.
Given this information, in the table below, we have calculated the average rate of return for an investor over a 10 year period, assuming an initial investment amount of $500.
| Year | Investment Amount | ROI of 9.47% | Total |
|---|---|---|---|
| 1 | $500 | + $47.35 | $547.35 |
| 3 | $599.18 | + $56.74 | $655.92 |
| 5 | $718.04 | + $68.00 | $786.04 |
| 10 | $1,128.82 | + $106.90 | $1,235.72 |
Can I Access Fundrise Promotions?
At the time of writing this article, there are currently no available promotions through the Fundrise platform.
Is it Safe to Invest via Fundrise?
Although few investments are considered 100% safe – and by this we mean a guaranteed return – lower-liquidity real-estate investments typically offer more protection from downturns in the wider market than investments in stocks or mutual funds.
With Fundrise, eREITs and eFunds are one the safest options you can find. eREITs and non-traded REITs are registered investments.
This means that while they do comply with SEC crowdfunding regulations just like an exchange-traded REIT, there is no direct correlation with the volatility of the stock market. This brings with it two pitfalls: 1) it lacks similar liquidity because they are not traded on the market and 2) front end fees will cost you more than exchange-traded REITs.
As we showed in our table above, the minimum investment for a Fundrise eREIT is only $500. The eREITs can be bought only, and clients can be notified whenever new assets become available to the eREITs.
Is Fundrise a Legitimate Company?
Real Estate Crowdfunding is a way to take the investment capital of many investors and pool the funds to buy a real estate asset with said funds. Investors earn a distribution of these earnings through the holding period.
This is called syndication in real estate, but the JOBs act, in conjunction with new crowdfunding rules, allows money to be solicited openly, online. Since these are securities, technically, they are SEC regulated. To comply with current SEC regulations, Fundrise can raise money in one of two ways:
1. Crowdfunding with 506(c) for Accredited Investors Only
This allows capital raisers to raise capital without the hassle of the paperwork it takes to go public. You will need to have a substantive relationship with the deal sponsor to invest in one of these. It allows investors to raise capital publicly and openly, online.
2. Regulation A+ For Non-Accredited Investors
The SEC’s Regulation A+ gives the company permission to raise a maximum of $50 million. The size of these offerings also brings higher costs to set them up. The high cost means that these are structured like a REIT.
But, accredited investors can participate in these, along with accredited. The only downside is that currently non-accredited investors can typically only invest a maximum of 10% of their net-worth, or their income, whichever is higher.
How is Fundrise Different From a REIT?
A key difference between Fundrise and a REIT is that when you invest with Fundrise, you are investing directly into commercial real estate, whereas when you invest in a REIT you are not investing directly into real estate. Instead, you are investing in a corporation that takes your money and invests it in real estate for you.
Redeeming Fundrise Shares
To redeem Fundrise shares from your portfolio, you will need to submit a redemption request. You can do this easily by going to the account settings on the Fundrise website. It will take a 60-day waiting period, after which you will receive liquidity each month. Bear in mind, the value of your redemption might be liable to a penalty fee of up to 3%.
Summary
If you’re thinking about investing your money into real-estate, keep in mind that it’s a long-term investment strategy. REITs are included in this, whether they are publicly traded or eREITs. The potential for portfolio diversification, capital appreciation, and regular distributions are appealing to many, but they are also never guaranteed.
REITs are a more passive way of investing in real estate, enabling you to invest in properties in different locations, while diversifying your portfolio, without the hassle of managing the property. That said, REITs come with high costs to the middle man. Fundrise has worked to remove the middle man and offer a low asset management fee of only 0.85%.
With its above-standard accountability guarantee, Fundrise brings a fresh outlook to the investment market.
Fundrise FAQs
-
How Do You Make Money With Fundrise?
Fundrise can potentially make smaller investors in real estate money by paying dividends and the real estate appreciate over the long term. The returns are earned from the individual real estate assets, plus the potential appreciation in the value of the property. Shareholders have the right to a pro-rata portion of all returns.
As real estate is a long term investment, experts recommend that you invest money for at least 5 years. With that, your potential returns will vary and you will be exposed to risk.
-
How Do You Use Crowdfunding in Real Estate?
Real estate crowdfunding utilizes the power of the internet and social media to connect investors with property investments. It’s kind of like equity investing in that an investor can buy a share of a property. Crowdfunding gives companies access to capital that might have been out of reach otherwise.
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Can You Lose Money in a REIT?
As with all investing types, there is a risk of losing money with REITs. Non-traded REITs, in particular, can be difficult to research. They also have low liquidity which means that it can be difficult to sell them.
Publicly traded REITs also carry the risk of losing value as interest rates increase, usually sending investment capital into bonds. Taking the necessary steps and researching the best REITs to invest in will help you go a long way.
-
Are REITs Riskier Than Stocks?
Publicly traded REITs do offer more protection than their exchange-traded neighbours. But, with all investing, there are still risks. Knowing the right steps to take when investing in both stocks and bonds is key to your success.
-
Do REITs Do Well in a Recession?
Historically, REITs have outperformed the S&P 500 by over 7% per year in late-cycle periods as of 1991 and have brought meaningful protection against downsides in recessions. This has underscored the potential value of defensive revenues and increased yields from dividends in highly uncertain environments. It also proves to be a positive in the current coronavirus recession.
Fundrise and the Competition
See how Fundrise compares to the top real estate investing platforms by reading one of the reviews below.
All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
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