FUNDRISE Review (features REITs and Crowdfunding)
- Posted on December 28, 2019
- Editors Pick
- By admin
Low budget investors seeking
to get into the real estate investing market are able to do so conveniently
without having all the requirements and funds to own real estate. One of the
ways to easily invest in real estate and earn money in the U.S is by participating
in the Fundrise investment scheme. It serves as an easy way to make money and
invest in commercial real estate online with little amounts of money, the least
being $500.
Its online commercial real
estate investing operations are carried out through the eREIT and eFunds.
Commercial real estate requires that you own various types of properties such
as apartment complexes, office buildings, etc. As a small or average investor
seeking to invest in commercial real estate you can do so through the real
estate investment trust (REIT).
The major advantage of
Fundrise is that it makes commercial real estate investments really easy by
taking the REIT online. That way you can easily invest from the comfort of your
home or wherever, and track all activities on your investment on your connected
devices.
In this article, we would
quickly run a review on Fundrise and how it can be beneficial to you as an
investor. We would also consider its different investment portfolios, and of
course, the pros and cons of Fundrise.
Real Estate Crowdfunding
Besides investing in real
estate using REITs, crowdfunding is another option that can be opted for. It is
another means for real estate investors to pool funds together and raise
capital for investment. Crowdfunding can also be used through REITs; however,
the main idea behind it is sourcing for funds. All through the holding period
of the investment, it is expected that each investor equally receives a
distribution of earnings and asset appreciation portion when a sale is
made.
What are REITs?
REITs, also known as ‘Real
Estate Investment Trusts’ are platforms that “allow individuals to invest in
large-scale, income-producing real estate.” A REIT does not allow for the
purchase of a real estate for the purpose of developing and reselling it,
rather, it “buys and develops properties primarily to operate them as part of
its own investment portfolio.” There are basically two types of REITs;
publicly-traded REITs and non-traded REITs. Both types of REITs can be
registered with the SEC.
As a low-budget investor
considering real estate, REITs can be beneficial to you in a number of ways
such as portfolio variety, and high dividend yields (especially non-traded
REITs). Like every other investment, REITs also come with its risks especially
the non-traded REITs. Some of its (non-traded REITs) risks involve illiquidity,
no transparency, clash of interest, and distribution payments made from
offering proceeds and borrowings. Another thing to note about REITs is that
they “own many types of commercial real estate, ranging from office apartment
buildings to warehouses, hospitals, shopping centers, hotels, and even
timberlands.”
What is Fundrise?
Fundrise is an online
commercial real estate investment platform that gives investors an opportunity
to invest online via eREIT and eFund. It allows average investors crowdfund
with other investors to pool funds together in order to purchase a real estate
asset or property. The dividends are shared among the investors quarterly.
Fundrise categorizes its own
kind of REIT as eREIT which makes it convenient for investors to easily access
the platform and services online. Its other online service called the eFund
functions as an avenue for pooling investor’s money for the purchase and
development of real estate before selling them off to the buyers.
The off-side to the REIT is
that is illiquid, meaning it can’t be traded on public exchange. The owners of
these shares have little or no chances of getting buyers to buy-off their
shares.
Fundrise Investment Portfolios
Fundrise offers three major
portfolios, namely: starter, core and advanced. Its starter portfolio requires
an initial investment of $500 while a $1,000 investment would upgrade you to
the Core portfolio package which offers you three plans to select from:
●
Supplemental
income: this is a flow of constant income focused on dividends only. It can be
categorized by its high dividends, low appreciation, and slightly above average
on its total return.
●
Balanced
investing: Offers greater portfolio building options and enhanced wealth
building. It is categorized by the balance it brings between the dividends,
appreciation, and total return.
●
Long-term growth:
Particularly for long-term investors interested in getting potentially high
returns in the long run. Its main target is full focus on total return and
appreciation compared to dividends.
How Fundrise works
The major focus of Fundrise
is real estate investment trust commonly known as REIT. REIT works by creating
a platform where average investors with a common goal can come together to pool
funds. It gets its assets either through acquiring, buying, or mortgaging.
Fundrise is more concerned
with the income and profit-making aspects of real estate. Simply put,
commercial real estate.
Fundrise works by letting you
invest in the provided investment amounts which are tied to the three different
portfolios. Once you’ve selected the portfolio that bests suits you, Fundrise
will invest your money and allocate to you a variety of eREITs and eFunds which
include private real estate properties located all over the U.S. Fundrise has
access to properties in all 50 states, thereby, possessing a comprehensive list
of available real estate properties across the U.S.
To get started on Fundrise
you must follow the following steps:
●
Go to the website:
there you’d see options of the special offers available
●
Select a plan
(starter, core or advanced): you’ll have to pick a plan that works for you
perfectly. It can be based on the amount you are willing to invest
●
Sign up: signing
up takes about 10 minutes. No accreditation is particularly required, however,
personal information is to be correctly provided.
●
Fund account:
once you’ve signed up successfully funding your account would be the next step.
It may take a few days to completely set up and fund your Fundrise account.
●
Get returns: you
get back returns on your investments at the end of every quarter. It's that
simple.
Through crowdfunding,
Fundrise gets the right amount of capital to build, manage, or acquire
properties such as office buildings, shopping malls, apartments, and industrial
buildings.
Fundrise earns its investment
returns through various means which include:
●
Acquiring
properties with high appreciation value
●
Rental income
collection
●
Acquiring and
renovating a low-value property to increase the rent amount or increase the
value of the property
●
Collecting
mortgage returns
All profits are being shared
among shareholders or investors according to each amount of investment made.
Fundrise payouts can be received in two ways:
●
Quarterly
dividend distributions among investors (this is the common payout)
●
Receive the
appreciation of an asset’s value at the end of its investment cycle.
Fundrise Fees
On its asset management,
Fundrise charges an annual fee of 0.85% and an advisory fee of 0.15%, making a
total of 1.0%. It would best not to assume that 1.0% is all there is to it as
Fundrise has a few hidden charges which cause the original percentage to rise
to about a 3.0% annual charge.
With Fundrise you get:
1. An accessible platform: the fundrise real estate
platform is just about the easiest commercial real estate platform to get on.
It is easily accessible to all its investors and visitors.
2. Affordable investments: the low investment opportunity
fundrise offers makes it possible for anyone with a minimum of $500 to invest
in real estate. It gives everyone an equal opportunity at real estate
investment
3. Money redemption: With its 90-day money return policy,
Fundrise allows its investors the opportunity or redeeming their money back at
the original amount. If you feel or believe that Fundrise doesn’t meet your expectations
or simply no longer interested in investing Fundrise allows you to request a
redemption. However, an extra charge of 3% would be charged on your redemption.
Fundrise Redemption
To redeem your Fundrise
shares you can simply do so by submitting a request for redemption. Simply go
to your account ‘settings’ on the website and follow the steps duly. After
submitting your redemption request a 60-day waiting period would begin. Once
that is over and your redemption request properly processed, monthly liquidity
may be made available to you or otherwise.
Fundrise Key Features
eREIT:
allows investments in multiple commercial real estate assets through its
non-traded REIT. Unlike the conventional REIT which requires a middleman and
cuts down earning, the eREIT makes no provision of the middleman, thereby
saving you extra costs
eFund: this
focuses more on commercial real estate growth compared to the income. It allows
you to invest in multiple real estate assets.
Self-Directed IRA: with this feature, you can make Fundrise investments using the
pre-tax dollars
Fundrise IPO:
through its internet public offering (IPO) Fundrise is able to sell shares
easily to qualified investors. A minimum of $1,000 would be required in your
account with an active advanced plan. The Fundrise IPO allows you to invest up
to 25% of your account balance.
Fundrise Pros and Cons
Pros
●
Minimum
investment of $500 & $1,000, respectively
●
No accreditation
required
●
Open to U.S
residents of 18 years and above
●
Passive
investment
●
Quarterly
dividends
●
Get money back
within 90 days
●
Portfolio
diversification and enhancement
●
Bankruptcy
protection
●
Available in all
50 states
●
Accepts
non-accredited investors
●
Portfolio
diversification
Cons
●
Illiquid
investment
●
Hidden charges
●
Regular tax payment
on earnings
●
Unknown future
returns
●
Limited offering
to choose from
●
No individual
deal crowdfunding
Fundrise FAQ
Q: How are eREITs different from traditional REITs?
There is a thing line between
the Fundrise eREIT and other REITs. Even as they hold a lot of similarities the
major difference is that eREIT is solely carried out electronically/online. It
also doesn't require the services of a middle man (broker). Fundrise charges an
annual 1.0% asset management fee compared to other REITs which require a 7%-14%
front-end load.
Q: What is the use of eFunds?
eFunds (electrical funds) are
particular to Fundrise. It serves as a tool for pooling together Fundrise
mutual funds. eFunds are majorly focused n growth compared to income.
Q: What is the advantage of crowdfunding through REIT?
Using the funds collected
from many investors, commercial real estate assets can be easily acquired or
purchased that ab average investor may not be able to afford individually.
Traditional REITs required the services of a broker which make Exchange-traded
REITs easily accessible with a few hitches.
Fundrise Competitors
Being one of the top-rated
real estate investing platform, Fundrise’s rival companies like Realty Mogul
and EquityMultiple holds the same ratings as Fundrise. The major noticeable
advantage Fundrise has over both companies can be seen in the investment
minimum. While Fundrise offers a $500 minimum investment, Realty Mogul has a
$1000 minimum investment amount and EquityMultiple offers a $1000- $5000
minimum investment range. It is only a matter of time before both companies
lower their prices to a minimum of $500 which would result in a tight
competition for Fundrise.
Conclusion
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