Fundrise Review: Invest in Real Estate for $10

If interest rates are rising or you're trying to save for a down payment on your own home, adding real estate to your investment portfolio might not seem like the best option.

That’s where a platform like Fundrise can help. It allows you to indirectly invest in real estate by purchasing shares of properties instead of purchasing a property outright.

This way, even if you don’t have the cash to buy properties of your own, you can still join the real estate market. 

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Overview of Fundrise

Fundrise is a real estate investment platform that offers access to a variety of assets, ranging from single-family homes to commercial real estate projects across all 50 states.

Rather than fronting a substantial amount of money upfront, you and other Fundrise investors pool your money together to crowdfund projects. In exchange, you receive fractional shares of real estate investment projects, called eREITs. 

A REIT — short for real estate investment trust — is a type of security that's backed by real estate and traded on the stock market. Unlike stocks, REITs are required to pay out a portion of their profit as dividends.

(While some stocks do pay dividends, not all do, and they're not all required to.)

Fundrise’s eREITs offer a similar value as publicly traded REITs with one big exception — they’re only traded on Fundrise. This gives you access to investing opportunities you might not find anywhere else.

For example, Fundrise offers shares of its eFund, which is a specific portfolio designed around industrial real estate.

Fundrise's goal is to lower the barrier to entry for real estate investing. For $10, anyone can create an account and set up a portfolio. By crowdsourcing capital to invest in large commercial or residential projects, you can benefit from the real estate market without having to buy a building.

Fundrise lets you choose from several different investment strategies. These range from generating fixed income to taking advantage of new real estate opportunities. This helps you ensure your Fundrise investments are aligned with your overall goals.

Regardless of your personal investing strategy, Fundrise is designed for long-term investors who are serious about making real estate part of their overall investment portfolio. You should plan to keep your Fundrise investments for at least five years.

While this can help establish a disciplined investing habit, it might make it difficult if you want to dip out after generating a return on your initial investment.

How Fundrise Works

You create your account on the Fundrise website or mobile app. Signing up takes a few minutes. You’ll need to validate your identity and connect an external bank account to fund your account. 

Once your account is created, the platform is fairly easy to use. You’ll have access to a dashboard that tells you the composition of your portfolio and the return on your investment. You can decide to make one-off deposits or set up recurring transfers to grow your portfolio over time.

A unique feature that Fundrise offers is the ability to create personal investing goals. These goals are tracked right in the Fundrise dashboard, allowing you to make sure you’re staying on target.

While dividends generated from eREITs aren’t guaranteed, this does allow you to earn supplemental income from your investments. You can reinvest your dividends into purchasing more eREITs, allowing your portfolio to grow even quicker.

While the goal of Fundrise is to promote long-term investing, you can redeem your shares of eREITs if you want. But there is a trade-off: If an eREIT is held for less than five years you’ll have to pay a 1% redemption fee.

One thing to note is that Fundrise isn’t a publicly traded exchange — eREITs traded on Fundrise stay on Fundrise. While this allows you to access unique projects, it does come with risks. At any point, Fundrise can halt redemptions, locking up your cash in the platform. 

Fundrise is not SIPC-insured, which means if the platform fails, you could lose all of your money. 

Fundrise Portfolios

You can get started investing on Fundrise with as little as $10.

Based on the amount you want to invest, there are five different levels of portfolios you can choose from:

• Starter
• Basic
• Core
• Advanced
• Premium

Each level offers different investing options and strategies to help your portfolio grow. The primary investing strategies you’ll get access to through Fundrise include:

• Fixed Income
• Core Plus
• Value Add
• Opportunistic

Based on the investment strategy you choose, each portfolio includes a mix of real estate and credit options.

Portfolios are diversified across different types of investments, including new development projects, build-to-rent, single-family homes, residential projects, and commercial projects.

READ MORE: How to Manage Your Own Investment Portfolio

Fundrise Fees

All Fundrise accounts are charged a 0.15% annual advisory fee. There’s also a 0.85% management fee for Fundrise’s real estate funds.

Some account types — like IRAs — come with extra fees. This includes a $125 annual custodial fee that can be waived if you maintain an account above $25,000 or you invest at least $3,000 into your IRA.

Access to certain portfolio levels also comes with a fee. Pro membership costs $10 per month and gives you access to special investment opportunities and the ability to customize your portfolio.

If you want to redeem an eREIT or an eFund share before you’ve held it for five years, there is a 1% penalty. This is something to keep in mind if you expect you’ll need to tap into your funds while you’re invested in Fundrise.

READ MORE: How to Start Investing When You Don’t Have Much Money

Who Should Invest With Fundrise?

Fundrise is available to any investors over the age of 18 in the U.S.

It's suitable if you want access to high-growth real estate projects but don’t have the capital to access those projects directly. 

It’s also good if you want to add more diversity to your portfolio without holding physical real estate assets.

Depending on your investment goals, Fundrise can also be a good platform for passive investors. You can automate your investments for a hands-off approach.

READ MORE: Your Full Guide to Investment Asset Classes

Who Shouldn’t Invest With Fundrise?

While Fundrise reduces the barrier to entry in real estate, it isn’t for everyone. There is a lot of work you will need to do upfront to understand the assets in each portfolio and the risks associated with them.

Even though real estate is a great asset to invest in, it does come with tremendous risks during an economic downturn. If you’re not able to weather an economic storm that might arise, Fundrise might not be the best platform for you.

Fundrise also might not be a good fit if you need access to your funds in the short term.

READ MORE: Understanding Value-at-Risk and Your Loss Potential

Alternatives to Fundrise

Fundrise is just one of many investing platforms that have emerged over the years to make real estate investing as easy as possible. Here are some others you can consider.

Fundrise vs. Yieldstreet

Yieldstreet is a popular platform for alternative investments, including real estate. What sets Yieldstreet apart is the access it provides to things like fine art, private equity, and structured notes.

Unlike Fundrise, Yieldstreet is for accredited investors. To be considered an accredited investor, you need to meet one of the following criteria:

• Earn $200,000 or more per year
• Have a net worth of $1 million or more
• Hold a Series 7, 65, or 82 license in good standing

Non-accredited investors can still invest with Yieldstreet but only through its Prism Fund. This requires a $10,000 minimum investment.

Fees vary on Yieldstreet. They include a 1% to 4% management and initial listing fee, depending on the asset.

Assets also come with different levels of risk, which means you’ll need to do some homework before investing with Yieldstreet.

Fundrise vs. CrowdStreet

CrowdStreet is another popular alternative. Like Fundrise, CrowdStreet allows you to invest in exclusive real estate projects and off-market REITs. It charges low fees that vary by project.

Where the two differ is in their accessibility. CrowdStreet comes with a higher minimum investment requirement, starting at $25,000. The platform is only available to accredited investors as well.

While it provides more opportunities for diversification, CrowdStreet can’t compare with the access Fundrise offers to new and unaccredited investors.

Fundrise vs. Roofstock

Both Roofstock and Fundrise offer the opportunity to invest in real estate. But Roofstock is a bit more focused, prioritizing direct investments in income-producing rental properties instead of crowdfunding larger development projects.

Roofstock allows you to purchase real estate directly. It’s more of a marketplace for accessing rental properties than an investment platform. The benefit of Roofstock is that it assists you through the process of purchasing investment properties, which can be different from purchasing a single-family home for yourself.

One of the draws of a platform like Roofstock is that it gives you access to real estate markets even if you don’t live in them. You can use the platform to match specific search criteria to ensure you select a property that suits your needs.

While Roofstock simplifies the real estate investing process, it doesn’t necessarily reduce the barrier to entry. You’ll still have to follow the same process to purchase a home and obtain a mortgage. This means you need to have more upfront capital to benefit from Roofstock than you would using Fundrise.

The Bottom Line

For new investors who want to get into real estate, Fundrise is one of the easiest options out there. It has a low minimum investment and you can pick different portfolios and strategies to match your risk tolerance.

But keep in mind that real estate investing can be risky and you'll need to research the funds available on Fundrise. As well, since it's a private exchange, investing with Fundrise isn't the same as putting your money into the stock market.

But for easy, affordable real estate investing, it's a solid option for beginners.

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