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Real estate has always been a lucrative option for investors. But, it’s as risky as any other business. You need to make countless decisions from where to invest, what to invest in, and how much to invest. This is where Fundrise comes to the rescue.
All this can be very difficult if you do not have the right help by your side. One of the best options for investors is a REIT (real estate investment trust). It offers investors a chance to diversify their portfolio while reducing the risk.
Fundrise makes it easy to invest in REITs. It's among the most popular online platforms offering real estate investment services. In this Fundrise review, we'll have a critical look at the tool and understand if it's worth a try. Let’s get started.
Quick Summary: Fundrise is an online real estate platform that allows you to invest your money, according to your goals, in a portfolio filled with dozens of real estate projects — each one carefully handpicked and proactively developed with the goal of growing your net worth.
What is Fundrise?
Fundrise is an online platform that allows investors to profit from the growing real estate industry. Launched in 2010, Fundrise was the first complete real estate investment platform that allows big and small investors to “build a perfect portfolio”.
It is one of the fastest growing real estate investment platforms. It generated major buzz in 2015 when it introduced its own eREIT, shortened for electronic Real Estate Investment Trust. When you choose Fundrise eREIT, you directly invest in the property instead of investing in a corporation that invests for you.
The company has invested in over 2.5 billion dollars of real estate. With an average return of 10.79%, Fundrise is a good choice for investors interested in increasing their profits from real estate.
The expected hold term is five years but the company may offer redemption options at a fee.
How Does Fundrise Work?
The platform is available in all 50 states and signing up is quite easy as well. Go here to make an account. You may be required to upload some documents for verification purposes. From what we know, the required documents changes from person to person.
You must be at least 18 years of age and a US resident, accredited or unaccredited, to be eligible to become a member. While the service is currently not available to non-US residents, foreigners may be able to open an account if they own an active US-based entity (LLC, trust, etc.) with a tax ID.
Once you become a member, you will get the option to invest in the Starter Portfolio (low-minimum) or Core Portfolio (choose from three plans).
Pick one that suits you the best and go ahead with the investment. Your money will be invested in real estate throughout the country. This is done through eFunds and eREITS.
The platform will allocate your funds or choose your investments based on your needs and goals. While the payout differs from user to user, most will receive it in one of the two ways:
- Dividends – distributed every quarter
- Returns – this is profit due to the increase in the value of an asset you have invested in
While dividends are more recurring, returns from the rise in the value of an asset can take time as most Fundrise portfolios are long-term, hence it may be a while before an asset matures or reaches the term end.
Moreover, these returns are not guaranteed but they can be very rewarding at times.
What Do I Need to Start With Fundrise?
It is very easy to start with the company as the current minimum investment is only $500. Anyone with $500 can start with the program under the Starter Portfolio.
You will need at least $1000 to invest in one of the Cort Portfolios. It offers three options to choose from:
- Long-Term Growth: This plan is suitable for investors who have the time to wait for their investments to bear fruit. These long-term portfolios may offer higher returns but they take longer to mature.
- Supplemental Income: This is said to be suitable for investors who want a continuous and steady stream of income. These plans focus mainly on dividends that are usually paid on a quarterly basis. While supplemental income assets also reach an end term and may appreciate over time, the returns from appreciation may not be very high.
- Balanced Investing: This option is designed for investors who want to build wealth. It’s more diversified than the other two plans.
It’s important to know about your goals and why you want to invest to be able to choose the right option. You can count on Fundrise’s three-step questionnaire to help you understand the right option for you.
|Cost||Fee system – 1% per year|
|Minimum investment requirement||$500|
|Length of investment||N/A|
|Support accounts||Personal accounts, joint accounts, entity accounts|
|Available properties||Single family, residential, commercial|
|Offerings||Preferred equity, equity, debt|
|Available in||The US|
- Fundrise Rating: This feature lets you understand how risky an asset is. The company provides a well-calculated rating with each investment asset in your portfolio. While you may see some high-risk assets in your portfolio, they are usually more rewarding and balanced out by some less risky options.
It uses a letter rating system (A to E) to help you compare different assets. It’s an objective system that’s designed only for the sake of information.
The ratings are not investment advice and may change over time with the changing scenario.
- Reinvest Dividends: The Fundrise Dividend Reinvestment Program (DRIP), lets investors reinvest dividends automatically without any extra charges. This is a great feature as the money you earn can be reinvested to help you earn more money.
- eFund: It’s a private fund that offers a variety of commercial properties. eFunds are designed for growth and not income.
- eREIT: Unlike eFunds, eREITs are designed for income. The main benefit of investing in eREIT is the money you get to save that you'd otherwise pay to the agents in the form of commissions if you went for traditional eREITs.
- IRA: The platform gives you the opportunity to invest with pre-tax money so you can retire peacefully. While it’s a great option for people planning for retirement, keep in mind that the platform currently only invests in REITs through IRA.
- Shares: The company is said to be working on an IPO. You must have a minimum of $1000 in your account to be eligible. Only those with one of the advanced accounts will be allowed to buy shares. You can invest a maximum of 25% of your total balance.
The IPO may be a great option for investors given the huge success of the platform. It has total funding of $55 million right now and some main investors include Renren. The company recently raised $14 million in an offering and is expected to grow big in the future.
Customer Support: It can be difficult to get in touch with the company unless you become a member. While there are some great resources on the site, the platform does not advertise a direct contact number or email.
How is The Performance?
As mentioned earlier, the platform appears to be doing well. Here are some historical figures:
Like all other investments, previous figures do not indicate future performance but it does show that the company knows what it’s doing with your money.
The overall performance seems to be good, especially since the company is working continuously to improve its game. Back in the day, cashing out your gains could be a problem as you could not make a profit until the asset you invested in was sold.
However, now, you can cash out of deals during specific periods. This gives you the chance to exit a trade when you don't want to wait for it to mature.
The company is also known for its impressive accountability policy. It ensures your money is safe and secure. It had a special 0% fee package unless you got 15% returns when invested in Income eREITs. While this policy is no more in place, it may come back into play.
Moreover, you’re also covered when you invest in Growth eREITs. You will receive $500,000 from the company if your investment gives you less than 20% returns.
Pros of Fundrise
- Low Minimum: You only need $500 to start, making it a lucrative option for all kinds of investors.
- Dashboard: The dashboard is very easy to use. You can see your earnings with just a click. There are also graphs for easy understanding of your portfolio and income.
- Property Details: You can learn more about your property by going to the map in the dashboard and choosing any specific property. The platform will show you details including images and current status (rented, etc.)
- No Accreditation: All types of US investors can invest with the company, which is a welcome change as most other platforms have limitations on who can be a member.
- Low Fees: The company only charges 1% asset management fee (yearly), which is low when compared to other options.
- Diversification: Your investment is safe thanks to the amazing diversification option as the company is known to invest in multiple assets to reduce risk.
- Guarantee: Fundrise is one of the few real estate investment companies to offer a 90-day money back guarantee. It gives you the right to get a complete refund if you are not happy or satisfied with the results. There are, however, some conditions that apply.
- Good Returns: You can receive regular income to opt for long-term goals. The company pays not just dividends but also profit when your investment gets sold at a high rate.
- Additions: You can add as low as $100 to your existing fund. Plus, you can also reinvest dividends.
Cons of Fundrise:
- Customer Support: It is not possible to directly contact the company unless you become a member. Your only option is to get in touch with the team via social media platforms.
- Payment Options: The platform does not accept debit and credit cards or savings account. You can only fund via ACH transactions or wire transfers if you want to invest above $25,000.
- Liquidity: Since Fundrise eREITs aren’t publicly traded, you do not have the option to sell your asset in a secondary market. This can be troublesome for investors. However, the platform now offers some ways to get out of it. Still, liquidity can be an issue.
- Tax: You may have to pay high taxes on distributions as they are treated as ordinary income.
Who is Fundrise For?
The platform is suitable for all kinds of investors including big and small investors (firms included). It offers a wide variety of plans and allows you to diversify your portfolio.
Plus, you can find a lot of information about the property, which is a great benefit as it makes you feel in control.
Who is Fundrise Not For?
It may not be suitable for users who want to enjoy liquidity as you may not be able to cash out funds whenever you want.
Fundrise Pricing Plan
The company charges only 1% fee (0.15% advisory fee + 0.85% management fee). However, there are also some hidden and miscellaneous fees that can take the total cost to as high as 3%.
These hidden fees can be a major block for some users as you may end up having to pay a lot without earning any money, especially in the beginning.
Are There Fundrise Alternatives?
Some good alternatives include RealtyMogul and RichUncles. The latter is said to be great as it offers $5 minimum investment. Nonetheless, no option out there is as easy to use and reliable as Fundrise.
You can send a redemption request from your portfolio if you intend to redeem your shares. There is a 60-day period, after which you will be able to obtain liquidity on a monthly basis. However, remember that you will have to pay a penalty of up to 3%.
Is Fundrise Safe to Use?
Technically speaking, no investment is safe but Fundrise works hard to mitigate risk. There are guaranteed returns but you have to compromise on liquidity.
Other than this, your data is safe as the platform uses bank-level security and AES bit encryption to ensure there are no hacks or attacks. It also uses AWS to host data, providing a great layer of security.
Give Fundrise a try if you’re serious about earning money. You can receive quarterly returns consistently.
It’s considered a pioneer in the industry and is known for being the first to introduce new services and products. The dashboard is also easy and the advisory board is reliable, but some more clarity regarding fees would’ve been better.
Fundrise is a great platform if you want to enjoy good returns from real estate investments. You can start with as low as $500 but the hidden fees can be quite a bit of trouble as you can never be sure of exactly how much you will pay in the name of charges. The good thing, however, is that you can make real money with this platform.
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