Real estate is known as an investment with high returns but it’s not always easy to raise enough capital to invest in on your own. Fundrise is a company that allows experienced and beginner investors alike to invest money in real estate investment trusts (REITs), a grouping of several real estate entities sold to numerous investors as shares.
Fundrise investors benefit from an easy-to-use online platform and mobile app that keeps track of how their commercial real estate portfolio is performing. Since real estate usually takes a while to increase in value, long-term investors are more likely to see growth.
It’s also important to note the fees associated with these investments and the illiquidity of Fundrise real estate investments. Review the information below to learn more about how the company works and whether Fundrise real estate is a beneficial investment for your portfolio.
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Who Is Fundrise for?
Fundrise is a simple way to begin investing in real estate but it’s not the right choice for every investor. Since real estate usually takes time to increase in value, this type of investment is best for those who don’t want to liquidate investments for a long time, such as when they retire.
Fundrise only specializes in real estate investments, so it’s also only a good option for investors who are looking to step away from stocks, bonds, and other investments. While the company claims it does extensive research on the REITs it offers, it’s still important for Fundrise investors to investigate these investments and track their returns.
Only investors who are willing to put in the work and do their due diligence to ensure they’re getting the most out of their investments should sign up for an account with Fundrise.
How Fundrise Works
To become a real estate investor with Fundrise, you must sign up for an account, fund your account, then select your investment package. With a minimum account balance of $500, you can choose the Starter Portfolio, which includes REITs and commercial real estate projects throughout the U.S.
If you invest at least $1,000, you may choose the Core Portfolio. Within this portfolio, you may choose to invest in one of three plans based on your goals, which include:
- Supplemental plan: Focuses on dividends and offers a steady stream of income from your investments.
- Balanced investing: Attempts to diversify your investments by allocating your money to numerous REITs.
- Long-term growth: Identifies REITs you can invest in now that are expected to perform in the long term.
The way you receive returns on your investment depends on the type of plan you choose. You may receive quarterly dividend distributions from your investments through rent collected or interest or you may only receive capital when your portfolio appreciates in value over time. However, just like other investments, profit isn’t guaranteed and is more likely if you’re willing to invest in the long term.
Fundrise has expanded the ways you can invest and now includes the following features:
- Self-directed IRAs: You can use the money in your self-directed IRA to invest in Fundrise but these funds may only be placed in REIT funds with the company.
- Investing based on goals: Fundrise recently updated its platform to focus on your goals instead of packages. You provide information on your investment goals and the system suggests real estatement investments that meet your needs.
- Internet public offering (iPO) investments: The company plans to sell shares during an internet public offering and will first offer these shares to current customers. To be eligible, you must be on an advanced investment plan and have at least $1,000 in your account with the company. You’re permitted to invest a maximum of 25% of your account balance in Fundrise shares.
You can sign in to your Fundrise account through the company’s website or mobile app. Within the investment app or on the website, your account dashboard provides you with information on your account balance and how your REITs are currently performing.
The platform alerts you of new asset acquisitions that affect your account, your dividend payments, the current state of the real estate market, and the status of real estate projects within your portfolio.
Fundrise Pros and Cons
All investment agencies have benefits and disadvantages for investors and Fundrise is no exception. Review the pros and cons of investing in REITs with Fundrise before deciding to fund an account with the company.
- You can cancel your account within 90 days if you aren’t satisfied, subject to limitations.
- Fundrise only requires $500 minimum to open an account and start investing.
- You don’t need to have a certain net worth or income to begin investing.
- Your money is invested in a pool of diversified commercial real estate, an opportunity you may not have without an agency.
- You may qualify for quarterly distributions, which can be reinvested in your Fundrise account for additional passive income.
- Your Fundrise account is subject to a 0.85% asset management fee each year.
- There are no guarantees on your investment and you may lose money.
- The distributions you take from your account are considered ordinary income, so you must pay taxes on what you earn.
- There isn’t a secondary market available where you can sell your Fundrise REITs so you must commit to the entire investment term.
What Are the Best Investments Fundrise Provides?
For most average investors, commercial real estate isn’t a feasible investment. It’s hard to identify real estate values and locations that will eventually grow and produce capital. Fundrise uses an underwriting process that analyzes real estate market data when choosing investments. The company reviews thousands of investment opportunities each year and only selects a few to add to their investment portfolios.
With Fundrise, investors can become portfolio owners of REITs in several commercial real estate establishments and projects. This allows investors to diversify their portfolio away from stocks and bonds without choosing specific real estate they think may perform.
Is Fundrise Safe?
There are no guarantees when it comes to commercial real estate investments. While your money is safe with Fundrise, you may not be satisfied with the returns on your investment, especially if you’re not dedicated to keeping your money invested long term.
If the economy takes a hit and the real estate market experiences a downturn, your investment will also feel this negative impact. In the event of a real estate market crash, Fundrise may not be able to allow investors to redeem their original investments and may not be able to pay dividends.
To activate your account with Fundrise and begin investing, you must deposit at least $500. The company charges a 0.85% asset management fee and 0.15% advisory fee each year. If you choose to redeem your shares, you’re subject to a redemption fee that may be as high as 3%.
If you’re looking for a way to diversify your portfolio and begin investing in commercial real estate, Fundrise can help you add this asset to your investments. Before signing up for an account, review the fees associated with REITs and ensure you’re ready for the risk that comes with a long-term investment.
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