There are many investors who make investments in real estate and earn big bucks. These people are the ones who already have a lot of money in their pockets to invest, but what about an average income earning person? Using Fundrise, anyone can invest in real estate with funds as low as $500. However, there is a lot more to love about this low-cost real estate investment platform. Check out this Fundrise review.
What Is Fundrise?
Fundrise is a crowdfunding platform for commercial real estate. Many people want to invest in real estate but are adamant to do so because of the money. One of their main products is eREITs(Electronic Real Estate Investment Trusts).
There are many ways in which the platform earns returns:
- Collecting interests by holding mortgages
- Buying properties which will be valued more in the future
- Buying undervalued properties and renovating them to increase their value
- Purchasing apartments and houses and putting them on rent
These REITs don’t trade on a public exchange and hence there is no guarantee to find a buyer for the shares sold by investors already. Fundrise highlights its main products USP by calling it eREITs because of their online functionality. Other than eREITs, it also has a product called efunds, in which people invest money to buy land, build houses and then sell it potential home buyers.
Each investor gets three investment options, including:
- Starter Portfolio
If you choose the Starter Portfolio, you have to invest a minimum of $500. Fundrise will invest this money in four to 10 properties across the United States.
- Core Plans
By investing $1,000, you can choose any of the three Core Plans. No matter which one you choose, your money is invested in over 40 projects across the country. The different plans include:
Your investment in long-term projects, so the returns you receive in early stages in less as it increases gradually.
Your money is invested in a combination of income and growth properties to receive dividends and appreciation equally.
Your money is invested in purchasing properties for renting purposes or giving a mortgage.
- Advanced Plan
In the Advanced Plan, you have to invest at least $10,000, which is invested in more than 80 projects in the United States.
Who Is Fundrise Best for?
As we mentioned before, the shares you buy on Fundrise can’t be sold to anyone else as they aren’t available in the market. If you want to know if you are right for investing in Fundrise, check if you follow in any of the categories below:
- Long-term investors
If you are someone looking for investing your money long-term, Fundrise is the first place for you. Since they aren’t subject to public exchange, you should keep your funds for at least five years. Fundrise allows an option to lock your funds and if you want remove them early, you have to pay a charge.
- Investors that want to get work done from others
If you don’t want to purchase and manage properties on your own, Fundrise will do that for you. They carefully select the properties that have definitive short and long-term profits.
- Investors wanting to diverse their portfolio
Fundrise stocks aren’t related to market trends, so their performance depends on the properties they are invested in. The company puts in a lot of research while selecting properties for maximum benefits. It also gives you an opportunity to create a diverse portfolio.
- Risk-taking investors
This is a new model and there isn’t a lot of data to prove how it will perform in the long run. If you are willing to take the risk, Fundrise is the right option for you. You can start with the Starter Portfolio and if you are earning good profits, you can expand the investment.
- Information-seeking investors
Each product offered by Fundrise has its own 200 pages long circular filed with the Securities and Exchange Commission. All things are explained well, so you won’t have a doubt once you read it.
We hope this Fundrise review of prospective investors help you to make the right choice.
How to Get Started with Fundrise?
Through Fundrise, you can invest money as low as $500 in real estate and grow your wealth passively. The real estate properties can be residential or commercial, which helps to diversify your funds and generate more income. Let’s take a look at how Fundrise works:
- Choose a plan
Pick a plan that fits your budget and requirements. The investment amount starts at $500 and goes on to over $10,000. More the investment, more will be your earnings.
- Sign up on the website
Enter your personal, bank, and communication details. You will have to mention your Social Security number as well. It should take you anywhere between 10 to 15 minutes.
- Transfer funds
This is the last step of the process. You can choose to make the transfer immediately or the next day. You have to transfer options — link your checking account or wire transfer.
You have completed your duties. Now, it is time to sit back and watch the funds grow. Investing for a long term is a better option as you receive higher returns.
There are two ways you can make a profit from the invested funds. These include:
- Quarterly dividends
This profit comes when you invest in rental apartments and houses. It is disbursed a few weeks after each quarter is over.
- Selling profits
A part of your money is invested in purchasing houses and renovating them to sell. The time taken to earn this profit is uncertain as the house can take any time to get sold. This profit is typically higher in amount compared to quarterly dividends. Whatever appreciation you receive, is given along with the selling profit.
Use this guide as a direction to navigate Fundrise. You have to sit down and research for hours until you are convinced to invest. Ask your friends or family who has invested in it earlier for feedback.
What Are Fundrise Fees?
Fundrise has nominal fees, which cost only one perfect of the investment amount. These are called management fees and there are as follows:
- Annual asset management fee
This fee is utilized for daily operations related to the properties you have invested in. The annual cost is 0.85 percent.
- Annual investment advisory fee
This fee is Fundrise’s fee, which are waived off in certain circumstances. The decision is subjective in nature.
Whenever Fundrise purchases a new property, you have to pay acquisition fees, which can be anywhere between zero to 2 percent. Other than that, there are extra costs specific to the eREITs you buy.
Pros and Cons of Fundrise
Reasons to invest in Fundrise
- No annual income requirement
You don’t need to disclose your income or net worth to invest in Fundrise. The options start from only $500, which is something anyone can afford easily.
- 90-day money-back guarantee
If you don’t like Fundrise and want to take out your money, you can do so within 90 days from starting the account.
- Passive income
All you have to do is transfer funds and the skilled investors and managers at Fundrise will do the work for you. It involves checking the property, signing documents, and maintaining it. In return, you receive returns.
- Real estate investment just at $500
Fundrise is a great way to start investing when you are young. You can build up your portfolio over the years and sell it when you want money.
Reasons you shouldn’t invest in Fundrise
- Uncertain future
Fundrise is a relatively new idea, so no one knows how it will behave in the future. It is a solid plan but you can never be prepared for the uncertainties thrown at us.
- High tax liability
The IRS doesn’t consider eREITs are dividends, which means you might have to pay your calculated income tax without any special investment benefits.
- Limited liquidity
Since eREITs aren’t traded publicly, you cannot sell them to someone else. Once you invest in Fundrise, you need to forget about the funds for at least five years to see a considerable growth.
In the past five years, Fundrise has shown tremendous potential. There are risks attached to every type of investment. Whether you make profits or not depends on the combination of your luck, market situation, and investment type.
This would have forced you to think whether Fundrise is safe or not? We don’t have an answer for it because it is a high-risk investment and despite doing well for the past five years, we don’t guarantee anything. Legally speaking, its portfolios are regulated by Securities and Exchange Commission. It requires Fundrise to carry out a lot of reporting, which makes the majority of the process transparent. It uses 2-factor authentication for protecting your personal information, so you don’t have to worry about your data getting stolen. The end decision lies in your hands.