Fundrise Review – Real Estate Crowdfunding as Low as $10
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Fundrise is a solid option for beginner investors who want to add real estate holdings to their portfolio. However, more experienced investors may want to look for an alternative.
8.5/10
Cost
8.5/10
Features
8.5/10
Ease of use
10/10
Services
8/10
Real estate investing has traditionally been reserved for those with deep pockets. However, with the advent of crowdfunding sites like Fundrise, it is now an option for the average investor. In particular, Fundrise offers investors the opportunity to create a diversified portfolio and earn some extra cash flow through dividends in exchange for a low minimum investment. Keep reading to see if this real estate crowdfunding platform is the right fit for you.
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What is Fundrise?
At its core, Fundrise is a real estate crowdfunding platform for individual investors. While private real estate investment has traditionally only been available to institutional and accredited investors (big companies and individuals with a high net worth), Fundrise was one of the first crowdfunding platforms to bring this opportunity to the masses.
Since its founding in 2012, Fundrise has undergone significant changes but has focused on cutting out the middleman and making real estate assets accessible to the everyday investor. As of the time of writing this review, you can invest with Fundrise for as little as $10.
Overall, It’s a great fit for those looking to create a diversified portfolio at a low cost. However, Fundrise’s investments are illiquid, which means this platform is not the best match for those with a short-term investment strategy.
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How does Fundrise work?
Like most sign-up processes, creating an account with Fundrise starts with clicking a “Get Started” button and entering an email address. However, once you’ve done that, there are a few more steps to follow before your account is officially up and running.
Plan Selection
Plan selection is where Fundrise differentiates itself from other crowdfunding sites. Rather than allowing users to invest in individual real estate projects or funds, the platform uses a proprietary model, which allocates your portfolio based on your selected plan and investment objectives.
Each plan is designated by its required minimum investment. While we'll get into specific costs later, it's important to note that a bigger investment will create a more diversified portfolio. As your initial investment grows, so does the total number of projects your funds will be allocated towards.
Create an account
Next, it's time to get into the nitty-gritty of creating your account. First, you'll be asked to provide basic information, including your name, account password, country of origin, and place of current residence. You’ll also need to provide additional personal information, such as your address, phone number, social security number, and birthdate.
Then, you’ll be asked to select the account type you want to open. With Fundrise, you’ll choose between an individual account, a joint account, an entity account, a trust account, or a self-directed IRA.
Finally, you’ll be asked to confirm how much your initial investment will be and whether or not you would like to auto-invest regularly.
Fund your account
Once your account has been created, you'll be asked to fund your account. For most people, this will be as easy as selecting your bank from a list of options and signing into your bank account using your login credentials. However, if you bank with a smaller institution, you may need to type in your account and routing information physically.
Disclosures and dividend reinvestment
The last step in this process is acknowledging that you've read a few disclosures and deciding whether you want to enroll in dividend reinvestment. As the name suggests, dividend reinvestment involves reinvesting any money you make from the platform into your portfolio instead of going directly into your bank account.
How much does Fundrise cost?
The costs behind Fundrise Investments can be broken down into two types: initial investment and ongoing fees. We’ve broken them down further below for your convenience.
Initial investment
Fundrise has five account levels. They are as follows:
- Starter: The Starter Plan requires an investment of $10, including the ability to auto-invest and dividend reinvestment. You can also get $25 if you invite someone and they sign up and meet certain conditions.
- Basic: This plan stipulates that you put at least $1,000 to work. It gives you access to everything in the starter portfolio, as well as access to IPOs and a $50 share bonus per successful invite. You can also invest via an IRA and create and manage investor goals.
- Core: Everything in the previous two plans and the ability to invest in non-registered products is included. The share bonus per successful invite bumps to up to $50, and the minimum investment is $5,000. Fundrise says this is its most popular account level.
- Advanced: Nothing changes in this level compared to Core, except a higher minimum investment ($10,000) and a higher share bonus per successful invite ($50).
- Premium: This account level is reserved for people who can invest at least $100,000 with Fundrise. The share bonus per successful invite is $100, and you also get priority access to the investor relations team and access to periodic accredited offerings.
Recurring fees
In addition to your initial investment, Fundrise also charges two separate advisory fees, which you will need to consider when weighing whether or not this platform is right for you. These fees are:
- Fund fee (0.85%): This fee is charged annually and covers the operating expenses of the company’s various real estate assets.
- Account fee (0.15%): You pay Fundrise in exchange for having them manage your portfolio. It’s also charged annually.
Fund-specific fees
Finally, in the company’s blog post on pricing, Fundrise reserves the right to charge certain fees specific to the funds you invest. These fees include development fees and liquidation fees. However, the company does not specify how much these fees will cost its investors.
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Fundrise features
Its defining features are the company’s proprietary investment products and redemption method. They are what makes investing through Fundrise so different than any other investment platform. With that in mind, we've discussed each of them below.
eREITs
Real estate investment trusts (REITs) are companies that own, operate, or finance income-producing properties. REITs are publicly traded, meaning they are sold in exchange for a certain share price and can be purchased through a broker.
In contrast, it can be helpful to think of an eREIT as more similar to a real estate ETF than a traditional REIT. These products are not publicly traded; instead of being purchased through a broker, they can only be purchased directly through Fundrise.
According to Fundrise, an eREIT is a REIT that invests in a diversified pool of commercial real estate assets from across the country, such as apartments, hotels, shopping centers, and office buildings.
eFunds
Like eREITs, eFunds are a proprietary product trademarked by Fundrise’s parent company, Rise Companies Corp. Again, rather than being purchased through a broker, you must use Fundrise to invest in one of these funds.
According to Fundrise, each eFund invests in residential real estate, including attached and detached single-family homes, townhomes, and condominiums.
Liquidation request process
Since Fundrise products are not publicly traded, they have less liquidity than other Investments. In this aspect, Fundrise is more similar to a traditional private equity fund. First, investors must file a redemption request with the company rather than simply selling their shares whenever they see fit. Fundrise's Flagship Fund and Income Fund offer quarterly liquidity, and no costs are associated with liquidating your position.
However, liquidating your eREIT/eFund shares comes with penalties. Shares held for under five years may be subject to a penalty of up to 1% of the total share value. No penalty will be levied if you've held a share for over five years.
Who is Fundrise best for?
Beginner investors
Portfolio allocation is one of the most challenging aspects of investing for beginner investors to conquer. Put simply, it requires a lot of time and research. However, Fundrise handles all the legwork of allocation for you. With this platform, you simply need a firm idea of your investment strategy, and Fundrise will handle the rest.
Small-scale investors
Typically, investing in real estate requires a lot of money. The costs can add up if you make a down payment on a home, invest in shares of a traditional REIT, or join a private equity fund. However, Fundrise sets itself apart by offering the opportunity to invest in real estate with a relatively small investment minimum. In this case, you can get started for as little as $10.
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- Over 100 Stock Picks with 100%+ Returns
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- 30-Day Membership-Fee-Back Guarantee
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Who shouldn’t use Fundrise?
Self-directed investors
If you want to build a custom portfolio, Fundrise is not the right investment platform for you. Since Fundrise allocates your portfolio based on your investment strategy, you're ultimately locked into the funds they choose for you. If you have the experience and capacity to do your research, you may be able to achieve higher returns with other investment options.
Short-term investors
Fundrise is ultimately meant to be a long-term investment. Any investments that are held for fewer than five years may be subject to a hefty penalty, which does not make it the best fit for those looking to cash in on their investments in the near future.
Pros and cons
Pros
- Opportunity for passive income. Fundrise offers an investment opportunity that is much less labor-intensive than traditional real estate investing. In particular, those who focus on a growth eREIT, or fund that invests in real estate assets that have the potential to appreciate over time can expect to see regular dividends.
- Low minimum investment. Investors can get started with Fundrise for as little as $10. Plus, the investment platform offers the opportunity to automatically invest funds on a recurring basis, which makes it easy to grow your portfolio over time.
Cons
- Illiquidity. You must hold your investment with Fundrise for a minimum of five years. Otherwise, you could be subject to a penalty that’s worth up to 1% of your total share value.
- Dividends are non-qualified. Non-qualified dividends are taxed at the same rate as ordinary income, which is higher than some other investment vehicles.
Fundrise vs. competitors
Crowdfunding Platform | Open to Non-Accredited Investors | Investment Minimum | Holding Period |
Fundrise | Yes | $10 | 5 years |
RealtyMogul | Yes | $5,000 | 3 years |
DiversyFund | Yes | $500 | 5 years |
RealtyMogul
If you have a little bit more money to invest, you might consider looking at RealtyMogul as an alternative to Fundrise. In particular, the three-year holding period makes it a better option for investors working with a shorter-term horizon. As an added benefit, the platform also offers a REIT buy-back option, which allows investors to sell their shares back to the company after one year.
DiversyFund
DiversyFund is similar to Fundrise in that it has low minimum investment, and small-scale investors might be attracted by the fact that this particular platform does not have any management fees. However, there is one big catch. Any profits you make on DiversyFund are automatically reinvested. Investors only receive payment once the property is sold after a five-year holding period.
FAQs
What type of real estate investments does Fundrise make?
Fundrise eREITs invest in commercial real estate properties while eFunds invest in residential real estate holdings.
Where can I learn more about the eReits and eFunds in my portfolio?
You can learn more about the specific investments that Fundrise makes on your behalf by visiting the platform’s investment offerings page.
Does Fundrise have a mobile app?
Fundrise currently has a mobile app that is available for both Apple products and Android phones, which makes it a good fit for those who want to invest on the go.
Is Fundrise legit?
Fundrise is a solid option for beginner investors who want to add real estate holdings to their portfolios. It’s an opportunity to dip your toe into real estate at a low cost and generate some passive income.
However, more experienced investors may want to look for an alternative. Fundrise does not offer the opportunity to customize your portfolio, and it has a long holding period. If you can research funds and investments independently, you may be better served by a traditional REIT, which may offer higher returns and more liquidity.
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Writer
Tara Mastroeni is a real estate and financial writer whose work has appeared on Forbes, Business Insider, LendingTree, Realtor.com, ApartmentTherapy.com, The Motley Fool, and Freshome.com.
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