– Fundrise Review –
Fundrise is a great crowdsourced investment service, and we consider it to be the best one for a beginner investor. Read our Fundrise review & start investing with as little as $10.
However, Fundrise is not the only real estate crowdfunding platform available.
It’s also critical to understand how its fee structure works and how the redemption process works.
Our Fundrise review will go over all of the platform’s pros and cons, features, account types, and liquidity concerns so you can decide if it’s right for you.
Invest online in commercial real estate via eREITs and eFunds. Gain access to real estate deals starting with just $10 and without being an accredited investor or paying expensive fee.
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Fundrise Review Reddit
It was one of the first real estate crowdfunding success stories.
Originally only accredited investors were allowed to participate, but a few years ago they began to allow unaccredited investors to invest in commercial real estate.
That’s when their growth skyrocketed!
The minimum investment is $500, and the process is very similar to that of investing in a mutual fund.
When the assets investment term expires, investors can expect a quarterly dividend payment from the Fundrise eREITs as well as any appreciation that has accrued.
Further Details on Fundrise Review Reddit
They currently have 9 different eREITs, some of which are stabilized and no longer accepting new investors.
When you invest, you can select an investment strategy, and Fundrise will distribute your funds among the eREITs to diversify your portfolio.
We’ll go over that in greater detail later.
Pros and Cons of Fundrise Review
Here are some of the pros and cons of Fundrise Review. Kindly study them carefully:
Here are the pros of Fundrise Review:
The minimum investment to start with Fundrise is $10.
Fundrise charges only a 0.85% asset management fee per year.
Unlike competing firms, Fundrise is open to any investor in the United States, regardless of income or net worth.
Unlike other private REITs, Fundrise eREITs have a pool of many properties that could smooth out returns.
Commercial Real Estate Access
Commercial real estate is typically a high-dollar investment, whereas Fundrise allows you to invest with little money.
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.
Variety of Investing Goals
Fundrise lets you choose different portfolio goals like supplemental income, balanced investing, and long-term growth.
Here are the cons of Fundrise Review:
Fundrise eREITs are not publicly traded.
Once you make an investment, you are pretty much committed to the investment for the term.
You can sell shares before a five-year holding period, but you pay a 1% fee in many cases.
Distributions are taxed as ordinary income, as opposed to the 15% tax rate on qualified dividends.
Fundrise Review Features
Through Fundrise review, we understand that Fundrise has changed significantly as a platform since its inception.
These days, investors have far more control over the types of investing accounts they use and their overall portfolio strategy.
Some of Fundrise’s main features include:
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. Goals include supplemental income, balanced investing, and long-term growth.
A non-traded REIT that invests in multiple commercial real estates.
Compared to traditional REITs, cuts out the middleman saving you on commissions.
Standard & Plus Plans (New)
Once you invest $10,000 or more, you can choose between Standard or Plus plans.
Both plans let you choose different investing goals.
Standard plans mostly invest in eREITS and commercial real estate funds.
In contrast, Plus plans can invest in more specialized real estate strategies that Fundrise’s team identifies in the market.
By investing in Fundrise eFunds, you get to actually invest in specific real estate projects.
For example, the Fundrise eFund targets debt and equity investments in homes and condos in the Los Angeles area.
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.
Benefits of Investing in Fundrise
While no type of investment is perfect, Fundrise does offer some benefits that help it stand out.
The best features offered by Fundrise, in my opinion, are summed up below:
Fundrise Charges Low Fees for its Services
There’s a 0.85 percent fee annually on assets and a 0.15 percent management fee.
Naturally, this compares favorably with traditional approaches that cost 5 or 6 percent a year.
If you’re looking for an investment option with fees that won’t eat away at your earnings too much, Fundrise might be it.
You can Potentially Invest in Fundrise through an IRA
If you open a self-directed IRA, you can invest your funds into Fundrise notes.
Fundrise lets you Search through and Filter the most Interesting Deals
Just like Lending Club lets you sort notes based on risk level and earning potential, you can browse the Fundrise site for investments that meet your personalized criteria.
If you like to have some control over your investments, this is a huge deal.
Fundrise Accounts are Free
Opening your account is absolutely free, and you won’t be charged for browsing investments, either.
If you want to dig around their website before you commit, you can.
And actually, I would suggest doing that anyway before you get started.
Fundrise Income is as Passive as it gets
While investing in real estate the old-fashioned way requires a lot of intensive planning and plenty of hands-on work, Fundrise requires nothing of the sort.
Once you choose your investments, nearly everything else is taken care of for you.
Most Fundrise Investments Offer Rolling Maturity Dates
While not always the case, most of their investment options let you cash out part or all of your investment every few years.
So while they are not liquid in a general sense, you will have access to your money periodically.
Fundrise lets you Invest from your home on their Secure Website
Opening an account and choosing your investments is easy.
Plus, you can add funds via an electronic check and even sign documents online.
Disadvantages of Fundrise
No investment option is perfect, and Fundrise is no exception.
While investing in Fundrise can offer high returns and truly passive income, there are some disadvantages to consider as well:
Few Fundrise Investments outside new eREIT Products are available to Unaccredited Investors
To become an accredited investor, you must meet certain criteria decided by the SEC.
One way to qualify as an accredited investor is earning an income of at least $200,000 per year or a joint spousal income of at least $300,000 per year for at least two years.
Also, having a net worth of at least $1 million dollars will do, regardless of your income.
There are other ways to meet the requirements to become an accredited investor, of course, but those are the two easiest.
Fundrise Investments are not Liquid until they Reach Maturity
While Lending Club offers a secondary market where you can sell notes if you need to cash out, Fundrise does not offer this option yet.
As a result, your investments are not liquid until they reach maturity. If you feel you might need to access your money at any time, this is a disadvantage.
Fundrise has recently introduced a stopgap measure to make it easier to cash out investments.
Fundrise offers Limited Investment Options at this Point
Even for accredited investors, investment options are somewhat limited.
This will likely continue to change as Fundrise grows its platform, but it’s still worth noting that your choices are not plentiful yet.
Fundrise is Relatively New, so we don’t have a lot of Data to Work with yet
While Fundrise investors earned an average of 13 percent on their investments in 2015, the company wasn’t founded until 2012.
Earnings dipped into the single digits in 2016 but bounced back to 11.44 percent in 2017.
It will be interesting to see what kind of earnings investors report in 2019 and beyond.
Why Most People Love Fundrise
I’ve spoken to numerous people who have invested in Fundrise, and they all rave about the experience.
These are the three features that most real investors love.
Fundrise makes it easy to understand what you’re investing in.
It helps that you can look at a picture of the property, find where it is on a map.
You can also dig into the financials of every single property. Have a question? Customer service will respond to emails and phone calls.
Lack of Liquidity
Logically, most people want money easily accessible, but having money “locked” into an investment is a great way to keep your money growing.
Fundrise has seen phenomenal returns, and part of their success comes from “forcing” their investors to stay the course.
However, note, that during tough times (like a pandemic), Fundrise may prevent you from withdrawing your funds.
Fundrise is a company that prides itself on it’s competitive advantage.
They invest primarily in projects that have between a $5 million and $100 million market cap.
These are too large for most private investors, but they get overlooked by banks who cannot accurately rate the risk profile of the developments.
In some cases, Fundrise has an advantage because banks face such high costs due to burdensome regulations.
What are the Minimum Requirements to Invest in Fundrise?
Fundrise requires a minimum starting investment of just $10.
This amount gets you the service’s Starter Portfolio, a diversified mix of eREITS and eFunds with underlying real estate projects located throughout the U.S.
You receive returns via quarterly dividends, as well as appreciation in the value of your shares.
With an investment of $1,000, you upgrade to the Basic Portfolio which opens up Fundrise retirement accounts, investment goal planning, and access to Fundrise iPO.
And if you invest $5,000, you upgrade to the Core Portfolio which lets you choose different investing plans to match your goals.
Different investing plans Fundrise offers include:
A steady income stream with a focus on dividends.
A diversified portfolio made for greater wealth-building.
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.
You can also compare all of Fundrise’s different account levels and perks to decide which plan is right for you:
|Potential iPO Access||No||Yes||Yes||Yes||Yes|
|Direct Investment Into Open Funds||No||No||Yes||Yes||Yes|
But the fact that it only takes $10 to begin investing in income-generating real estate is one of Fundrise’s main strengths.
And after investing $5,000, you have more control over the types of investing plans you use.
Fundrise Fees & Pricing
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.
You don’t pay transaction fees or sales commissions either.
However, the company can charge other miscellaneous fees like development or liquidation fees that that can add up to 2%.
But for many long-term investors, Fundrise only charges 1% annually in fees.
How to Redeem your Fundrise Shares
When it comes to investing in real estate, liquidation is one crucial factor to consider.
After all, real estate properties are less liquid than investing in stocks, ETFs, or even cryptocurrency in most cases.
Thankfully, Fundrise has made some positive changes to make its shares more liquid.
For eREITS and the Fundrise eFund, you can request partial or full redemption of shares without paying penalties if you’ve held shares for 5 years or more.
For shares under 5 years, you pay a 1% penalty.
As for Fundrise’s Real Estate Fund and Income Real Estate Fund, there’s a quarterly liquidation window in the form of quarterly repurchase-offers that carry zero penalties.
Overall, Fundrise is a long-term investment play because of the 5 year requirement for avoiding penalties.
And just note that shares aren’t as liquid as other assets like stocks and ETFs.
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.
How does Fundrise Work?
The money you invest gives Fundrise the capital necessary to acquire, build, and manage properties.
These include things like apartment complexes, single-family homes, office buildings, industrial properties, hotels, and shopping centers.
Fundrise earns returns in a variety of ways:
1. Undervalued real estate, and then renovating the property to raise the rents or property value.
2. Collecting rental income on stabilized properties
3. Holding mortgages and collecting interest
4. Acquiring properties that have potential to appreciate in value
The profits are then distributed to the shareholders.
If you’re looking for a short-term investment, this isn’t the app for you.
Fundrise is best for long-term investors who want a simple way to get into real estate.
Check out their website to start investing with just $10.
How to Make Money through Fundrise
Fundrise pays its investors in two ways:
1. Quarterly Dividends
This is rent income generated from the rental properties.
You’ll typically receive dividend distributions a few weeks after the end of each quarter.
You can choose to have them directly deposited into your bank account or automatically reinvested back into Fundrise.
2. Appreciation in Share Value
You’ll receive proceeds when a property is sold. Appreciation is only paid at the end of the investment – this can take a few years.
While a few years might sound like a long time, in reality, real estate has shown to be an overall good investment.
If you want to get into real estate without tying up your money for years at a time, check out Groundfloor.
They offer short-term, high-yield investments for just 6 to 12 months.
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How to Withdraw Money from Fundrise
Real estate is an inherently illiquid asset, meaning it’s hard to get your money out quickly once it’s invested.
It’s like owning a home. You may have $200,000 invested in your home, but that doesn’t mean you can liquidate its full value for cash tomorrow.
Fundrise says its platform is best suited for investors who hold their investments at least five years. You’ll pay a 1% fee on all eREIT and eFund redemptions processed before an investment is five years old.
You’ll also undergo a minimum 60-day waiting period before the shares are sold.
After five years, you can request to redeem your eREITs or eFunds at any time for their full value with no penalty.
As an alternative, the Interval Fund offers quarterly liquidity. This basically gives you four chances a year to liquidate these shares with no penalty or cost.
eREITs are non-traded — meaning they aren’t publicly traded on a stock exchange , so they generally have less liquidity than traditional REITs.
You can’t sell eREITs and other Fundrise investments as quickly as you can sell stocks held inside a traditional brokerage account because there’s no guarantee there will be buyers for your real estate shares.
Fundrise most recently flexed this restriction from March 2020 to July 2020 in response to the Covid-19 pandemic.
Fundrise Account Levels and Minimum Investments
Fundrise offers five account levels with different minimum balance requirements: starter, basic, core, advanced and premium.
Each account type invests your money in a mix of eREITs and eFunds.
The Fundrise Starter
The Fundrise Starter Portfolio is the most affordable option, with a $10 minimum requirement.
This low-cost plan doesn’t include IRA access or other advanced features.
The Fundrise Basic
With an investment of $1,000, you’ll be upgraded to the company’s Basic plan.
This account level lets you set investment goals and open an IRA.
The Fundrise Core
It operates on a $5,000 minimum investment.
This account level offers more customization with access to “core plans” or goal-based automated investment strategies.
Core plan choices include generating consistent cash flow, maximizing long-term growth or balanced investing.
The Fundrise Advanced
This account level operates on a $10,000 minimum investment.
This account level gives you access to “plus plans,” or add-on options to each core plan.
These plans allocate a portion of your money to more advanced real estate strategies.
The Fundrise Premium
It has $100,000 minimum investment.
This account level provides accredited investors with access to private funds.
These specialized, illiquid private funds come with long time horizons but offer big potential payoffs.
All Fundrise investors pay a 1% annual fee on their portfolio balance.
This fee is the combination of:
1. A 0.85% annual asset management fee.
This fee supports the properties themselves, and pays for things like project-specific accounting, zoning and construction.
2. A 0.15% annual advisory fee. This fee is similar to what you’ll find at most robo-advisors.
It’s the fee the company charges to manage your portfolio.
Fundrise doesn’t charge any transaction fees or sales commissions on its funds. Its low fees are a big selling point for many investors.
However, other Fundrise costs may be less apparent.
The company notes that it “could potentially charge other fees, such as development or liquidation fees, for our work on a specific project.”
Fundrise isn’t transparent on the exact cost of these additional fees, and they’re not easily accessible on the company’s main website.
Finally, remember, Fundrise charges a 1% fee if you sell your eREIT or eFund shares before the five year mark.
Fundrise Retirement Account
Fundrise offers the option to open a traditional or Roth IRA. You can also choose to roll over an existing IRA or 401k.
In addition to the standard fee structure charged on all Fundrise accounts (1% a year), Fundrise’s IRA custodian — Millennium Trust Company charges an annual fee of $125.
That’s right — $125 a year plus a 1% annual fee.
Like Fidelity, Betterment, SoFi, Merrill Edge and Vanguard — charge an annual advisory fee under 0.5% with no additional annual fees on IRAs.
It’s hard to justify the cost, Fundrise’s website doesn’t mention any perks or unique investment opportunities associated with this $125 fee.
If you’re an experienced real estate investor interested in a self-directed IRA, then a Fundrise retirement account might be a good fit.
Summary of Fundrise Review
Fundrise is a real estate investment platform that allows you to get started with as little as $10.
It’s a low-minimum private Real Estate Investment Trust (REIT) that’s simple to use.
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FAQs about Fundrise Review
Here are some of the frequently asked questions that are pertaining to Fundrise Review. Kindly study them carefully:
1. How secure is Fundrise?
Fundrise uses bank-level security for your protection. Your information is encrypted with an AES bit symmetric key, the same as level as the largest commercial banks.
Each connection to Fundrise is always encrypted over HTTPS with Transport Layer Security (TLS).
2. What is better than Fundrise?
None is really better than Fundrise, but CrowdStreet is equally good.
3. Can you Lose Money in Fundrise?
Can you lose money on Fundrise? Yes, so it’s important not to invest with funds you can’t afford to lose.
While the goal with any investment is to make money, there’s no guarantee you won’t suffer any losses, either.
4. Is Fundrise Good for Passive Income?
It’s a completely passive investment, which is exactly what Fundrise does for me outside my IRA.
I use the “barbell investment method”. That means I have a lot of money invested in safe investments, and a small amount invested in high-risk/high-return investments.
5. How is Fundrise doing?
Bottom line, Fundrise is doing very well. In fact, the company just posted its best investment performance in history in 3Q 2021.
The average investment on the Fundrise platform is about $5,000 with annual returns ranging from 8.5% to 12.5% according to management.
6. What is the Average Return on Fundrise?
Fundrise says its average annualized platform returns were between 7.31% and 16.11% between 2017 and the third quarter of 2021.
7. Is Fundrise Insured?
No, your investments with Fundrise will not be insured under SIPC or FDIC rules, which are commonly seen for banking or traditional investment clients.
Fundrise is registered with the Securities and Exchange Commission.
8. Who owns Fundrise?
Ben Miller owns Fundrise.
9. How is Fundrise different from a REIT?
Standard REITs can be publicly traded, privately traded or public non-traded, while Fundrise REITs are private.
10. Is Robinhood Legit?
Robinhood is a true discount broker. Although its offerings may not be as robust as some other brokerages, it has some of the lowest costs in the industry.
It is extremely easy to use.
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