Fundrise Review – Commercial real estate investing can be an excellent way to grow your nest egg, although it’s not without risks. The big risk? Commercial real estate requires large amounts of upfront capital to purchase a property. In order to properly diversify your portfolio, you should own multiple properties, various types of features (e.g., apartment complexes, strip malls, office space, etc.) and properties in various locations.
Invest online in commercial real estate via eREITs and eFunds. Gain access to real estate deals without the high dollar commitment typically needed, without being an accredited investor and without paying the high front-end load fees. However, since its investments are illiquid, publicly-traded real estate investments might be a better option. So it will be enough with the introduction regarding Real estate investing, crowdfunding and we can move forward straight to the Fundrise Review. Make sure that all our reviews are affiliate free based on our own opinion and public information from P2P channels and sources.
One avenue for the small investor who wishes to invest in commercial real estate is through a REIT (real estate investment trust). Luckily for investors, there’s an online platform that can simplify investing in REITs.
It’s called Fundrise, and we think it’s one of the best real estate investing service in the market today ( Our personal opinion ). Let’s take a closer look to review how it works, how you can utilize it and if it is for you.
Review What Is Fundrise?
Fundrise is one of the pioneers of online real estate crowdfunding. Founded in 2010, the platform has had some of the earliest successes in this space, allowing everyday investors the opportunity to profit from real estate offerings for only a few hundred bucks.
In 2015, Fundrise shook the crowdfunding space with the introduction of its first eREIT. An eREIT (short for electronic Real Estate Investment Trust) is an invention by Fundrise to make investing in commercial real estate accessible to the masses. eREITs are similar to investing in an ETF or mutual fund.
Review What Are the Minimum Requirements to Invest in Fundrise?
To get started with Fundrise, you need to make an initial investment of only $500. That will invest you in the service’s Starter Portfolio, a diversified mix of eREITS and eFunds with underlying real estate projects located throughout the U.S. You’ll receive returns via quarterly dividends, as well as appreciation in the value of your shares.
With an investment of $1,000, you’ll be upgraded to a Core Portfolio. Here, you can choose from three plans:
- Supplemental Income: A steady income stream with a focus on dividends.
- Balanced Investing: A more diversified portfolio designed for greater wealth-building.
- Long-Term Growth: Designed for potentially superior returns over the long term.
If you are unsure which one is right for you, Fundrise offers a three-step questionnaire that can help determine how you should invest.
How Does Fundrise Work?
When you sign up for Fundrise, you’ll invest either in the low-minimum Starter Portfolio or in one of the three Core Portfolio plans. Whichever one you pick, your money will be invested in an allocated assortment of eREITs and eFunds consisting of private real estate assets located across the U.S. Fundrise will tailor your specific allocation based on your personal investment needs.
Although your own results will vary according to your personal plan, you can expect to receive payouts in two ways:
- Quarterly dividend distributions
- Appreciation in asset value at the end of that asset’s investment term. Keep in mind, though, that Fundrise’s portfolios are meant to be long-term in nature, so it won’t happen overnight! (Also, these returns can’t be guaranteed.)
Fundrise Features Review
|Investment Length||0- 0|
- Self-Directed IRA (New) – Now you can invest in Fundrise with pre-tax dollars and use for retirement planning. (Note that, currently, self-directed IRAs can be used only for eREIT offerings.)
- Goal-Based Investing (New) – Via the Fundrise 2.0 platform, invest in real estate based upon your goals rather than types of investment or location.
- eREIT – A non-traded REIT that invests in multiple commercial real estates. Compared to traditional REITs cuts out the middleman saving you on commissions.
- eFund – A private fund that invests in multiple commercial real estate properties that, unlike Fundrise’s eREITs, focuses on growth rather than income.
- Fundrise IPO (New) – Fundrise is getting ready to sell shares in the company itself via an “internet Public Offering” (IPO). To be eligible for this investment, you must have at least $1,000 in your Fundrise account and have selected one of the advanced plans. You can invest up to 25% of your total account balance in this offering
Review How Has Fundrise Performed?
Fundrise recently revealed stats on how its REITs have performed. In fiscal 2014, 2015, 2016 and 2017, they returned 12.25%, 12.42%, 8.76% and 11.44%, respectively, on an average annualized basis. Obviously, keep in mind that previous performance does not indicate future results.
There’s a slight complication when you want to cash out those gains — because the money you invest is put into particular properties, you wouldn’t be able to receive money from a deal until the physical property is sold. To rectify this matter, Fundrise now allows investors to cash out of deals during specified quarterly periods. So you can get exit a trade during four windows per year without having to wait for a sale.
What Are Fundrise Fees?
Fundrise charges an annual asset management fee of 0.85%, in addition to a 0.15% advisory fee. These add up to 1.0% annually. However, the company can charge other miscellaneous fees that can add up to 2%. In total, expect to pay as much as 3% on fees.
Goal-Based Investing (New)
Fundrise currently offers three investment styles:
|Balanced Investing||Income & Growth|
|Long Term Growth||Growth|
Your investments with Fundrise will consist of their eREITs and eFunds. The allocation will depend upon if you are looking for growth, income or a combination of both.
For the launch of their eREITs, Fundrise offers an “accountability policy” that’s far from industry standard:
- As an investor in their Income eREIT, you pay $0 in asset management fees unless you earn at least 15% annualized return during the first two years of operation, until Dec. 31, 2017.
- For their Growth eREIT, Fundrise will pay a penalty of up to $500,000 to investors if it earns less than a 20% non-compounded annual return.
Fundrise is not a newcomer to real estate investing, and their team has experience in many areas of the real estate marketplace. In 2015, they had $525 million in real estate assets under management and provided an average annual return of 13% net to their investors.
Is Fundrise Safe?
Very few investments can be considered truly “safe” — that is, with a guaranteed return. However, less-liquid real estate investments tend to give better protection from downturns in the broader market than securities such as stocks and mutual funds.
And Fundrise’s portfolios of eREITs and eFunds are about as safe as you can find in the real estate space.
Non-traded REITs and eREITs are registered investments, and while they’re subject to the same SEC requirements that an exchange-traded REIT must meet, they’re not directly correlated with stock market fluctuations. Two downsides: There isn’t the same liquidity since they’re not traded on the markets, and front-end fees are higher than exchange-traded REITs.
eREIT vs. Non-Traded REIT vs. Publicly Traded REIT
|Type||eREITs||Non-Traded REITs||Exchange-Traded REITs|
|Secondary Market||No||Typically No||Yes|
|Front-End Fees||None||0-15%||0-7% + broker commission|
The minimum investment is just $500 for Fundrise eREITs, and you don’t have to be an accredited investor to participate. Shares of the eREITs are purchased exclusively online, and Fundrise members receive notifications when new assets are added to the eREITs.
Review How to Redeem Your Fundrise Shares
If you want to redeem your shares from your Fundrise portfolio, you’ll need to first submit a redemption request. You can do this simply from your account settings on the site. After a 60-day waiting period, you may obtain liquidity on a monthly basis. Keep in mind, however, that your redemption value may be subject to a penalty of up to 3%.
Review Fundrise Pros & Cons
- Low Minimum — The minimum investment to start with Fundrise is $500.
- Low Fees — Fundrise charges only a 0.85% asset management fee per year.
- No Accreditation — Unlike competing firms, Fundrise is open to any investor in the United States, regardless of income or net worth.
- Diversification — Unlike other private REITs, Fundrise eREITs have a pool of many properties that could smooth out returns.
- 90-Day Guarantee — Unheard of in the investment industry, if at any time during your first 90 days as an investor you’re not satisfied, Fundrise will buy your investment back at the original investment amount. This offer is subject to certain limitations.
- Commercial Real Estate Access — Commercial real estate is typically a high-dollar investment, whereas Fundrise allows you to invest with little money.
- Passive Investment — Unlike owning your own commercial real estate outright, Fundrise investments are truly passive.
- Quarterly Redemptions and Distributions — The Fundrise eREIT has adopted a quarterly redemption plan to provide periodic liquidity; however, distributions are not guaranteed.
- Investment Liquidity — Fundrise eREITs are not publicly traded. Once you make an investment, you are pretty much committed to the investment for the term. There is currently no secondary market to sell your investment to others; however, there is a quarterly redemption program whereby investors may be able to redeem their shares, subject to some limitations.
- Tax Consequences — Distributions are taxed as ordinary income, as opposed to the 15% tax rate on qualified dividends.