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- Fundrise Review
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Contents
Saving your cash has never been more prevalent and required, than it is in the world we live in today. Most of us, hopefully, have had it drummed into our heads as we grew up, that putting money away for a rainy day is important. Some of us stuck it in the bank, hoping that the interest rate would make it grow; others put it in that lovely glass jam jar or pink porcelain pig on the counter, ready for the day we needed to smash it up. And, some more savvy individuals, put their well-earned money and savings into proper investment vehicles.
Deciding what investment vehicles to use can be tricky. There are many out there all promising the world and more. Fundrise is one such option you can consider. They’re a rising firm featured on Forbes, Yahoo Finance, The Wall Street Journal and The New York Times, and I’ll review what strategy they use in the investing world.
| Fundrise Features | |
| Minimum Investment | $500 |
| Fees | 0.85% per year |
| Year Founded | 2012 |
| REITs | Yes |
| Property Types | Commercial |
What Is Fundrise All About?
- Fundrise’s trademarked eREITs
From their start in 2012, Fundrise has evolved from the typical crowdfunding form of investment house, to providing their clients with a one-stop platform to invest in stocks and bonds. If you ever wanted to invest in property, here is a good place to do it, with less risk than actually buying property outright.
Fundrise has designed a unique process of getting your money into the real estate market. They call it eREIT, which is short for Electronic Real Estate Investment Trust. They also invest in eFunds or electronic funds.
If you know a bit about mutual funds or ETFs, then eREIT investing will sit better with you. For those not in the know, a mutual fund is where you invest into a program managed by professionals and where the funding comes from the shareholders. An ETF, or exchange-traded fund, allows funds to be invested and are spread across various vehicles, such as bonds, commodities, and other assets, such as you would find in an index fund. The price changes on a daily basis as they are sold and bought.
What Are eREIT’s Exactly?
With the eREIT there are some fundamental differences from mutual funds and ETFs – the fees are lower, and you do not deal with a broker or intermediary, but rather directly with Fundrise. And, as we all know, a broker would need to take their portion of fees, so this drastically allows Fundrise to reduce the fees due.
What Are eFunds?
Electronic Funds are also exclusive to Fundrise and also are investments in real estate. Unlike the eREIT, eFunds are not publicaly traded. They are also taxed very differently, and in fact, you make a savings here, by avoiding double taxation, as they are set up as partnerships, and not as corporations. As with their eREIT’s, you do not accrue broker fees or commissions. The eFunds are generally used for the Growth packages, as they are built better for this goal.
What Are The Fees?
Fundrise charges an annual asset management fee of 0.85% for the eDirect funds (eREITs and eFunds). Clients of the investment services and management system will pay an additional 0.15% annual investment advisory fee.
The founders, among having very strong ideas about providing an investment vehicle for the everyday man, also strongly disagreed with a high fee structure, which oftentimes, ate into the investment.
Fundrise Pros And Cons
| PROS | CONS |
| Low minimum investment contribution ($500) | Lack of liquidity as they are not traded on the markets. However, they do offer quarterly distributions and redemptions (they are unfortunately not guaranteed) |
| Less risky than investing directly in real estate | Tax liability – distributions are taxed as regular income, as opposed to the 15% charged on qualified dividends |
| Low fees | In comparison to Index Funds, their fee structure is higher |
| Pre-funded with their own capital | The average investment is less than $10,000, in comparison to other crowdfunding sites like Realty Mogul, which edges on $60,000 |
| Big players in the industry back the Fundrise way of investing | Not open to non-U.S. citizens (at least not yet – although they suggest you can make a request if you’re an international client) |
| The deals are quality (and Fundrise only approves 2% of their deals) | |
| Their track record is one of the best in the investment industry | |
| There is no minimum criteria in terms of your own credentials (i.e. experience, gender, area code, income, etc.) | |
| 90-Day Guarantee is given to all new investors. What this means is that if you are not satisfied with the rewards gained in the first 3 months, you can close your account and Fundrise will buy your investment back at the original price you paid for it. Please note that there are certain limitations, terms and conditions. | |
| Diversity – their spread of real estate options allow you to ensure you smooth out any risk you are not happy with in the mix | |
| Accountability Policy – explained in detail below. In short, this is a guarantee that Fundrise offers each and every investor |
Why Fundrise?
Fundrise was developed by the founders, Dan and Ben Miller, wanting to create a platform for the man on the street to invest in property. Bringing the real estate to the investor, instead of them going to the real estate. The upliftment of communities was key to their idea.
While most of their projects are based in Washington, D.C. where they started, they have branched up into the New York state area and are starting to venture further up the East Coast. Other areas, including Chicago, Dallas and the West Coast, are also on their geographical map.
What Properties Does Fundrise Invest In?
Fundrise investment packages are made up of their unique eREIT’s and eFunds. Depending on which strategy option you choose (see next section) your investment basket will form a mix of these two types of funds.
As for the types of properties that Fundrise invests in, they do not want to rule out any forms of property into their fund, and have a good mix of condominiums, single and multi-family homes, industrial buildings, retail developments, and many other multi-use properties. They look at both complete projects and those in the construction phase, urban infill, and those needing rehab.
Stats show that in 2015, Fundrise was investing in over $525 million of real estate assets, and more impressively, they were giving their investors an average annual return of nearly 13% net. Those figures are what make Fundrise a very good option for many investors, and it appears they are only showing more growth year in and year out.
Fundrise Investment Options
Every good investment decision begins with a strategy. And, Fundrise has made it easy for you to decide which strategy of theirs will be the best option.
They realize that many of their potential investors will not have the know-how around real estate or even around investing, so they have provided a nifty and easy to use calculator. All you have to do is answer the questions posed to you and the calculator will give you the best strategy package based on those questions.
In addition, Fundrise promotes Goal-Based Investing:
- Income Only
- Income and Growth
- Growth Only
Then, you apply the strategy option that best works for you, open your account after the simple registration process, start depositing funds, and see how your money grows.
The portfolio strategies on offer are three great choices, giving you real diversity:
| Supplemental Income (Create an attractive, consistent passive income stream) |
| Objective: Income |
| Should you be looking to supplement your income, this is a great way to do it. Targeted at those getting near to retirement, or for those just wanting an additional income, the Supplemental Income package is perfect.
With a low variability, a decent time horizon for growth, and a passive income offering, you will find it in this package. |
| Balanced Investing (Build wealth confidently with the maximum level of diversification) |
| Objective: Income & Growth |
| If your aim is to build on what you already have, wanting to see results can increase your wealth basket, the Balanced Investing package is ideal.
Expect to leave your investment in for a moderate to long term period, and be open to many diverse avenues on the investment pickings. There are minimal risk factors with this investment package. |
| Long-Term Growth (Pursue maximum overall returns over the long term) |
| Objective: Growth |
| This is the package where you need to leave your money and not think about it. The Long-Term Growth package is built for the person that only wants to withdraw after many years. The results over this time will be great, but patience is the key here. Your investment is gauged into aggressive risk portfolios in the real estate market, and you will see many ups and downs as the years go by. |
The Accountability Policy
Now, this is a real rare addition to any investment company’s modus operandi. Fundrise, having such confidence in their real estate mix, has added in an Accountability Policy for those clients investing in the Income and Growth packages. (The Supplemental Investing and the Long-Term Growth options, as mentioned above)
- Those investing in the Growth package will find that Fundrise will pay a penalty up to $500,000 should they not perform more than a 20% non-compounded return in any given annual period.
- The Income package investors – should you not earn at least a 15% annualized return, Fundrise will not charge you the asset management fee. This pertains to those in the first 2 years of investment, and expires at end of 2017.
How Accessible Is Fundrise?
While they are a growing company, they pride themselves on being available to potential investors and those already investing in Fundrise. They are also firm believers in educating their investors, and if you look on their website, they have a neat drop-down menu where you can source a great deal of information. From advanced investing, to just how real estate investing works, you can have a good read. The reading is simple and in layman’s terms in order to assist all levels of investors.
Their email contact link is managed quite closely, and replies back can be expected anywhere between 24 and 48 hours.
The team is clearly outlined on their website, giving you all the credentials of each and every person involved, down to their Office Administrator (who happens to be a dog called Zappa) – clearly a joke, but I like their humor.
Fundrise Promotions?
I’m not sure how long the offer will continue, but once you’re a customer you can start making referrals and earn 90 days of no advisory fees per referral. Just log into your account and you’ll see the option on the sidebar or under the menus.
Final Thoughts
In conclusion, given all the facts,I am quite impressed with Fundrise’s formula and unique offerings.
Are you the right candidate for investing in Fundrise? Well, if you can afford a minimum of $500 to invest, are a U.S. resident and are over the age of 18, you can certainly get started. Their typical investor is in the 30 to 40 age bracket and invests around $15,000 on average. If you do live outside the U.S., you can certainly contact Fundrise to determine eligibility. Simply pop them an email to see what they can do for you.
With their Accountability Policy and other fair fee spreads, the investment is pretty sound and easily managed.
I suggest you take some time in reading about Fundrise online. Sip some coffee while you go through a few of their interesting articles, and then give them a try when you’re ready.
I wish you good luck and leave you to make the right decision for your hard-earned income and/or savings.
Disclosure:
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.The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.
I'm constantly tweaking my investment strategies as I gain more insight and as investment options evolve. Below is my current lineup.
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