Fundrise Review 2021

This article includes links which we may receive compensation for if you click, at no cost to you.
Fundrise

Overall Rating

9.5

Bottom Line

Thankfully, with the help of Fundrise, you don’t have to have a ton of money or time to invest in real estate and maintain it. We highly recommend Fundrise to investors that want to diversify their portfolios, or to non-accredited investors that want to dive into the real estate crowdfunding space.

Pros

  • Easy to use platform
  • Great Customer Support
  • Reasonable Fees

Cons

  • Investment is not Liquid

Ease of Use

10.0

Customer Support

10.0

Fees

9.0

Diversification

9.0

Real estate is one of the best alternative investment classes. Real estate property could help diversify your investment portfolio, and real estate returns don’t necessarily correlate with the stock market.

But not everyone has enough money to become a real estate investor. You’d need a lot of up-front money to buy property, and you’d need a stable cash flow to maintain rental properties.

And then there’s the time commitment. Finding tenants, and — God forbid — dealing with tenants who don’t pay or who trash the property could become a full-time job!

For almost a decade now Fundrise has been lowering these hurdles so more people can invest in real estate. We’ll discuss why you might want to invest in Fundrise in this review.

Some of our site’s team members are active investors with Fundrise, so their experiences will help guide this review.

What Is Fundrise?

Fundrise is a Washington, D.C.,-based, online real estate investment platform developed and launched by brothers Ben and Dan Miller back in 2012 after receiving SEC approval in 2010.

Fundrise has become one of the best (and best-known) real estate crowdfunding platforms. On Fundrise.com, a $500 deposit you could make you a real estate investor.

Fundrise was the first real estate crowdfunding platform in the United States, and it remains one of the only real estate investment portals open to non-accredited investors.

How Does Fundrise Work?

Real estate crowdfunding platforms lets you put a smaller amount money in real estate just like Lending Club lets you invest in personal loans without starting a bank.

Through Fundrise you can invests your money in real estate through two different investment vehicles:

  • eREITs (Electronic Real Estate Investment Trusts) — Fundrise invented these non-publicly traded trusts which resemble mutual funds or ETFs though without the liquidity. A single eREIT share could include pieces of a lot of different real estate developments or properties. Shares in eREITs target short-term income growth for you, the shareholder. These funds normally hold projects such as office buildings and shopping centers.
  • eFunds — Fundrise’s eFunds target long-term growth in property value for the you, the investor. Shares in these funds are more likely comprised of residential properties, including single-family homes and condo or apartment complexes.

Unfortunately, neither eREIT nor eFund shares can be publicly sold, making them hard to cash out. Fundrise has worked to address this issue, but, ultimately, you’d still need another investor to buy your shares. This takes time.

I was skeptical at first and invested only because Fundrise promises a 90-day money-back guarantee. Within the first 90 days, however, I was satisfied with my portfolio return, low fees, and transparent practices. So I decided to stick it out for the next 5 years!

Fundrise Investment Plans

When you invest with Fundrise, you select a specific type of portfolio and risk tolerance. You can also choose a plan. Each plan invests your money in a different combination of eFunds and eREITs, diversifying your investments and reducing your risk compared to traditional real estate investing.

Your Fundrise real estate assets could become a source of passive income, adding to your cash flow every quarter. Your shares could also grow your portfolio and your net worth through real estate deals.

Let’s look at each Fundrise plan:

Starter Portfolio

  • Minimum investment: $500
  • Advisory fee: 0.15%
  • Management fee: 0.85%

This portfolio invests half of your money in the Income eREIT and half in the Growth eREIT, so your money is going directly into commercial real estate and long-term management projects. This also has the lowest minimum investment of all portfolios on Fundrise.

At this level, you can’t choose specific funds to invest in. Once your account reaches $1,000 in asset value you’ll have more control using the Core plans below.

Supplemental Income

  • Minimum investment: $1,000
  • Advisory fee: 0.15%
  • Management fee: 0.85%

Invests a quarter of your money into these REITs: East Coast, Heartland, West Coast, and Income. This gives you a ton of diversification and will protect you from losses if one region suddenly becomes undesirable.

Balanced Investing

  • Minimum investment: $1,000
  • Advisory fee: 0.15%
  • Management fee: 0.85%

This is the most diversified portfolio on Fundrise. Balanced invests 20% of your money in the Income eREIT, 18.33% of your money in each of three eREITs (Heartland, East Coast, West Coast), 15% in the Los Angeles eFund, and 10% in the Growth eREIT.

Long-Term Growth

  • Minimum investment: $1,000
  • Advisory fee: 0.15%
  • Management fee: 0.85%

The long-term growth plan focuses heavily on eFunds. With this portfolio, Fundrise invests 20% of your money in the Growth eREIT, 20% in the Los Angeles eFund, 16.67% in three eREITs (Heartland, East Coast, West Coast), and 10% in the Washington DC eFund.

Retirement Account

  • Minimum investment: $1,000

You can open an IRA with Millennium Trust Company, and invest in any of the eREITs for a $75 annual fee per eREIT. This fee is paid directly to Millennium Trust and is capped at $200 per year.

Fundrise eREITs

Fundrise eREITs fall into these categories:

  • Growth eREIT: Commercial properties, particularly multifamily buildings, that will appreciate over time.
  • Income eREIT: Debt investments in commercial properties.
  • Heartland eREIT: Debt and equity investments in the Midwest.
  • East Coast eREIT: Debt and equity investments on the East Coast.
  • West Coast eREIT: Debt and equity investments on the West Coast.
  • Balanced eREIT: Debt and equity investments in commercial properties across the nation.

eFunds

Fundrise has a second investment product too: eFunds.

Instead of investing in single properties, eFunds pool money to buy commercial real estate or managing buildings. eFunds pool investor money to purchase land, build houses, and then sell them to buyers. Like eREITs, these are also hard to cash out in the short-term.

Additionally, there are two types of eFunds on Fundrise: one based in Washington D.C. and another based in Los Angeles. These are focused on investing in urban areas frequented by millennials.

My Fundrise Results

I’ve been investing within my Fundrise account since March 2017. I put $3,000 into the Long-Term Growth Plan. Every quarter since the second quarter of 2017, I’ve received a dividend, which I reinvest.

Check out my portfolio below.

Check out all the assets/properties that I own a percentage of within the map below:

map of properties with fundrise

My $3,000 initial investment returned $357.56 in dividend growth in 19 months (6.3 quarters), or just over 7% annual return.

Fundrise Review. Quarterly Dividends

Fundrise Pros and Cons

There are definitely advantages to investing with Fundrise, but there are some disadvantages too, we will cover them all:

Pros

  • Investing in real estate as part of your diversified portfolio can be a good idea.
  • It is possible to get higher returns in the private real estate markets than in the public REITs.
  • Allows for instant diversification, so you are not stuck with one property manager or building project — a great solution for new investors.
  • Ability to capture the “liquidity premium.” Diversified away the single-property risk, and can hold illiquid assets that pay higher because they are illiquid.
  • Quarterly dividends for Income eREITs.
  • Customer service is great over the phone and through the Fundrise website.
  • Excellent ease of use — my favorite among all the crowdfunding sites I’ve tried.
  • The structure of the investment simplifies the messy taxation of these types of investments.
  • At 1% annually, fees are reasonable.
  • A Fundrise investment can be included within an IRA, including a self-directed IRA.
  • Real estate projects are curated with due diligence to meet Fundrise’s high standards for investors.
  • No middleman brokering trades between investors which lowers costs.
  • Also has higher tier plans for higher value investors.

Cons

  • Investment if not liquid (1%-3% redemption fees, unless held for five years).
  • You have to wait at least 60 days before your redemption request will be considered.
  • There are ordinary income requirements for buying shares.
  • Investment strategy too passive for some individual investors.
  • A decade isn’t enough time to know how Fundrise would perform in a true recession or depression.
  • Simple 1% asset value fee doesn’t always tell the entire story. Check out offering circulars to see a more nuanced fee structure.

Fundrise Is Best If…

  • You want to diversify into real estate holdings
  • You don’t mind illiquid assets.
  • You favor a passive investing strategy.

How Do I Get My Money Out Of Fundrise?

You’re expected to hold the shares for at least five years, and you may be charged an early termination fee if you decide to exit early.

With this in mind, try your best to hold your shares for as long as possible. This gives you the most time for your investments to make gains and reduces the fees you need to pay Fundrise when it eventually comes time to sell your shares.

Here’s a breakdown of the redemption fees:

  • 0% if in redeemed in the first 90 days
  • 3% discount if the shares were held at least 90 days, but less than three years
  • 2% if shares held at least three years, but less than four years
  • 1% if shares held at least four years, but less than five years
  • 0% if shares held five or more years

Additional Information

Once you pick a portfolio, investing in Fundrise is pretty simple. Unlike other real estate investing platforms, you’re not picking from a single property when you invest. This keeps your risk low, so you don’t have to worry about one deal going wrong ruining your entire portfolio.

Additionally, beyond an early exit fee, there are a few others you should be aware of too.

The service fee charges a modest asset management fee of 0.85% and an advisory fee of 0.15%. Also keep in mind that if you redeem your shares within 90 days, you’re not charged anything additional.

Do note that Fundrise can sell shares at a premium, so it’s always in your best interest to hold shares for as long as possible. As stated earlier, this gives you the longest possible time to make gains and incurs the least interest possible.

Is Fundrise Worth It?

Thankfully, with the help of Fundrise —you don’t have to have a ton of money or time to invest in commercial or residential real estate and maintain it.

The JOBS Act of 2012 made online real estate crowdfunding portals perfectly legal. This quickly spurred hundreds of different real estate portals, letting accredited (and in some cases, every day) investors to buy small pieces of many properties at once.

Along with Fundrise you may want to consider RealtyMogul, Prodigy Network, and iShares.

In the beginning, we rarely saw these portals open to the everyday investor, so there was a sense of exclusivity in real estate investing.

But nowadays, that’s all changing. A few real estate crowdfunding services have popped on the scene that doesn’t require accreditation and has small investment minimums but still offers premier investment opportunities to investors, including Fundrise and RealtyMogul.

The Fundrise platform is one of the best in the industry and is one of the first that’s open to all investors—not just those meeting specific income requirements.

All in all, we highly recommend Fundrise to investors that want to diversify their portfolios, or to non-accredited investors that want to dive into the real estate crowdfunding space.

Considering there’s a $500 investment minimum, you can test the waters before diving in head-first (other platforms require a higher minimum!)

Leave a Reply

Your email address will not be published. Required fields are marked *

In This Article