Fundrise Review 2020: An Easier Way to Invest in Real Estate
Building an investment portfolio can include more than just stocks and bonds. You may also want to try your hand at real estate investing.
Owning property and being a landlord may not be realistic. But you can still invest in real estate through a platform like Fundrise.
Fundrise is an online company that lets everyday investors invest in commercial properties through real estate investment trusts and funds.
It's a simplified way to diversify a portfolio with a low minimum investment.
But is Fundrise right for you?
Read on to learn how the platform works, what investment options are available and how to start investing before you decide.
Fundrise is Good For:
- Investors who want to invest in commercial real estate.
- Individuals who have smaller amounts of money to invest.
- People who want to pay low fees for real estate investments.
- Real estate investors who don't want to own property directly.
Fundrise Pros & Cons
Types of Accounts Offered
The range of account options at Fundrise is similar to what you'll find at other online investment platforms. You can open any of these account types:
- Individual account
- Joint account
- Entity account
- Trust account
- Individual retirement account
The only account types Fundrise doesn't support are 401(k) plans and custodial accounts for minors.
Entity accounts are accounts you can set up as a business.
For example, you can invest as a limited liability company, single-member LLC, S-corporation, limited partnership or C-corporation.
If you're setting up a trust account, it can be a revocable, irrevocable or testamentary trust.
Different Fundrise Accounts
There are two ways to invest with Fundrise: a Starter portfolio or a Core plan.
The main differences between the two are the minimum investment amount that's required and how you can invest.
Here are the basics of the Starter Portfolio:
- $500 minimum investment.
- Diversification across a minimum of two Fundrise eREITs.
- 90-day satisfaction guarantee.
- Earn returns via quarterly dividends and share appreciation.
- 1% annual management fee.
- Auto-invest with a minimum of $100.
According to Fundrise, the Starter portfolio is good for someone who's just getting started with real estate investing.
It's appropriate for diversifying across 5 to 10 property investments.
Here's what you can expect with a Core plan:
- $1,000 minimum investment.
- Choose from one of three investment plans to fit your goals.
- Earn returns via quarterly dividends and/or share appreciation.
- 1% annual management fee.
- Diversify across 40 to 80 investment projects.
The Core plan is better suited to someone who's familiar with real estate investing and wants more options when it comes to choosing properties to invest in.
Fundrise also offers two other investment levels, Advanced and Premium. The minimum investment at the Advanced level is $10,000, while it climbs to $100,000 for a Premium account.
These accounts are designed for more sophisticated real estate investors who are comfortable taking on more risk for a chance at earning higher returns.
Fundrise offers two investment vehicles: eREITs and eFunds.
The eREIT is a real estate investment trust. Real estate investment trusts are companies that own real estate properties. REITs are required to pay out 90% of dividends to investors and they offer the tax benefits of owning property without actually having to own it.
And, eFunds are private investment funds that invest in real estate. Both eREITs and eFunds offered by Fundrise focus exclusively on commercial properties, not residential.
Starter portfolios cover these four investment options:
- Income REIT
- Growth REIT
- Income REIT 2019
- Growth REIT 2019
Growth REITs are designed for appreciation. Income REITs are geared toward cash flow. All four differ in terms of the number of projects they invest in, the dividend payout and return performance.
Core accounts work a little differently. At the Core level, investing is strategy-based. You can choose from:
- Supplemental Income
- Balanced Investing
- Long-term Growth
The Supplemental Income Portfolio earns returns mostly through quarterly dividends.
The goal of this portfolio option is to provide investors with consistent income.
According to Fundrise, the projected annual return is 7.8% to 9.2%.
Balanced Investing offers investor's returns through a combination of quarterly dividends and appreciation.
This option is an almost equal split between debt and equity real estate investments.
The annual return profile for this option is 8% to 12%.
The Long-term Growth portfolio focuses on providing long-term appreciation.
This one has the highest annual return profile overall, at 8.2% to 14.7%.
But, this option might not be right for you if you're not looking to buy and hold real estate for the long haul.
Whether you have a Starter or Core plan, investments are taxed the same way. You'll pay ordinary income tax on returns.
Fundrise simplifies investing by offering eREITs and eFunds.
If you're looking for a way to invest in individual real estate projects, you'll need to check out a different real estate investment platform.
The same goes if you're looking for residential real estate investments.
What Are the Fees When You Invest With Fundrise?
There are two fees to know about with Fundrise.
The first is the annual asset management fee. This fee is 0.85%. This fee covers the annual management cost associated with an eREIT or eFund.
The second fee is a 0.15% annual investment advisory fee. This fee can be waived under certain circumstances.
Altogether, investors pay 1% annually to invest through Fundrise.
According to the platform, this fee structure is up to 40% more cost-efficient than investing in REITs directly.
The Fundrise Advantage: Real Estate Made Accessible to Everyone
At other online investment platforms, there are restrictions on who can invest.
The worst part:
Some platforms only allow accredited investors.
An accredited investor is someone who has an earned income of more than $200,000 for the last two years or a net worth of over $1 million.
Fundrise doesn't have those restrictions.
Anyone can invest through the platform, as long as they're a U.S. citizen aged 18 or older.
The platform also makes it easy to invest if you don't have a lot of money to start. The $500 investment minimum for a Starter portfolio is lower compared to some platforms that require $5,000 or $10,000 to invest.
You can also upgrade to a Core account once you have the $1,000 minimum needed to get started. It doesn't cost anything to upgrade your account.
Online and Mobile Experience
Fundrise's investment platform is easy to navigate and use. You can get your account set up online in 10 minutes or less.
To get started, you just need to give Fundrise your:
- Phone number.
- Social Security number.
- Account funding source information.
Once your account is set up, you can log in to manage your investments. You can access your account from your laptop, desktop or mobile device.
From there, you can review different eREIT and eFund offerings. You can look at each one individually to get details on the underlying properties.
Fundrise also includes plenty of charts and graphics to help you visualize your investment strategy.
Overall, the mobile and online experience is comparable to what you'll find with other online real estate investment platforms.
Fundrise offers a number of resources for investors.
Again, you can log in to your account to view the details of individual investments.
For example, you can see where the property is located, whether it's a debt or equity investment and the projected annual return.
You can also see how much Fundrise has committed to the project, whether returns are appreciation or dividend-based the typical average investment of a Fundrise investor.
That kind of transparency is helpful in making investment decisions. Beyond that, Fundrise also educational resources, including:
- An investing glossary.
- Point of View articles on investment trends.
- Investing 101 articles.
- Advanced investing articles.
All of these resources are great, whether you're just starting to invest in real estate or you're a seasoned property investor.
Should You Invest With Fundrise?
Investing with Fundrise could be right for you if you're a non-accredited investor, have at least $500 to invest and you want to diversify with commercial real estate.
The platform is easy to use and between the Starter portfolio and the Core plan, you can shape your investment strategy to fit your needs and goals. The fee structure is straightforward and there are no hidden costs.
What you have to remember, however, are the risks of investing in real estate in general and REITs in particular.
REITs aren't liquid investments.
You may be tying your money up for several years when you invest through Fundrise or any other online real estate investment platform.
Keeping that in mind can help you decide whether REITs--and Fundrise--are a good fit for your portfolio.