Fundrise rebranded in June 2017 as more than just a real estate crowdfunding platform - they have created a totally new marketplace for private real estate investing similar to a mutual fund, but with lower fees thanks to their direct to consumer model.
This gives consumers unprecedented access to the commercial real estate market that was previously only available to institutional investors such as university endowments and state pension funds.
Since opening its doors in 2012, Fundrise raised over $170 million in capital from accredited investors and nonaccredited investors including individuals, institutions, and family offices as of November 2016.
The platform launched its first deal in 2012 and by mid-2015 has facilitated over 70 transactions with an average deal size of $1 million. The average investment on the platform has been about $12,000 with annual returns north of 10%; you can keep track of their returns on their Historic Performance page.
You can learn more about Fundrise's new offerings by requesting access to their platform here, or continue reading our Fundrise review for more information.
Assets Under Management$1.36 Billion
Number of Users200,000
The eDirect funds (eREITs and eFunds) pay a 0.85% annual asset management fee. In addition, clients of the investment services and management system pay a 0.15% annual investment advisory fee. In total, Fundrise eDirect investors will pay 1.0% in fees, which is significantly less than the 1.37%-6.45% in asset management fees typically incurred with comparable traditional investments. Investors also incur an upfront cost of 2% in asset origination fees, which is significantly less than the 25-40% charged in many traditional real estate deals, saving investors 23% to 40% upfront.
- Diversifies your investment across many different commercial real estate properties, making the process easy and much less risky
- Pre-funds all deals with their own capital – this is huge!
- Low minimum investment (only $500)
- Longest track record in the industry
- Well capitalized
- High quality deal flow (they only approve about 2% of deals)
- Backing from major industry players (examples include Renren, a major social networking company based in China)
- Best way to invest in large commercial real estate deals with a small budget and no access to deal flow
- Shares potential drawbacks of other crowdfunded real estate investments including lack of liquidity and risk
- Taxes - You’ll be taxed on your distributions as regular income versus the 15% on qualified dividends
- High fees compared to index funds
- Only access to residential and commercial, no access to farmland, unlike Acretrader
Fundrise is headquartered in Washington, D.C. and the platform allows individuals to invest as little as $500 in real estate development projects.
The average investment on Fundrise is less than $10,000 compared to $60,000 on Realty Mogul, another major crowdfunding site.
The inspiration for founders (and brothers) Ben and Dan Miller was to open up real estate investing to ordinary people and to give them a chance to own a piece of property in their communities. Their thinking was that locals would have knowledge of the area and a personal stake in the success of projects.
Fundrise launched its first project in Washington, D.C. and all subsequent projects are located in the United States. The platform targets urban infill, construction, rehab and development projects in the top 25 metropolitan markets. The company’s average deals are for assets valued under $50 million and Fundrise generally invests directly up to $5 million. For larger deals, such as recent ones in 2015 for commercial properties in Brooklyn and Atlanta valued at $10.5 million and $15.5 million, half to two-thirds is sold to institutions.
Perusing deals on the site turns up single and multi family homes, mixed use properties, condominiums, industrial and retail developments. In the early days many of these properties were located on the East Coast but they’ve since expanded to the West Coast and the Heartland in locations such as Arizona, Chicago, Dallas, Denver, Los Angeles and Seattle. The projects are typically located in emerging areas of major markets.
Fundrise says its companies have developed 1.24 billion square feet of property or 1.8 times the size of Manhattan. Fundrise has originated over $660.3 million across equity and debt investments, and has invested over $3.2 billion into real estate investments.
You can view Fundrise's list of current deals by requesting access to their platform here.
What sets them apart?
Fundrise's boasts about their eDirect Technology™, which they claim sets them apart. It is basically a flashy marketing term for their combination of direct-to-consumer business model enabled by their online portal, and the fact that they've made private REITs accessible for the average non-accredited investors. They also take advantage of the web to operate at a lower cost compared with traditional investment advisors/fund managers, and pass those savings onto individual investors.
Despite the name, eDirect Technology™ is less about technology and more about business model. However, the end result is that Fundrise has successfully brought down the costs as well as the minimum requirements of investing in private real estate investment trusts for small, individual investors.
You may not care that they've lowered costs and automated away some back office functions, but these translate into very real savings for small investors.
Fundrise offers three portfolio strategies to choose from: Long Term Growth, Balanced Investing, and Supplemental Income. Your selection determines what type of deals you’ll be invested in, making commercial real estate investing as simple as investing in an index fund! Here are some details on the three strategies:
- Long Term Growth - aggressive portfolio with some higher risk, higher return projects that’s ideal for new grads with a long time horizon wanting to maximize their returns and take advantage of the power of compounding
- Balanced Investing - maximizes diversification to minimize risk at a medium time horizon, perfect for those in mid career wanting a stable investment that still generates attractive returns
- Supplemental Income - generates a consistent passive income stream through low risk investments on a moderate time horizon, great for those close to or already retired
To make things even easier, Fundrise provides a handy calculator tool that helps you select the right strategy - just answer a few questions and it’ll spit out the suggestion that best fits your unique situation. You can head to Fundrise's website to get started.
What Is A Fundrise eREIT?
After launching as a real estate crowdfunding platform that allowed users to select and invest directly into individual deals, Fundrise pivoted quickly to an eREIT (shorthand for electronic Real Estate Investment Trust) fund product.
So just what exactly is an eREIT? Much like traditional REITs (Real Estate Investment Trusts), eREITS allow investors to invest in a professionally managed portfolio of diversified commercial real estate assets. These include hotels, shopping centers, apartments, as well as office buildings throughout the US. This allows individual investors to achieve, with no effort, a level of diversification that would be impossible on their own.
Unlike traditional REITs that may be offered as a private fund or as an ETF (electronically traded fund), Fundrise's eREIT's main innovation is that it is sold directly to investors via the Fundrise website - cutting out the middleman brokers and passing on the savings to users, resulting in up to 90% reduction in fees compared to traditional REITs.
Through their online investor platform, Fundrise's eREIT also offers superior visibility into the individual investments within the fund. And like traditional REITs, eREITs offer investors an asset that has a lower correlation to the broader market, giving their overall portfolio a reduction in volatility.
What Is A Fundrise eFund?
An eFund is essentially a fund for residential real estate. This is a branded, direct to consumer investment product available through the Fundrise platform. Like with eREITs, it allows investors access to a diversified portfolio of professionally managed properties across the country, except in this case the properties are homes, townhomes, and condos.
eFunds are structured as a partnership rather than as a corporation, so the investor is not subject to double taxation. As with the eREIT product, Fundrise boasts lower fees due to their direct to consumer model, cutting out brokers and passing on the savings to investors.
Fundrise’s typical investor clients are in their mid-30s to 40s and invest about $15,000 each. As of early 2020, the site is only open to U.S. residents though international investors have the ability to invest in U.S. properties by contacting Fundrise directly.
The minimum investment is $500 (Starter Portfolio) which is an advantage for those with less to invest or waiting to proceed cautiously.
To invest in the Core Portfolio, the minimum investment is $1,000. To add additional funds to an account, the minimum amount is $100.
Fundrise’s leadership team gets high marks from industry insiders. The founding brothers, Benjamin and Daniel Miller, are sons of noted Washington D.C. real estate developer Herb Miller.
Fundrise charges a 0.15% annual investment advisor fee which covers their expenses for managing the portfolios through their online platform, as well as providing ongoing reporting, automated distributions, composite tax management, investor relations, and asset rebalancing.
There’s also an asset management fee of 0.85% annually which includes the operational oversight of the real estate properties, which includes construction/repair, financing, zoning, accounting, sales, and marketing.
Unlike hedge funds, Fundrise does NOT take a share of the upside in the form of carried interest or stock options, allowing them to pass on higher returns to you.
More details of Fundrise's fee structure can be found on their website.
Unlike other real estate crowdfunding platforms where you should still look into each individual property to perform due diligence, Fundrise makes things much easier by offering a diversified mix of in three simple portfolio options.
Their new product offerings reduce risk and enhance returns while making it much easier to invest in commercial real estate. Check them out today to see if they might be a solid addition to your overall investing portfolio.
Frequently Asked Questions
Can you make money with Fundrise?
While this Fundrise review doesn't actually involve a long-term tracking of returns, the answer is yes, based on the historical performance data you most certainly can make money by investing in a Fundrise eReit.
Fundrise portfolios earn investors money via property income, interest payments, and capital appreciation. Shareholders in Fundrise eReits are entitled to their pro-rata portion of any income earned from the fund's investments.
As with all investments, nothing is guaranteed, and you must balance potential returns with your risk-appetite.
Is Fundrise a good investment?
From 2014-2018, Fundrise averaged between 8.76% to 12.25% annualized returns, net of fees.
This is an outstanding return, though its worth noting that this is in the midst of the largest bull run in history. With strong historical performance and the ability to gain exposure to an uncorrelated asset class, most stock investors would be wise to at least explore the Fundrise investment platform.
We recommend signing up for the Fundrise platform and doing your own due diligence before investing.
As with all investments, making smart asset allocation decisions that are suitable for your net worth and time horizon, is key to sustainable long term returns.
How do I get my money out of Fundrise?
Fundrise investors looking with get their money out of Fundrise simply need to login to the Fundrise platform, navigate to the Settings section and select Account Settings.
From their, scroll to the bottom of the page and look for the section called "Redeem Shares". Here you'll find a link to the Redemption Request Form. There is a 60 day waiting period after a redemption request, and redemption requests may be subject to certain limitations. Early redemption requests may be subject to a penalty up to 3%, depending on how long you have held the shares.
It's worth noting that real estate as an asset class is intended to be a long-term investment and is inherently illiquid. Fundrise eREITs are structured to provide liquidity after a 5 years period of operations, but there is no guarantee that market conditions will allow for immediate liquidity.
How do I deposit my investment?
For all investments under $25,000 you need to fund your investment via ACH, which helps keeps fees low. After signing up on the investment platform, you'll be prompted to connect your bank account.
If you're investing more than $25,000, you can also fund your investment with a bank wire. Fundrise does not accept investments via credit or debit cards.
Does Fundrise pay dividends?
Yes, the Fundrise Income eReit (Fundrise's product for investors targeting cashflow) currently pays a 9.00% dividend, as of 2020.
Can you automatically re-invest dividends?
Yes, Fundrise offers a DRIP Dividend Reinvestment Program, which automatically reinvests dividends. These will be allocated according to the same allocation as the investors' chosen plan - these settings can be changed in the investor dashboard. Fundrise does not currently charge any fees for participating in the DRIP Dividend Reinvestment Program.
Investors can opt-out of DRIP at any time, though in order for it to be applied to that quarter's dividends, investors must opt-out prior to the end of the quarter.
Can I setup put my Fundrise investments on auto-pilot?
Yes, if you're a believer in automating your finances, you can choose to automatically invest on a recurring monthly or bi-monthly period. However, this is not setup by default - you need to opt-in by enabling "auto-invest" in your investor dashboard.
What accounts does Fundrise support?
Currently Fundrise supports investments via personal accounts, joint accounts, as well as investments via the following entity accounts: Limited Liability Companies (LLCs), Limited Partnerships (LPs), C Corporations, and S Corporations.
Does Fundrise accept non-US investors?
Unfortunately not. As of 2020, Fundrise only accepts investments from US residents.
However, international investors can invest via a US-based entity that has a tax ID number and files and pays US taxes such as a Trust, an LP, or an LLC. In order to comply with foreign withholding requirements, Fundrise does not accept investments via a pass-through/disregarded entity owned by non-US investors. Fundrise recommends that anyone seeking to invest via a US-based entity consult a tax professional prior to investing.
Can I invest in Fundrise through an IRA?
Yes, through Millennium Trust Company, investors can invest via an IRA. Millennium Trust Company will assess a $75 annual fee for each Fundrise eREIT or a $125 fee for multiple eREITs. To start investing in Fundrise via an IRA click here.
What is a Fundrise Plan?
Fundrise offers different plans that are based on your financial goals. The plan determines the asset allocation of your invested funds. Fundrise offers a starter plan (min. investment of $500) as well as 3 core plans (min. investment of $1,000). Based on the plan you select after you sign up, they will build you a custom-portfolio that maximizes your desired performance characteristics.
They also offer an easy questionnaire to better understand your goals as an investor - if you're not sure what plan to choose, by answering this questionnaire Fundrise can assign a plan that best suits your investing goals.
Do you need to be an accredited investor?
Both accredited and non-accredited investors can invest.
Are Fundrise investments audited?
Yes, an annual audit of financial statements is performed and disclosed to investors via Form 1-K. Public filing of this form is an SEC requirement, and must occur within 120 days of the end of year.
How do investors track their earnings?
Investors will primarily track their investments via the online investor dashboard, which includes potential earnings via capital appreciation and dividends. The investor dashboard also provides monthly accounts statements and periodic asset updates.
What tax documents do investors receive?
Investors can expect to receive a Form 1099 and/or a Form K-1 by around mid-March of the tax year. These are available through the Documents tab in the investor dashboard. Fundrise also partners with H&R Block to offer a 35% discount to Fundrise investors for online tax preparation services.
How often will my investment values be updated?
NAV (Net Asset Value) per share represents the value of a single share. Changes in the value of the underlying real estate assets that make up the portfolio will change the NAV of the fund. But unlike with publicly traded assets, there are obviously no real-time markets available for price discovery.
For each offering, after an initial period to allow for the ramp up of the portfolio, Fundrise adjusts the Net Asset Value per share on a quarterly or bi-annual basis. Investors can login to the Fundrise platform and check their investor dashboard for updates to NAV.
The information contained herein neither constitutes an offer for nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering document, and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. No money or other consideration is hereby being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Fundrise Platform neither constitutes an indication of interest in any offering nor involves any obligation or commitment of any kind.
Well, investing in a single property is definitely different than investing in a fund of properties. After the eREIT got past 10 properties, I pretty much stopped paying close attention when they tell me about new acquisitions. I like that the eREIT has a lot more commercial properties, which can be expensive and tend to have higher minimum investments when done individually (often $25k minimum for a single deal). I give up control in exchange for diversification. For residential properties, I think individual properties offer you at least the illusion of control in picking a good situation.
Invest in commercial real estate via crowdsourced investments. Gain access to real estate deals without the high dollar commitment typically needed, by diversifying acquisitions through a REIT (real estate investment trust).
REITs and property crowdfunding platforms have made it extremely easy for the average investor to include real estate investments in his or her portfolio. Just this month, Fundrise, a crowdfunding website, launched the world’s first Internet REIT. Like traditional REITs, Fundrise’s eREIT will give its unitholders the opportunity to benefit from income-producing property. While eREits are similar to traditional REITs in that respect, there are a number of differences between the two. For instance, shares in Fundrise’s eREIT can only be redeemed at the end of each quarter, and as such may not be a suitable investment for many retail investors. Additionally, the eREIT might be tax-inefficient for young investors who could benefit much more by realizing capital gains rather than investment income. Conservatives investors should also note that Fundrise is a new player in the REIT business, and as such may be riskier than other REITs because of its unproven track record.
Fundrise is an investment service that allows you to invest directly into commercial real estate. They've achieved this by creating a B2C marketplace that lists commercial real estate properties for individual investors to choose from. Their goal is to "make the process of investing in the highest quality commercial real estate from around the country simple, efficient, and transparent." Essentially, they bridge the gap between the investor and the developer.
Since Fundrise crowd funds capital ahead of acquiring an asset they are able to move quickly providing a large amount of cash to invest in a short time window. This allows them to focus entirely on senior debt and ownership positions that dramatically reduce the investments' risk.