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The Bottom Line: Fundrise is the first investment platform to create a simple, low-cost way for anyone to access real estate's historically consistent, exceptional returns. It allows you to invest in commercial real estate and REIT's
Did you know over 90% of today’s millionaires built their fortune with help of real estate investing?
With numbers that astounding, it’s no wonder so many people want to use real estate to build their own wealth. (I mean, don’t we all want to be millionaires one day?)
But, historically, real estate has been a tough market to break into. Only the insanely wealthy have been able to purchase enough properties to diversify their portfolio by asset type and location.
So what do you do when you don’t have mega-dough lying around, but you still want to invest in real estate?
Enter Fundrise—today’s hottest online real estate investment platform.
In this article, we’ll breakdown everything you need to know about Fundrise, so you can confidently decide if it’s the right choice for you.
Minimum Investment: $500
Promotion: No current promos
What Is Fundrise And How Does It Work?
Fundrise is a crowdfunded platform that is blazing a trail in the fintech industry. They have one simple mission—to make real estate investing available to the masses through their intuitive online platform.
Unlike other online investing platforms, Fundrise is the first to offer private alternative investments in real estate—a truly groundbreaking accomplishment.
As of 2019, Fundrise has over 500,000 users who have collectively invested almost $2 billion in real estate across the US.
Thanks to Fundrise’s invention of eREITs and eFunds, everyday people can invest in real estate without needing a ton of cash.
But before we dive into the meat of this review, let's take a closer look at eREITs and eFunds.
These are the building blocks of any Fundrise portfolio, so it’s important to understand what they are.
What Are eREITs?
eREIT stands for electronic Real Estate Investment Trust. Similar to an exchange-traded fund or mutual fund, eREITs allow you to invest across multiple assets (in this case real estate), which diversifies your portfolio and lowers costs.
eREITs—which are exclusive to Fundrise—are made up of commercial real estate assets such as apartments, shopping centers, hotels, and office buildings.
What are eFunds?
eFund stands for electronic Fund. Similar to eREITs, they are used to diversify your portfolio and are exclusive to Fundrise.
Unlike eREITS, however, eFunds consist of residential real estate assets such as single-family detached homes, townhomes, and condominiums.
Fundrise’s Historical Performance
Over the past 5 years, Fundrise has averaged an annual return of 10.80%—slightly better than the average stock market return of 8 to 10%.
Yes, Fundrise hasn’t been around nearly as long as the stock market, but these results are still impressive.
As with any investment, past performance isn’t indicative of future results. While Fundrise has had promising historical returns, we have yet to see how they perform in an economic downturn—like the Great Recession of 2008.
How You Earn Returns & Receive Funds
You earn money three ways through Fundrise:
- Interest payments
- Property income
- Appreciation in property value
If you wish to redeem shares, you may do so by submitting a redemption request on Fundrise’s website. After the 60-day waiting period, you’ll receive monthly liquidity payments.
Please note, however, that your redemption could be subject to a 3% liquidity penalty.
Real estate is a fairly illiquid investment.
You may receive dividends and periodic distributions when properties are sold, but Fundrise encourages you to hold your investment in the market for at least 5 years—eREITs and eFunds generally become liquid after this time frame, although this isn’t guaranteed.
Fundrise Account Fees
Fundrise investors pay two annual fees:
These fees total 1% annually and are competitive with other online investment platforms.
Types Of Fundrise Portfolios
$500 is all you need to open a Starter Portfolio—half the price of Fundrise’s Core plans. This makes it a great option for new or young investors who are strapped for cash.
The Starter Portfolio has a target diversification of 5 to 10 projects and has the following asset allocation:
50% in Income eREIT IIII
25% in Growth eREIT 2019
25% in Growth eREIT
The biggest advantage of the Starter portfolio is that it comes with a 90 day money-back guarantee, and you can upgrade to a Core plan for free once you’ve invested $1,000.
Let’s take a look at each of these portfolios.
Just as the name implies, this portfolio is perfect for those wanting supplemental income. It prioritizes dividends first, followed by total return, and then appreciation.
With this portfolio, Fundrise purchases properties or invests in assets that generate predictable returns.
As Fundrise collects rent or interest payments, you realize your returns.
The current weight of eREITS and eFunds in the Supplemental
Income Portfolio is:
75% in Income eREIT III
5% in East Coast eREIT
5% in Heartland eREIT
5% in West Coast eREIT
10% in Income eREIT
The best of both worlds—and Fundrise’s most popular plan. The Balanced Investing portfolio aims to earn returns from both dividends and appreciation.
To accomplish this goal, Fundrise allocates your portfolio across debt and equity real estate assets.
Fundrise deploys both strategies used with the Supplemental Income portfolio and the Long-Term Growth portfolio to keep your investments balanced.
The current weight of eREITs and eFunds in the Balanced Investing portfolio is:
45% in Income eREIT III
5% in East Coast eREIT
5% in Heartland eREIT
5% in West Coast eREIT
30% in Growth eREIT 2019
5% in Income eREIT
5% in Growth eREIT
Are you more interested in higher growth potential than dividend payouts? The Long-Term Growth portfolio may be a good fit for you.
With this portfolio, Fundrise purchases properties with a high potential growth value—think fixer-uppers.
Next, they get to work improving the property through zoning, development, and leasing. You realize your returns when Fundrise sells the property.
The current weight of the Long-Term Growth portfolio is:
10% in East Coast eREIT
10% in Heartland eREIT
10% in West Coast eREIT
50% in Growth eREIT 2019
20% in Growth eREIT
Fun fact: 32% of Core plan investors have a Long-Term Growth portfolio, according to Fundrise.
This portfolio is for the sophisticated investor. It requires an initial deposit of at least $10,000 and has a target diversification of 80 or more projects.
You still choose between the Supplemental Income, Balanced Investing, and Long-Term Growth portfolios mentioned in the Core plans, but the target diversification increases by at least 100%.
This expands your potential for higher returns.
Fundrise Customer Reviews & Ratings
Fundrise has an almost cult-like following. Most customers love the company’s transparency and its sleek user interface.
They state that Fundrise always keeps you up to date on a project’s progress and the money you’ve made. You never have to worry about how things are going.
Other reviewers comment on the peace of mind they get from Fundrise stating no company has ever made it easier to invest in real estate.
This simplicity is what’s led many people to invest in the Fundrise iPO.
Let's take a look at how Fundrise online reviews break down by website.
Better Business Bureau (BBB)
The BBB gives Fundrise an A+ rating. Over 50 customers have left reviews on this website earning Fundrise a positive rating of 4.98 out of 5 stars.
Fundrise has a nearly-perfect 4.9 out of 5-star rating on Google, based on over 300 reviews.
Once again, Fundrise has a glowing 9.8 out of 10-star rating based on almost 300 Trustpilot reviews.
Fundrise Features And Benefits
Quarterly Dividend Payouts
Dividends are made up of loan interest and rental income payments.
Fundrise pays dividends at the end of the quarter, but payouts aren’t guaranteed four times a year. (They’re dependent on many factors such as portfolio, asset allocation, and market conditions.)
If you wish to have your dividends automatically reinvested, you can opt into the Fundrise Dividend Reinvestment Program (DRIP).
Thanks to Fundrise’s partnership with Millennium Trust Company you can invest in diversified commercial real estate directly through your IRA.
Millennium Trust Company charges an annual fee of $75 for each Fundrise eREIT. If you choose to invest in multiple eREITs (i.e. through a Fundrise investment plan), you pay a flat annual fee of $125.
The major benefit of investing through your IRA is that your earnings could grow tax-deferred depending on your account type.
90 Day Money Back Guarantee
If you’re unsatisfied with your investments for any reason, Fundrise will buy back your investment within 90 days of purchase.
As one of the only companies in the industry offering money-back guarantees, this is an added bonus for those who want to try out the platform stress-free.
Fundrise 2.0 Platform
In 2017, Fundrise released Fundrise 2.0. This new version of their platform includes the first-ever robo-advisor for real estate.
If you need help choosing an investment strategy, for example, all you have to do is answer a few short questions. Then, Fundrise will make a recommendation.
Fundrise offers portfolios to help you reach your financial goals. Similar to Wealthfront and Betterment, this robo-advisor provides investment services with low fees, hands-off management, and automatic diversification.
But unlike these other services, Fundrise is the first to offer private alternative investments in real estate.
As we’ve already discussed, Fundrise is a real estate crowdfunding platform. It has raised the majority of its equity in two ways: through Venture Capital funds and its platform investors.
While Venture Capital funds are nothing new, Fundrise invented—and was the first to use—Internet Public Offerings (iPOs).
In just 24 hours of offering iPOs, Fundraise raised $14.6 million in equity from just over 2,300 investors, according to this article from Technically Media.
Fundrise’s initial goal for iPOs was $1 million—they beat this record by 146% in just one day.
This revolutionary funding model cuts out the middleman and allows current Fundrise investors to purchase equity directly in the company.
For users who already swear by the Fundrise platform (as many do), iPOs are the perfect way to help the company expand and grow its offerings.
eREITs & eFunds
Fundrise uses exclusive eREITs and eFunds to diversify investor portfolios across multiple commercial and residential real estate projects.
This, in return, lowers costs and reduces risk for investors.
Fundrise allows investors to set up automatic monthly or bi-weekly payments.
You can still do manual payments if you wish, but this feature is one way to passively invest without having to remember to make a deposit every month.
H&R Block Discounts
Fundrise partners with H&R Block to give investors discounts on tax preparation services. At this time, discounts are:
35% off online tax preparation fees
20% off tax preparation software
$25 off retail tax preparation services for new clients
Free Tax Identity Shield for prior clients
Pros & Cons
How To Get Started With Fundrise
Fundrise’s account opening process is fully online. Follow the steps below to get started.1. Go to the Fundrise website. Click Get Started at the right-hand top of the page.
2. Choose between the Starter, Core, and Advanced plans.
3. Select your investment plan. (If you choose the Starter Portfolio, you’ll skip this step as there’s only one investment plan option.)
4. Fill out your personal information, fund your account, review, and sign your agreements. your text here...
Who’s Fundrise Best For?
Fundrise could be a good fit for anyone interested in real estate—regardless of whether you’re a brand new investor or a seasoned pro.
You can open an account as long as you’re a US resident, over the age of 18, and have at least $500 to get started.
Should You Invest With Fundrise?
Fundrise is on the cutting edge of the financial services industry. They invented iPOs, eREITs, and eFunds. They were the first to offer a robo-advisor and goal-based investments for the private real estate market.
Plus, they’ve made real estate investing available to the average investor—no easy feat.
All their success is validated by the fact that customers love them. They have an almost-perfect rating on the BBB, Trustpilot, and Google.
Not to mention there are thousands of platform users who have directly invested in the company because they want to see it grow.
We can’t predict the future, and we don’t know how investments will perform moving forward, but we can recommend this service to those who want to give real estate investing a shot.
Have you used Fundrise before? Let us know your experience in the comments below.