FUNDRISE Review (features REITs and Crowdfunding)

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

 

With Fundrise you do not necessarily need accreditation to be a registered member. Accredited investors, as well as unaccredited investors, have the same opportunity of investing in Fundrise. To get the best out of Fundrise investments, you must be willing to commit to long term investments-- as Fundrise is best known for long-term investments, crowdfunding, and non-traded REITs. Every investment holds chances of both risks and rewards, and this is not particular to Fundrise. However, it would be best to properly go through the Fundrise policy for proper clarification and understanding before committing your money in its investments

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