A real estate investment option that may not be suitable for short-term investors.
Fundrise is an online platform that lets you invest in their real estate trusts and projects without the upfront and ongoing costs of property ownership. This can be a decent long-term investment. But if you want to reap your benefits in five years or less, other investment options could be the more prudent choice.
8.7% to 12.4%
What we think of Fundrise
Fundrise is a crowdfunding platform that invests in real estate projects across the US. Fundrise buys a property, then creates a private real estate investment trust (REIT) which investors can buy.
On the plus side, you don’t have to be an accredited investor — i.e. to have a net worth of at least $1 million or an annual income of $200,000 or more — to start investing. With Fundrise you can invest with as little as $500 with the Starter Portfolio. To get access to more eREITs, you have to start off with at least $5,000, which puts you in Fundrise’s Core Plan.
But unlike standard REITs that you can trade on the market like mutual funds or ETFs, Fundrise creates eREITs (electronic REITs) and eFunds that are completely private. You can’t trade them whenever you want. You pay fees if you withdraw your investment before five years have passed, and you may be locked out of selling your investment altogether in cases of severe economic downturn.
Because of the limitations and fees, Fundrise is not a great option for short-term investing. Consider Fundrise only if you plan to hold your investment in the next five to ten years or even longer.
The average return on investment isn’t spectacular, but it’s not that bad either
In the end of 2019, the average return for the previous three years was around 10% annually, according to Fundrise. With compounding interest and dividend reinvestment option, this number could grow exponentially the longer you hold your investment. But since we can’t directly confirm these returns and because they are reported by the platform itself — take it with a grain of salt.
If these returns are real, however, 10% annually is the average return of the S&P 500 Index. Technically, you can earn the same return on investment if you put your funds in an ETF that closely tracks the index. You would also get the benefit of selling your ETF whenever you want without restrictions.
But as with any type of investment, past performance does not guarantee future results. Make sure to do your own due diligence to avoid surprises.
Fundrise cost of investment
Fundrise charges clients annualized fees. It it also draws management fees from the funds it runs. You may think of this as an expense ratio.
- Investment Advisory fee: 0.15% annually
- Fund Management fee: 0.85% annually
In addition, the following early redemption fees apply to eREIT and eFund shares. These depend on how long you’ve owned the shares before selling:
- Less than 90 days: None
- 91 days–3 years: 3% of value
- 3–4 years: 2% of value
- 4–5 years: 1% of value
- 5 years+: None
Pros and cons
Real estate investing involves risk, but you may have potential for strong returns.
- Diversification. Portfolios contain a diverse mix of commercial and residential properties that generate revenue differently. Depending on which investment plan you choose, you can invest in growth or income eREITs and eFunds.
- Low entry requirements. You can start investing with at least $500. However, this won’t give you access to all eREITs and eFunds.
Any returns you make with Fundrise are taxed as ordinary income along with the following downfalls:
- Illiquid. Fundrise’s eREITs and eFunds are illiquid and there’s no guarantee that there will be buyers if you want to sell. You can request to redeem shares any time. But Fundrise notes on its website that “such redemption cannot be guaranteed — especially in times of economic uncertainty — and there may be costs associated with premature redemption.”
- Lack of transparency. Return projections for each investment style is available to investors only.
- Fees. Much like ETFs have annual fees, you’ll find annual management fees with Fundrise as well. Luckily, these are around 1% annually.
- Additional costs. You may directly or indirectly take on fund development fees, asset origination costs, liquidation charges and early redemption fees.
Compare with other real estate investing platforms
Explore your options by minimum deposit, eligible investors, asset types, annual fee and average return. Select the Go to site button for more information about a particular service.
Fundrise reviews and complaints
Fundrise feedback is mixed. Its mobile app gets stellar ratings but it receives lukewarm feedback on Trustpilot.
As of June 2021, Fundrise is a Better Business Bureau (BBB) accredited business with an A- rating and 76 complaints. On Trustpilot, Fundrise maintains a TrustScore of 2.8 out of 5 based on 309 reviews. Its mobile app scores 4.8 out of 5 on Google Play and 4.8 out of 5 in the Apple App Store.
Customers praise the company’s frequent investment updates and its beginner-friendly platform. But there are numerous complaints on both the BBB and Trustpilot of investors having difficulty withdrawing funds. A number of these complaints were filed in 2020, with investors stating Fundrise refused their withdrawal request due to the unstable market conditions produced by the coronavirus outbreak.
How to get started wth Fundrise
Sign up for Fundrise in 10 minutes:
- Visit the Fundrise website and click Get Started.
- Select your plan or answer the questionnaire to get a plan recommendation.
- Fill in your personal information, then click Continue.
- Confirm your country of citizenship and residence, then click Continue.
- Choose your account type, then click Continue.
- Fill in your contact information and Social Security number and click Continue.
- Choose your initial contribution and fund your account, then click Continue.
- Read and agree to all account disclosures and agreements, then click Continue.
- Review your information and account details, then click Submit.
- At least 18 years old
- US resident
- US citizen
- Valid Social Security number
- Valid US address
- $500 minimum deposit
- First and last name
- Phone number and email
- Social Security number
- Bank account information
Two ways to contact Fundrise customer service
Get in touch with customer service by:
- Email: contact@Fundrise.com
- Social media:
- Twitter: @fundrise
- Facebook: @fundrise
I’m ready to start using Fundrise. Now what?
Now that you’ve signed up, here’s how you can make the most out of the service:
- Investor profile. Set up your investor profile and any other account information, such as beneficiaries, accreditation, etc.
- Set up auto-invest. If you plan on investing regularly, set up auto-invest to make recurring contributions.
- Refer friends. Depending on your account, Fundrise will waive your fees for a specific period of time for each qualified friend you refer.
- Add two-factor authentication. Visit your account settings page to set up two-factor authentication.
- Turn on notifications. Get notified when there are new projects, portfolios or other important details.
- Resources. Take advantage of the Fundrise investor resources to learn about investing, real estate and more.
- Download the app. Download the Fundrise iPhone app from the app store to manage your portfolio when you’re away from your desktop.
One alternative is to invest in REIT stocks. These are stocks like any other you can buy on the stock market, except you buy a company that invests in real estate. But if you’re looking for a direct Fundrise alternatives to buy private REITs, consider:
- DiversyFund. Similar to Fundrise, DiversyFund lets you invest in private REITs with as low as $500 and you don’t have to be accredited investor. But unlike Fundrise where you can withdraw your funds before five years have passed, with DiversyFund there’s no such option.
- RealtyMogul. To invest in private REITs with RealtyMogul, you have to start with at least $5,000. This is way higher than Fundrise. Compared to Fundrise, RealtyMogul offers multiple investment options, but you’ll need to be an accredited investor and start with a minimum of $25,000 to gain full access.
- Roofstock With Roofstock you can invest in single-family rental homes. This is slightly different than Fundrise because you get to earn rental income from the tenants.
Fundrise is an online investing platform that allows users to invest in real estate without the need for down payments, maintenance costs and other barriers to entry. It has a medium minimum investment of $500 and an annual fees of 1%.
But investments are extremely illiquid and early withdrawal fees may apply. Learn about other real estate investing platforms then compare your options if this one isn’t right for you.