Fundrise is one of the original online real estate crowdfunding companies. Founded in 2010, it launched its first real estate investment offering in 2012. Since then it has invested in more than $4 billion worth of real estate across the United States. It manages more than $1 billion in equity today on behalf of 150,000 individual investors.
Fundrise’s model is to allow everyday investors the opportunity to profit from real estate investments with its eREIT (electronic Real Estate Investment Trust). These are similar to investing in a mutual fund. Real estate is typically one of the best performing investment assets but it can be prohibitively expensive for everyday investors. Its goal is to make high-quality real estate investments available to everyone at a low cost.
In addition to its eREITs, Fundrise offers eFunds that pool investors’ money to be used to buy land, develop housing and then sell it to home buyers. It also has an Interval Fund with higher liquidity than its other offerings and increased diversification making it a potentially lower risk option.
Like almost all investment options, Fundrise has a minimum initial investment. Fundrise has a very low minimum for the real estate investment industry of only $500 for its starter account level.
It has been named to the Forbes Fintech 50.
One of Fundrise’s major benefits over going with a traditional real estate investment is that its fees are low for the industry. It is dedicated to being transparent about its fee structure and to minimizing fees.
Fundrise charges its investors a small fee for its unaccredited investor offerings. Its annual service fee is 0.15 percent. This means that over a 12-month period an investor would pay $1.50 in an advisory fee for every $1,000 they have invested with Fundrise. Funds in its standard portfolios pay a 0.85 percent asset management fee annually. Fundrise likes to point out that Vanguard’s famously low advisor fee is 0.30 percent.
Fundrise also does a good job being transparent about how these fees are spent. It manages a lot of things in-house to save money. Its advisory fee exists to reimburse the company for the time and money that is spent on its investors behalf.
Many real estate investment or traditional investment firms aren’t transparent about their individual investments. This means that it's difficult to determine in detail where your money is being invested.
Fundrise sees value in providing its investors with detailed investing experiences. Through its in-app newsfeed, investors can watch each asset in their portfolio evolve over time. It publishes milestones and asset updates like construction progress, occupancy reports, market data trends and project completion alerts. This detailed investment experience is unusually engaging.
Some online real estate platforms are available only to accredited investors. In the U.S. securities law this means an individual having a net worth of more than $1 million, or an annual income of at least $200,000 for individuals or $300,000 for a couple. This is financially prohibitive for the majority of the U.S. population.
Many of Fundrise’s products are available to all investors. It also has low investment minimums making it even more accessible if you don’t have deep pockets.
Fundrise has a unique IPO model that enables investors in Fundrise real estate portfolios to become fellow shareholders of the company. It is investor-owned. This is a unique arrangement and helps it minimize its dependency on outside capital. It also implies that this enables it to better align its own long-term interests with those of its investors.
Fundrise’s crowdfunded real estate platform is new. It hasn’t truly been tested in a real estate-driven downtown such as in 2008 in the United States.
For example, what might happen to investor’s funds in the event of a housing crash. Would Fundrise be forced to postpone investor’s redemptions? Some of its funds do not have an early redemption penalty but many do.
Fundrise’s model is not a good fit for investors looking for a quick return or who want to have access to their funds. It should be viewed as a long-term investment. Investors may request to redeem shares at any time, but Fundrise does not guarantee redemption, especially in times of economic uncertainty.
There will also be costs associated with any premature redemption. For example, early redemption from its eREITS and eFunds in the Core, Advanced, Premium service levels may mean an early redemption fee of up to 3 percent.
Sierra Thomas Tallahassee, FL
1 year ago