Today we will be reviewing a company Fundrise. Is Fundrise the real deal? Find out in this Fundrise review.
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DISCLAIMER: This is a fully independent review. I’m not affiliated with the company in any shape or form whatsoever.
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Fundrise Review: Quick Details
- Name: Fundrise
- Website: https://fundrise.com/
- Niche: Real Estate Investing
- Minimum investment: Varies per account type
- Recommended?: No. Investing in real estate is a very risky business to get into.
What is Fundrise?
Real estate investing may seem to be something best left to the professionals. After all, you may invest in the stock and bond markets.
Isn’t that supposed to assist you with maintaining a well-diversified portfolio? According to Fundrise, this may not be the case.
Traditional investment methods have been confined to asset classes such as public equities and bonds, but Fundrise is changing that.
Now you can learn from the professionals how to invest in real estate. If you want to develop a diverse investing portfolio, this platform is a good alternative to examine.
Fundrise is a financial technology company situated in the Washington, D.C. metro region that runs a crowdfunded real estate investing platform. It is registered with the Securities and Exchange Commission.
A group of long-term investors founded the company in 2010. It provided consumers with a new way to invest in high-quality real estate without having to cope with the exorbitant fees connected with traditional real estate.
Fundrise now has over 210,000 investors who have invested in over $7 billion in real estate around the nation. In 2021, members received a 22.99% average yearly return, compared to 7.31% in 2020.
How Does Fundrise Work?
Fundrise is an online real estate firm that allows non-wealthy people to participate in private commercial and residential buildings by pooling their assets via an investing platform.
Real estate investment trusts, or REITs, are Fundrise’s core products. REITs engage in income-producing real estate by purchasing and managing properties or retaining mortgages.
The company’s products are known as “eREITs.” Fundrise also provides eFunds, which pool money from investors to acquire land, build houses, and then sell it. Fundrise also provides an Interval Fund, which has more liquidity and diversity than the rest of its products.
Investors obtain Interval Fund, eREIT, or eFund shares by purchasing one of Fundrise’s portfolios: Starter, Supplemental Income, Balanced Investing, or Long-term Growth. Each plan’s combination of eREITs and eFunds, as well as the underlying properties, are determined by Fundrise.
Fundrise also has Advanced and Premium account levels, which provide investors access to a larger number of real-estate projects as well as additional features and incentives.
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Fundrise Overview
In this section of the Fundrise review, we will be looking at what the company offers.
Your money are distributed among a broad mix of Fundrise’s products, known as eREITs and eFunds. Both of these are professionally managed portfolios, and belong to private real estate assets situated across the United States.
What is an eREIT?
An eREIT (electronic real estate investment trust) is a sort of online investment that may only be made via Fundrise. An eREIT is a company that invests only in commercial real estate assets, such as apartments, hotels, retail complexes, and office buildings.
eREIT investments, like ETFs and mutual funds, allow you to conveniently diversify across a large number of properties at a cheap cost.
For real estate investors, Fundrise provides a variety of eREITs. Each eREIT has a certain goal in mind, such as revenue, expansion, or both. Property having the potential for appreciation, or growing in value, is the emphasis of eREITs with an income aim.
Income and growth eREITs adopt a balanced approach to investment, concentrating on both cash flow and future appreciation
eREIT options from Fundrise include the following:
- Development eREIT. This option focuses on multifamily and commercial buildings that are in different phases of rehabilitation and development and has an income goal. You’ll need to contact Fundrise to ask about availability.
- Heartland eREIT. This eREIT is one of the Fundrise alternatives that focuses on a particular area of the United States, which is the Midwest. Its goals are income and growth, and it invests in both residential multifamily and commercial real estate. It’s only accessible to Core account holders.
- Growth eREIT. This eREIT invests in commercial properties that have the potential to rise in value. Its goal is to expand, as the name implies, and it’s only accessible to investors who have a Core account or above.
- Income eREIT. This eREIT invests in commercial real estate assets with a debt component. Its goal, predictably, is to generate revenue. Investors with a Core account or above are eligible.
eREITs offer cheaper costs than regular REITs since they take out the intermediaries and are sold straight to the investor. What does this imply for you, as a investor? Investing in real estate costs a lot less than investing in stocks.
However, since eREITs are not publicly listed, they have less liquidity than REITs. Simply put, this implies that selling your eREITs will be more difficult. Make sure to do your homework before making any investment, just as you would with any other.
What is an eFund?
An eFund is similar to an eREIT, except it only invests in single-family homes, townhouses, and condos.
Historically, the main way to participate in the housing market was via publicly listed homebuilders such as Toll Brothers or D.R. Horton, both of which have shares available for purchase.
However, “double taxation” applies to these businesses, making them less efficient investments than Fundrise’s eFunds. When a corporation’s earnings are taxed, shareholders are taxed on the dividends received from those earnings, which is known as double taxation.
Unlike those publicly traded and constituted as companies, Fundrise’s eFunds are formed as partnerships, so they aren’t subject to double taxation.
In other words, Fundrise considers you and every other investor to be partners. As a result, any cash distributions you receive will not be taxed twice.
Fundrise Real Estate Interval Fund
Fundrise launched this product in December 2020. It aimed to raise $1 billion in its first public offering, with no limit on how much it might raise. It has quarterly liquidity, allowing you to access your cash more quickly, and it is quoted daily.
When you invest fresh money, they are allocated to the Interval Fund according on your account level and plan type.
Fundrise Features
This section of the Fundrise review is dedicated to showing you the different features you can expect from the company.
User-friendly platform.
Signing up should take no more than 10 minutes. You input your name, address, phone number, and Social Security number, and then decide whether to fund your account through an ACH transfer (i.e., connecting your bank account), manually entering your bank information, or a wire transfer.
Low investment minimums.
Fundrise may be a good fit for you if you want to enter into private real estate transactions but don’t have a lot of cash.
Easy redemptions.
Fundrise has a redemption scheme that enables investors to sell their shares back to the company, but they must pay a 1% charge if they haven’t held them for at least five years.
During instances of acute economic instability, Fundrise may halt or postpone redemptions: it did so in March 2020, during the economic effects from the coronavirus epidemic, before returning to regular operations in July 2020.
Similar tactics are used by other organizations in this industry, and it’s something to keep in mind if you’re thinking about investing in real estate.
Possible fees.
Fundrise claims to save money for investors by putting them in touch with real estate directly. The company eliminates the need for a broker-dealer, which saves money. However, there are hidden fees in each real estate transaction that investors may not be aware of.
While Fundrise makes its asset management and advising costs transparent, it also states that its funds retain the right to charge extra fees for work on particular assets, such as development or liquidation fees.
These costs are not immediately accessible from the main site.
Signing Up for Fundrise
This part of the Fundrise review will tell you how you can get started.
The procedure for joining Fundrise is quite straightforward. On Fundrise.com or via the Fundrise app, you may create a Fundrise account.
To get started, choose one of the account tiers. Each one provides you a description of the sort of investor it’s ideal for, so you can figure out which one is best for you.
Then you must give personal information such as your name, email address, Social Security number, citizenship, and residence. You have the option of opening an individual, joint, or trust account.
To conclude, connect your bank account to your account and fund it.
U.S. nationals or permanent residents who are presently living in the United States and are above the age of 18 may use Fundrise to learn how to invest in real estate.
To utilize the platform, you do not need to have a particular net worth or be an authorized investor. There are five distinct portfolios to pick from, so there’s something for everyone.
Account Levels
The Starter, Basic, Core, Advanced, and Premium investment programs are available via Fundrise.
eFunds are available in the Core and Basic portfolios, while eREITs are available in the higher-tier portfolios. Yearly asset management fees of up to 0.85% and annual advising fees of 0.15 percent apply to investments.
While Fundrise has a low minimum investment and minimal fees, it’s crucial to go through Fundrise’s offering circulars to discover about additional expenses connected with certain investment alternatives.
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Can You Make Money with Fundrise?
In this portion of the Fundrise review, you will learn how you can make money with the company.
As a Fundrise investor, you may get passive income via a mix of interest payments, property revenue, and the possibility for property appreciation.
Depending on your chosen plan and the assets in your portfolio, the time and precise amount of your return will vary.
It’s crucial to remember that Fundrise investments are illiquid (not readily convertible to cash) and are intended to be kept for at least a few years. Fundrise’s investments, according to the company, are meant to grow for at least five years.
Fundrise, on the other hand, has a monthly redemption plan that allows you to sell your shares. To redeem your shares, you’ll need to wait at least 60 days after making your request.
Early withdrawals may also be subject to a 1% liquidity penalty, depending on how long you held the shares.
Potential returns on your investments may be expected to be paid out quarterly or at the conclusion of the asset’s investment period, depending on the asset’s value appreciation. Unless you choose to participate in the Fundrise Dividend Reinvestment Program, all dividends will be paid into your bank account (DRIP).
Instead of being paid into your bank account, all profits received will be reinvested in open offers without incurring costs. Keep in mind that dividends reinvested are taxed the same way they would be if you got them in cash.
How can you assure that your investments are safe?
Because of the nature of the assets, Fundrise eREITs and eFunds have a weaker correlation to the larger market and might possibly provide more market volatility protection.
Fundrise isn’t simply interested in any real estate. The real estate division at the corporation exclusively pursues high-quality assets that have the ability to generate revenue while also protecting against losses.
You can relax knowing that your money is going towards safe investments rather than hazardous real estate ventures. Fundrise also employs bank-level security to keep your data secure while you’re on the site.
How can you maximize your earnings?
Your earnings potential with Fundrise will vary based on your portfolio and the investments you make within it. There are, however, a few things you may do to increase your profits.
Fundrise doesn’t provide a single all-encompassing portfolio, but rather a variety of solutions geared to your particular investing style.
Before you begin, make sure you understand each of these programs so you can make the best decision for your scenario.
Also, it’s tempting to take your gains and do whatever you want with them, but reinvesting your dividends sends that money directly back into Fundrise’s open offers. Reinvesting your dividends is free.
Is Fundrise the right platform for you?
Real estate as a means of diversifying your portfolio has a lot to offer, and the Fundrise platform is simple to use.
However, it’s also true that crowdfunded real estate platforms like Fundrise have yet to be put to the test during a downturn in the real estate market. Fundrise, for example, may be obliged to postpone redemptions for certain investors if the housing market collapses.
While the Interval Fund has no early redemption penalty, the eREITS and eFunds in the Core, Advanced, and Premium service levels may charge a 1 percent early redemption cost. Investors who are worried about this may want to invest via a traditional brokerage account, which allows them to access a wider selection of products.
If you currently have a diverse stock and bond portfolio and have at least five years to invest, using a platform like Fundrise to add real estate to your portfolio might be a good option. Simply be aware of the dangers and do your own research.
Final Verdict – Fundrise
Before I end this Fundrise review, I would like to share a few more insights that could help you.
When it comes to investments, you should always take note of the potential risks. After all, values of things usually change. This is why you should expect volatility and losses.
On the other hand, if you are already an expert with being able to tell which opportunities are worth investing at, then I can see no problem with that. However, even with expertise and experience, there is still the possibility that you will face losses.
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