Private Real Estate Investing by Fundrise
Fundrise is a private real Estate investing platform that actively manages several private Real Estate Invest Trusts (REITs) and Funds comprised of a mix of real estate and debt. Fundrise distributes your Investment across multiple REITs and funds depending on your investment goals. It's a simple concept that provides access to the private real estate market equity, debt and income generated through commercial properties.
Account Creation & Funding
Fundrise's account creation process is pretty seamless. Simply click the "Get Started" button on their website (fundrise.com) and follow the step-by-step instructions. You must provide the standard information - name, address, contact info, social security numbers, etc. As part of the process, you must select a portfolio level (more below) and fund your account. Like many of the other platforms we review, Fundrise uses Plaid (plaid.com) to transfer funds from your bank account to Fundrise.
Plans & Fees
Fundrise offers 2 levels of investing - Starter and Core. Below are quick overviews of each level.
The Starter Portfolio, with a $500 minimum investment, provides a low-investment entry point for investors exploring private real estate. This portfolio allocates your investment evenly across 4 REITs with both growth and income strategies. Dividends are paid during the month following each quarter's close and periodic distributions are made when a REIT property is sold. Note: This portfolio carries a 1% annual fee.
Investors can step-up to the Core Plans for free by investing $1000 or more. The Core plans provide 3 portfolios - Supplemental Income, Balanced Investing and Long-Term Growth. Investments are weighted based on the goal of the plan. For example, the Supplemental Income Plan is skewed heavily toward debt holding that will provide investors with a consistent income stream. The Balanced Investing and Long-Term Growth plans are weighted based on their investing goals. Note: These plans carry a 1% annual fee.
Fundrise emphasizes that they provide long-term investments in private real estate. As we saw in the mid-2000s, real estate is susceptible to significant losses. That is especially true for commercial real estate. Therefore, investors must be aware of the risks and take a very long view of their investment.
Fundrise provides some transparency by listing the active property holdings of each portfolio. You can easily see Fundrise's ratings and projected returns for each property, which allows you to conduct some due diligence before investing.
It is important to note that your investment is not liquid. Large properties are difficult to sell. Because of the long holding period, there is no guarantee you will be able to access funds if needed. You should only invest if you do not need the funds for at least 5 years. You may be able to withdraw funds earlier, but there is no guarantee. If funds are available, Fundrise requires a 60-day waiting period after you make the request.
Also, investors should consider the tax implications prior to investing. You will receive a 1099 and K-1 for each REIT and Fund in your plan. That can complicate your tax returns. We strongly suggest you consult with a tax expert prior to completing any significant investments.
There's not many investments more exciting than real estate. You can see and touch it. It's working for you around the clock. You can look at a tall apartment building and relish in the fact that you own a piece of it - albeit a small piece.
In our very simple opinion, real estate is complex, but also a potentially lucrative investment. REITs have been available in the stock market for years, and those provide greater liquidity. But, they are subject to more volatility as investors buy and sell the shares in the open market. Fundrise provides access to a private market, dampens some of the volatility and diversifies your investment. It is certainly worth considering as part of your alternative investment portfolio.
As with all of our posts, this is not intended to provide any financial advice or solicit investments. This is only our opinion of the platform, services provided and potential risks we see. For more information please see our services page.
Managing your investments is never easy. It's difficult to navigate the options and ensure you’ve invested your money in the best possible places. At What to Invest in Today (WIT), we're working diligently to provide clear, straightforward explanations of the platforms we explore. BlindSquirrel, the lead blogger for WIT, has been active in the markets since graduating college in the early 2000s. He has a master’s degree in Economics from Johns Hopkins University and an MBA from UVA's Darden School of Business. Join him as he explores mainstream and alternative investments.
Exciting news today! The creation of our Starter Level account has been completed. We are now proud owners of $500 worth of Fundrise eREITS.
Interesting to note, when the account was created, Fundrise debited our account for $125 four times. This corresponds with the $500 equally distributed between 4 eREITs. We assume that is for accounting purposes since we are purchasing shares of each eREIT. So, if you invest through them, be prepared to see several debits from your account.
We'll update this post periodically to let you know how the investment is panning out. Keep checking back, and feel free to use the comments to ask any questions.
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