Fundrise Real Estate Investing Review

Real Estate investing is one of the best alternative investment classes. Not only does it let you diversify your investment portfolio, but it’s proven to have returns that don’t necessarily correlate with the stock market.

But not everyone has the money to front for an investment property, and even more don’t have the time to upkeep a rental property, find tenants, and—God forbid—have to deal with tenants that don’t pay or trash the property.

Real Estate Crowdfunding

Thankfully—you don’t have to have either in 2018. After the JOBS act was introduced in 2012, it 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.

In the beginning, we rarely saw these portals open to the everyday investor, so there was a sense of exclusivity in real estate investing. For those unaware, accredited investors must have an income of $200,000, and couples must have a combined income of $300,000.

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

The real estate crowdfunding service 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.

In the article below, we’ll discuss why you might want to invest in Fundrise and give you our full review. Some of the team members on our site are active investors in the site, so we’ll use their experiences to guide this review.

Fundrise Fundrise offers crowdsourced real estate investing, most real estate investing platforms are only open to accredited investors, but Fundrise makes it accessible to all investors. Start Investing Today Fundrise

Fundrise and Real Estate Crowdfunding Investments

I first entered the real estate market in 2010. South Carolina was a relatively easy place for a 24-year-old to buy a house. Especially with the help of the first time homebuyers tax credit. Interest rates weren’t the lowest, but banks were giving out loans with very little down.

I consider myself fortunate; it’s harder to buy real estate today. The Housing and Economic Recovery Act of 2008 that established a tax credit for first-time homebuyers no longer exists.

Real estate markets in high cost of living areas are extreme. House hacking is a great way to help build equity, however, it requires a large downpayment. Building up a real estate rental property portfolio is harder to do on your own.

The reality is, many are struggling to buy a home. Saving up for a down payment is often the challenge. Luckily, you can increase your real estate investment exposure with the support of many others. In this post, the real estate investment platform Fundrise is reviewed.

Because of Fundrise, there is now a way to invest in real estate for as little as $500.

Fundrise Quick Facts

Fundrise’s technology eliminates typical industry inefficiencies to help save time and money for the ordinary investor. It is truly cutting-edge. With Fundrise, you can unlock:

  • Institutional-quality investing power,
  • Unique potential for long-term growth and cash flow,
  • Over 100 real estate projects of various size, type, location,

Fundrise’s goal is to build the best real estate investing experience ever, making real estate a smart choice for any investor’s portfolio

Invest with Fundrise

Complete Fundrise Review

Fundrise is a Washington D.C. based real estate investment portal. The portal launched in 2012 after receiving SEC approval and has quickly become one of the net’s best (and most well known) real estate crowdfunding portals. In addition, it’s still one of the only portals available to non-accredited investors.

Fundrise is a little different than other real estate crowdfunding portals, though. On the portal, you can buy and sell eREITs—or, real estate investment funds—giving you a share of a real estate investment that’s generally income producing. Unfortunately, these shares cannot be publicly sold, making them hard to cash out.

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

With Fundrise, you invest in a diversified portfolio of assets geographically located throughout the United States. Assets can be in the form of a development, commercial construction loan, apartment complex, etc. It’s pretty cool to be a part owner of all these properties! Check out all the assets/properties that I own a percentage of within the map below:

map of properties with fundrise

 

Fundrise Real Estate Investing

Advantages & Disadvantages of Fundrise

There are definitely advantages to investing with Fundrise, but there are some disadvantages too.

Fundrise 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.
  • Ability to capture the “liquidity premium.” Diversified away the single-property risk, and can hold illiquid assets that pay higher because they are illiquid.
  • Customer service is great.
  • 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.

Fundrise 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 income requirements for buying shares.

Types of e-REITs Available on Fundrise

  • 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

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 and hit by the housing crisis.

How do you get your money when it’s time to cash out?

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

How To Invest With Fundrise

When you invest with Fundrise, you select a specific type of portfolio. Each of these invests your money in a different set of eFunds and eREITs, diversifying your investments and reducing your risk. There are several different portfolio/plan types on Fundrise—here’s the rundown on each:

1. 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.

2. Supplemental Income Plan

  • 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.

3. Balanced Investing Plan

  • 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.

4. Long-term Growth Plan

  • 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.

5. 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.

Visit Fundrise.com

Each asset has a risk measure

You can select asset types with varying risk measures. Check out my portfolio below.

Fundrise Real Estate Investing

Other Important Fundrise 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 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 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.
Bottom line

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!)

My Fundrise Results

I’ve been investing with Fundrise since March 2017. I put $3,000 into the Long-Term Growth Plan. Every quarter since Q2 of 2017, I’ve received a dividend, which I reinvest. Below is a snapshot of my dividend returns.

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

Grant Sabatier

Creator of Millennial Money and Author of Financial Freedom (Penguin Random House). Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. Grant has been featured in The New York Times, Wall Street Journal, BBC, NPR, Money Magazine and many others. He uses Personal Capital to manage his money in 10 minutes a month.

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Posted in: Brokerage Reviews, Real Estate

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