Fundrise Review: Real Estate Crowdfunding
How Does Fundrise Work?
Fundrise takes commercial projects across the states and turns them into Electronic real estate investment trusts (eREITs).
This is in contrast to regular REITS whether privately or publicly traded REITS.
You can think of this as similar to an index fund where each eREITS is a basket of various commercial real estate projects.
Fundrise has declared that their average annual returns is 8.76% 0 12.42% since 2014.
The minimum requirement is only $500 to get you started into their starter portfolio.
You may opt to upgrade to their core portfolio if you invest at least $1,000.
Fundrise Core Plans
Within Fundrise’s core plans there are three options.
- Supplemental income pays higher dividends.
- Balanced investing
- Long term growth, which is lower dividends but higher appreciation over the long term.
Once you’ve invested you can expect quarterly dividend distributions and hopefully appreciation.
Versus other types of investments, this investment is not liquid, you’re looking at a time horizon of three to five years or longer.
So you might be asking yourself, why not directly invest directly in a REIT?
With Fundrise you’re directly investing in the real estate as opposed to a publicly-traded REIT for example, you’re actually invested in the company that owns the properties.
The Fundrise platform will let you know which properties you’re invested in your portfolio as well as various updates when an investment matured or is sold off.
Accredited Investor versus non-accredited investor
What is an accredited Investor?
- An accredited investor is someone who has greater than $200,000 per year in income.
- Or they have accumulated $1 million dollars in net worth not counting their primary residence.
The reason an accredited investor rule existed is to prevent people from praying on unsophisticated investors.
Pros and Cons
- Low minimum to get started
- Fees are relatively low at 1% per year (0.15% for an advisory fee & 0.85% for management fees)
- Access to an asset class that you’re not able to before
- Well-diversified into different projects in different regions of the U.S.
- Passive income
- Not liquid, of course, there are exceptions but generally, you may have to pay a penalty if you try to get your money before maturation
- Taxes on the distribution as ordinary income
One Year Returns with Fundrise
I invested with Fundrise since November 2019. At first I started with the starter portfolio.
My portfolio is worth $2,145.57 as of this writing. Structured with 30% debt and 70% equity across 85 active projects.
Across all of my different eREITs, I gained an average weighted return of 3.3% since inception and is $48,57 in real money.
I have to confess that I signed up with Fundrise through Mint because they offered zero fees for the first year. As you can see from the image above, fees are starting to kicking after my first year.
This is what you will see inside Fundrise’s dashboard displaying your various projects and Fundrise’s own ratings.
Another cool feature is that you can go into each individual project in your portfolio to see more detailed descriptions such as the city and state the project is in as well as various different pictures and status updates.
I will have to monitor the fee’s impact on my net returns and see if Fundrise is worth it. For now, a 3.3% return is not that impressive, although this return still beats inflation, high-yield savings, and money market funds at the current rates of return.
I will probably keep putting money into this investment to have some exposure to commercial real estate. I have just begun to invest in Vanguard’s public REIT (VGSNX) within my HSA fund so I am very happy that I have some money in both private and public REITs.