Have you ever thought about investing in property? Well now because of sites like Fundrise, almost everyone can. Fundrise is an online crowdfunding platform focused on real estate investments.
With as little as $500, the average investor can create a public non-traded REIT portfolio. The only other real estate investment alternatives are publicly traded REITs and private REITs. Unfortunately, publicly traded REITs — like Vanguard’s VNQ — can be relatively volatile and expensive. Even worse, private REITs are only available to accredited investors — someone with a net worth of $1 million or an income of $200,000.
I’m not an accredited investor. I probably won’t be for many decades. But I still wanted to diversify my investments outside of the typical exchange-traded REIT. When I heard about Fundrise I thought it was a great opportunity to add real estate to my portfolio. Last year I opened a Fundrise account, and it has been steadily growing ever since!
“Buy land, they’re not making it anymore.”
Investing with Fundrise
Fundrise has a lot of recent success. The company was named #35 on the Inc. 5000 list of fastest-growing companies for 2018. They also received the Fintech Breakthrough Award in 2019, and they have been selected for the Forbes Fintech 50 list in 2015, 2016, 2017, and 2019.
Fundrise has two flagship products: the eREIT and eFund. The eREIT invests in commercial real estate, like apartments, hotels, shopping centers, and office buildings. The eFund concentrates on residential properties, such as single-family homes, townhomes, and condominiums.
Through these options you can choose to invest in equity, debt, or a combination of each. Equity investments favor asset appreciation. Debt investments generate cash flow through dividends.
Fundrise offers 1 intro plan and 3 core plans to new investors. They are pre-made portfolios for those that want to get started quickly.
- Starter Portfolio
- Supplemental Income
- Long-Term Growth
- Balanced Investing
Unlike the 3 core plans that need $1,000 to open, the Starter Portfolio requires just $500. This plan has a balance of properties throughout the United States with exposure to both growth and income investments.
The Supplemental Income plan invests in assets that generate dividends through rent or interest payments. This plan may also pursue property improvements to increase its income stream (e.g. update an apartment kitchen and charge additional rent).
The Long-Term Growth plan acquires assets with the potential to grow in value. The strategy of this plan is to look for unrecognized markets before they appreciate.
Similar to the Starter Portfolio, the Balanced Investing plan uses a combination of growth and income investments. It seeks returns through appreciation and cash flow.
These pre-made portfolios are built using the Fundrise Core Accounts. For investors who want more customization, Fundrise allows customers to invest in those individual accounts. With these options you can invest in specific geographic regions or choose a targeted investment style.
The Advanced Accounts are only available to individuals who invest at least $10,000 in their Fundrise portfolio. Premium Accounts also exist for those that invest $100,000. However, I couldn’t find a ton of information on the premium option.
What do you get from the higher level accounts? Well, they come with extra perks including waived advisory fees, additional investment options, greater project diversification, and more sophisticated strategies with the potential for higher returns. Although, Fundrise adds a disclaimer that the higher returns also come with additional risk.
Core Account holders can also create an IRA account to hold their eREIT investments. In addition, Fundrise offers shares of the company through its Fundrise iPO. This is not your traditional public IPO. Rather it’s an “internet public offering” aimed at giving customers an early-stage investment opportunity. However, it is still unclear if you can liquidate your shares, or if Fundrise will ever get listed on the Nasdaq or NYSE.
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