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What is Fundrise?
Fundrise is a real estate crowdfunding platform that began in 2012. Now one of the most well-known players in the space, the company allows non-accredited investors to get into real estate with as little as $10.
The Fundrise app removes the need to physically manage properties as well as the need to have significant sums of money to pursue real estate investing.
This greatly expands the opportunities for people to invest.
Over the past decade, the platform has performed over $5 billion in transactions and has paid out over $100 million of dividends to investors.
How does Fundrise work?
Fundrise is a crowdfunding platform that allows investors to pool their money together to invest in real estate projects. When you invest through Fundrise, you become a part-owner of the property or project that you’ve invested in. And because Fundrise does all the legwork for you, it’s a great way to get started in real estate investing without having to give up a lot of money and time.
So how does it work? First, you create an account and deposit money into it. Then, Fundrise uses that money to invest in real estate projects on your behalf. You can choose to diversify your investments by putting your money into different types of projects, or you can focus on one specific type of investment.
For example, you could choose to only invest in office buildings, or you could choose to invest in a mix of residential and commercial properties. Unlike the stock market, where you buy stocks and ETFs, with Fundrise, you are buying partial ownership in various real estate investments.
Once the projects are completed, you’ll start to earn money from your investment through quarterly distributions. And as the property values increase over time, so will your returns.
You can even choose to cash out your investment at any time and receive all of your money back, plus any profits that have been made.
Pros
- Low minimum investment requirement – You start investing with as little as $10.00
- No accreditation – Fundrise lets any United States citizen invest on its platform regardless of the user’s net worth or income
- Diversification – With Fundrise, you can invest in properties all over the country, which helps to diversify your portfolio and protect you from local market fluctuations
- Easy to use: The Fundrise platform is very user-friendly and makes it easy to manage your investments, sell your shares, and see your real-time historical performance just at the click of a button
Cons
- Fees – There is a 0.85-1.00% annual fee, which may seem like a lot, but is actually lower than many other similar investment platforms and options.
- Not as hands-on – When you invest in real estate through Fundrise, you’re not actually buying the property yourself. This can be seen as a pro or a con, depending on your investment goals.
- Investment liquidity – Unlike the stock market where you can sell your asset quickly, Fundrise investments it can take some time to sell your investment in a property.
Who Can Invest in Fundrise?
Both accredited and non-accredited investors can invest with Fundrise for a minimum of $10.
Fundrise Fees & Pricing
Fundrise prides itself on eliminating as many unnecessary fees as possible. Despite premium offers for big investors, the platform wishes to provide a level playing field for those of average and below-average wealth through multiple low-cost investment opportunities.
To start, Fundrise has a relatively high asset management fee of 0.85%. This covers the company’s operational expenses as they invest directly, cutting out any 3rd-party costs.
Fundrise also charges an additional small advisory fee of 0.15% for unaccredited investors. Annually, that’s a 1% service fee, which is roughly $5 for a $500 investment package.
Remember when we said that Fundrise dove into optimizing user experience? Well, here it is showing. Because the platform handles all investing directly, compared to other platforms that use third-party services, which bloats pricing, Fundrise aimed to remove as many minute investment barriers and nuances as possible to benefit potential investors.
Fundrise Features
Each online investing platform operates a little differently. Here’s what sets Fundrise apart from its competitors.
Low Minimum Investment Requirements
Fundrise has the lowest minimum requirement to open an account in the industry. For just $10, you can open an account and get started in private real estate investing.
Many other investing platforms require at least $500. While that does lower the barrier to entry for people to invest in real estate, it may still hold some investors back.
Read our guide on the best ways to start investing with $500 or less if you want to identify other options.
You Can Invest in an IRA
Investing in residential real estate is a fantastic way to diversify your portfolio. However, gains can impact your taxable situation.
Fundrise alleviates that by allowing users to house investments in a Traditional IRA. This also helps you shelter gains from taxes until you withdraw them for retirement.
There is a $125 annual custodial fee to be aware of for IRAs, so keep that in mind as you consider your options. Read our guide on the top places to open a Roth IRA online if you want to avoid the fee.
They also allow trust accounts in addition to individual and joint accounts.
You Don’t Need to Be Accredited
Investing in residential or commercial real estate used to always require you to be an accredited investor.
An accredited investor is someone who meets one of the following three requirements:
- Earned at least $200,000 (or $300,000 if married) a year for the previous two years
- Has a net worth of at least $1 million
- Is Series 7, 65, or 82 licensed, in good standing
You don’t need to meet those requirements to open an account with Fundrise. They do offer opportunities for accredited investors in their Premium account level, but that’s not required to start investing.
Excellent Diversification
You don’t typically invest in a single-family housing unit with the platform. Each eREIT includes a variety of investment properties, allowing for instant diversification.
If you combine this with investing in stocks, you can increase your diversification and further help your entire portfolio better weather potential storms.
Fundrise regularly adds new properties to its platform to increase your investment options.
Debt and Equity Investments
Two legitimate ways to invest in real estate include debt and equity. Debt allows you to lend money to property owners.
Equity lets you own a stake in properties. Each of these investment styles has its own purpose, and you can choose either with Fundrise to further enhance your investing.
Goals-Based Investing
If you open an account with at least $1,000, you can utilize their goals-based investment approach. This opens up more investment opportunities for users.
It also allows you to pick a specific strategy. These include:
- Balanced
- Passive income
- Aggressive growth
If you’re not sure which strategy you should choose, they provide a small questionnaire to help you determine which is best for your situation.
Why should you invest with Fundrise?
There are a lot of reasons why investing with Fundrise is a great idea. For starters, it’s one of the most convenient ways to get started in real estate investing. With just $10 minimum investment, anyone can become an investor. And because Fundrise does all the research and legwork for you, it’s a great way to invest in real estate without having to put in a lot of time or effort.
Another reason to invest with Fundrise is that they offer a wide variety of investment options. Whether you’re looking to invest in office buildings, residential properties, apartment complexes, or even mixed-use projects, Fundrise has something for you. And because you can choose to diversify your investments, you can minimize your risk while still earning great returns.
Finally, Fundrise is a great option for those who want to earn passive income. With their quarterly distribution payments, you can start earning money from your investment right away. And as the property values increase over time, so will your returns. So if you’re looking for a passive income investment, Fundrise is definitely worth considering.
Is Fundrise Legit?
Yes. Fundrise is one of the oldest and largest crowdfunding real estate investing platforms. Founded in 2010, the company has over $3.1 billion in assets under management.
Fundrise also submits regular reports to the Securities and Exchange Commission for all its REITs and funds, meaning that it is one of the more publicly transparent players compared to most of its closely-guarded private competitors.
How successful is Fundrise?
Fundrise started in 2012 and has since become the biggest crowdfunding real estate company. Since its inception, the company has generated $7 billion in real estate transactions with over 254 active projects and 131 completed projects. The company has strategically diversified the property types it invests in to ensure dividends can be paid to its investors quarterly, future valuations will be reached, and the potential market downside is mitigated.
What is commercial real estate investing?
Commercial real estate investing is the process of investing in properties that will be used for businesses. This can include office buildings, retail space, warehouses, and more.
Commercial real estate investing is a great way to diversify your portfolio and earn passive income. And because commercial real estate typically has a higher return than residential properties, it’s an especially attractive option for investors.
One of the best things about commercial real estate investing is that you can choose to be as hands-off or as involved as you want to be. For example, if you’re looking for a passive investment, you can simply invest your money and let Fundrise do all the work for you.
Or, if you’re more hands-on, you can choose to be involved in the property management and day-to-day operations. This is a great way to get started in real estate investing without having to put down a lot of money upfront.
What is the best Fundrise investment plan?
The answer to this question depends on your investment goals and how much risk you’re willing to take. If you’re looking for a more conservative investment, the long-term growth portfolio is a good option since it utilizes lower-risk commercial real estate investments. On the other hand, if you’re looking for a more consistent, steady income, the balanced investing or supplemental income portfolio may be a better option since they’re more liquid assets that produce more dividends.
To learn more about the different types of Fundrise plans, check out their website here or look at the photo below, which illustrates the different kinds of plans their estimated target return profiles.
Conclusion
Fundrise, though not the best choice for everybody, is undoubtedly a good one whether you’re looking to start a portfolio or continue building and diversifying those you already have.
Despite being one of the older companies, their acclimation towards providing a practical and accessible digital real estate investment space is no small feat. Their ability to stay relevant despite heavily relying on a highly illiquid asset should be testimony enough of their credibility and expertise.
While low investment minimums and the availability of flexible investment options are strong draws, bear in mind that their investment offerings are complicated and require due diligence to appreciate and leverage fully.
As with all investments, Fundrise, good as it may be, is not a one-size-fits-all. It boils down to what you intend to achieve and what you are prepared to do. The platform has the means, and you have the resources; together, both can surely generate wealth.
Open an account with Fundrise for only $10 (with $50 in free shares) and start your real estate investment journey.
