Is Fundrise A Good Way To Invest

Fundrise Review: The Best Way To Invest In Real Estate

Ive been working with Fundrise since the company began in 2012. Fundrise is the largest and best real estate crowdfunding platform today. Let me share me detailed Fundrise review so you can decide whether to invest with the platform or not.

More investors are looking for ways to diversify their investment portfolios and reduce volatility. In my mind, buying real estate is the best way to diversify and profit from inflation. Inflation helps boost rental income and real estate values.

However, some of you dont have the 20%-30% downpayment to get started in rental property investing. Therefore, Id like to explore the real estate crowdsourcing industry with Fundrise, one of the leaders in the space.

Ive been a big fan of real estate since college. Since 2003, Ive built a $10 million real estate portfolio in San Francisco and Honolulu. Ive always just bought a place to live in for several years and then rented it out.

But with Fundrise, I can now invest with as little as $10 in various types of diversified eREITs with no hassle. In the past, these deals would have required hundreds of thousands of dollars or even millions to access. No more!

Since selling my main SF rental house in 2017, I reinvested $550,000 of the proceeds in real estate crowdfunding to earn income passively. This has been a life-saver given I also became a new father in 2017.

Fundrise Encourages People To Invest

But my counterargument to that is, Well, if Fundrise encourages people to invest because they do have this slick platform and they tell their investors about the latest investments that their money is being put into and it gets them excited about investing, isnt that a good thing?

Isnt that a good thing if that encourages them to take the five hundred dollars they have and invest it rather than taking it and blowing it on same gadget thats going to be outdated in less than a year or something else they dont really need?

So its kind of like the Acorns app if paying that small monthly fee to Acorns is whats going to get you excited about investing and to start investing, Im all for that.

And its the same thing with Fundrise.

How Liquid Is Fundrise

Well, not very.

Thats a big reason why I caution brand new investors: The folks who are in my DMs asking me why it takes three business days to get their money out of their brokerage account are likely not prime candidates for Fundrise, where you cant touch your investment for five years. Its locked up, because its actually being used to buy properties.

Think about it this way. If you bought the house down the street and you gave the bank $50,000 for it upfront and then mortgaged the rest, would you expect to be able to go to the bank and be like, Yo, Id like to withdraw my $50,000. And also, can I cash out some of that appreciation? No. You have a house, not money. Until you sell the house, you dont get the money. Tough luck.

Fundrise isnt THAT illiquid but theyve determined that thats the amount of time they need all funds to remain invested in order for the best results.

The idea of not being able to withdraw for 5 years might feel a little foreign in the age of Robinhood and instant gratification, but Ive heard it described as a way to protect you, the investor.

If you and five friends put money into a pot to buy a house over a five-year period, you wouldnt want one of your friends pulling out their funds after two years. That would hurt your overall investment. Its kinda like that, except way more complex.

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Maximizing Your Earnings With Fundrise

Your potential earnings with Fundrise will vary depending on your portfolio and the investments within it. But there are a few things you can do to help maximize your earnings. Consider these tips before jumping in:

• Look at your options: Fundrise doesnt offer one catch-all portfolio but rather a handful of options tailored to your specific investment style. Understand each of these plans before you begin so you know youre choosing the best option for your situation.
• Reinvest your dividends: It might be tempting to take your earnings and do with them what you want, but reinvesting your dividends puts that money straight back into open offerings with Fundrise. There are no fees to reinvest your dividends.

Fundrise Performance Update For 2022

When I first invested my $1,000 five years ago, I told Fundrise to automatically reinvest all of my dividends , which is why the portfolio value has grown as it has.

As of April 12, 2022, my original $1,000 investment has earned a pretty decent return on average over the past five years. Just looking at the first quarter of 2022, the dividend payment was the lowest it’s ever been, but the appreciation was simultaneously the highest it’s ever been.

2021 was the best year at 20.4% and 2020 was the worst year at 9.7%.

This screenshot above was taken on April 12, 2022 the same day my Q1 dividend for 2022 was automatically reinvested.

Here’s a quick snapshot of EVERY dividend I’ve received since I got started five years ago.

Is 14% a decent return over the past five years?

Considering I spent no time or energy stressing over property managers, tenants, contractors, lenders, or anything, for that matter, I think it’s pretty good.

Could I make a better ROI with other investments? Absolutely.

The appeal of Fundrise isn’t in how high the returns are. The appeal is the passive nature of this investment and the fact that it doesn’t require anything from me aside from the initial dollars I put into it.

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How Do Fundrise Returns Compare With Other Investments

So I have an average annual return with my Fundrise investment of 13.3% in just over four years. But is that a good return?

It all centers on the basic question: What if I had invested my money in something else?

That can include other real estate investments, as well as stocks and crypto.

It really depends on what your investment goals are, and what you compare those returns with.

How To Stay Safe Investing With Fundrise

Because of the nature of the investments, Fundrise eREITs and eFunds have a lower correlation to the broader market and could potentially offer greater protection from market volatility.

Fundrise doesnt invest in just any real estate, either. The companys real estate team only goes after high-quality investments that can potentially earn income and safeguard against losses. So you can rest easy knowing your money is only going toward sound investments, not the riskier forms of real estate investment. Fundrise also uses bank-level security to ensure your information is safe while using the platform.

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Fundrise Review: Final Thoughts

The first question to ask yourself regarding Fundrise is whether youre planning to invest for a minimum of five years. While the 1% early redemption fee may seem small, a publicly-traded REIT doesnt have that fee, nor do non real estate investments such as a stock market index fund.

For non accredited investors, I like Fundrise as a way to diversify ones portfolio while learning about real estate investing. Its low initial investment gives a non accredited investor the ability to invest in the real estate market with little money, without risking too much of their savings.

There are plenty of good options for those who decide to increase their real estate asset exposure as they gain more experience. If youre interested in real estate and think you might want to pursue it further at some point in the future, this can be a great way to learn the language and methodology in a reasonably safe way. Since Fundrise chooses the properties, youre less likely to make a bad decision or get swindled.

Plus, their annual reports and in-depth circulars are also a great way to learn how to understand potential deals.

For higher-net-worth investors, Fundrise is a worthwhile choice for those looking to earn regular dividends or diversify their portfolios. Specifically, in a traditional 60/40 portfolio, one might look to diversify their bond allocation with some real estate, which is where Fundrise could fit in.

The Three Biggest Disadvantages Of Fundrise

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Who Is Fundrise For

So, who is Fundrise for?

Well, to start with, the requirements to invest with Fundrise are to be a U.S. citizen and at least 18 years of age.

But Fundrise investments are for:

• Long-term investors
• Investors who are looking to diversify their portfolio- aka having more than stocks and bonds
• People looking for private real estate and commercial real estate investments
• Hands-on investors, those who will do the research and some leg work to invest wisely

You dont have to be a seasoned real estate investor to benefit from Fundrise, but to do real estate funds or trusts, youll want to be dedicated to the work of making smart investments.

Youll have some leg work to do to make sure youre putting your money into opportunities youre comfortable with.

Your risk tolerance has an important part to play here and your research skills will need to be at the ready!

Fundrise Vs Reits: Which Is A Better Investment

• Crowdfunding platforms are popular during times of volatility.
• Fundrise is often compared to publicly listed REITs and presented as a superior alternative.
• I disagree and believe that REITs are much better investments in most cases.
• I do much more than just articles at High Yield Landlord: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

designer491/iStock via Getty Images

With market volatility back on the rise, increasingly many investors are now turning to alternative investments like crowdfunding.

Since I mainly cover real estate investment trusts on Seeking Alpha, I often get asked questions about Fundrise. Specifically:

What do you think about it and how does it compare to REITs?

Fundrise

In case you aren’t familiar with Fundrise, it is today the largest crowdfunding platform for real estate investments in the world.

They have about $7 billion of assets under management and over 300,000 users on their online platform.

That’s quite an achievement!

They pride themselves on leveling the playing field and letting everyday investors get a piece of properties that have traditionally been reserved for the rich and wealthy.

If you go on their website, you will notice that they like to compare themselves to REITs and make a lot of claims that puts them in a good light.

But how much of that is really just marketing?

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The Fundrise Advantage: Real Estate Made Accessible To Everyone

At other online investment platforms, there are restrictions on who can invest.

The worst part:

Some platforms only allow accredited investors.

An accredited investor is someone who has an earned income of more than $200,000 for the last two years or a net worth of over $1 million.

Fundrise doesn’t have those restrictions.

Anyone can invest through the platform, as long as they’re a U.S. citizen aged 18 or older.

The platform also makes it easy to invest if you don’t have a lot of money to start. The $500 investment minimum for a Starter portfolio is lower compared to some platforms that require $5,000 or $10,000 to invest.

You can also upgrade to a Core account once you have the $1,000 minimum needed to get started. It doesn’t cost anything to upgrade your account.

How Good Is Fundrise Support And Knowledge Base

Fundrise provides a comprehensive support and knowledge base on its website. You can find resources for both FAQs and education on the Fundrise website.

The FAQs articles provide the answers to many of the commonly asked questions you may encounter when investing with Fundrise. On the other hand, education resources provide you with market data and analysis to guide your investment decisions.

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Fundrise Alternatives For Real Estate Investing

For the last few years, Fundrise has proven to be a top choice for those looking to get exposure in real estate, without the hassle of buying and managing properties.

Yet, you may be looking at Fundrise alternatives as well.

Maybe you want to diversify into more real estate offerings or maybe you arent a fan of the platform or fees, so you are looking for something different.

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Fundrise Payout Terms And Options

Real estate investments generally require time to increase in value. As a result, Fundrise advises users to hold their investments for at least five years. When you invest with Fundrise, you are purchasing shares in physical properties.

Thus, you will not be able to withdraw your earnings easily since the company will need to sell the properties for you to do so. Nonetheless, Fundrise allows you to liquidate your investments once per quarter without penalties.

There are some limitations when withdrawing your funds from Fundrise. You should check to ensure that you meet these requirements to avoid additional fees.

Fundrise Plans And Portfolios

• Starter The most straightforward way to invest in real estate, the starter portfolio requires a minimum investment of only $10.
• Basic Invest at least $1,000 to access additional features like investor goals and the ability to invest in IRAs.
• Long-Term Core Strategy Invest at least $5,000, and Fundrise will set up your portfolio to prioritize the long-term returns.
• Income Core Strategy Invest at least $5,000, and Fundrise will help maximize your portfolios dividends.
• Balanced Core Strategy Invest at least $5,000 and get a blend of long-term and income strategies.

You can learn more about these strategies at Fundrises website.

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Fundrise Vs Reit Investing

Investing in REITs especially publicly traded REITs is a lucrative option for many investors. Not only do these investments traditionally perform well, but the majority of the time they even boast a higher return yield than the S& P 500. The REITs offered through Fundrise are privately traded investments, however. This means that they may not boast the same returns or have the same benefits as public REITs purchased through a brokerage account.

With that said, Fundrise REITs usually cover a wide range of investment types. Because of this, they may help hedge against market downturns better than some specialized REITs or individual real estate purchases. Heres a look at some of the important differences between the two REIT investment methods:

All REITs are required by the IRS to pay out at least 90% of their taxable income to investors. These are disbursed in the form of dividends. While dividends are never guaranteed, this requirement can make REITs an excellent choice for investors seeking passive income streams.

Who Should Choose Fundrise

Fundrise makes sense for people who want to invest in real estate without needing to purchase property or become a landlord. Open an account for as little as $10 and get quick access to real estate funds tailored to different investment goals.

Fundrise warns that investing in real estate is a long-term proposition, meaning you should have at least a five-year time horizon. We agree. However you choose to buy, real estate is a long-term investment that delivers returns in a timespan measured in years or decades.

While some of the platformâs funds give you penalty-free early redemptions if you choose to take out money within five years, most do not. In addition, Fundrise notes that it reserves the right to freeze redemptions during an economic downturn.

Fundrise is designed to meet the needs of smaller, nonaccredited investors. While they also offer options for accredited investors who are prepared to contribute six-figure sums or more, they are not the main focus of the platform.

Note that other real estate crowdfunding platforms like CrowdStreet concentrate on the higher-end market and could be better choices for bigger real estate investments.

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