1 Minute Review
Fundrise, a real estate investment platform, allows small investors to gain exposure to a diversified portfolio of real estate projects hand-picked by the Fundrise team. Investors can choose between a starter plan and three advanced plans, all designed to meet certain investing goals. Each plan gives you an exposure to a specific portfolio which comes in a form of eREITs and eFunds, custom-made products which are not traded on security exchanges.
- Small real estate investors
- Passive investors
- Long-term investors
- Allows small investors to get exposure to commercial real estate
- Diversification in the real estate sector
- Goal-oriented investing
- Relatively low fees
- 90-day guarantee
- Liquidity issues as eREITs and eFunds are not exchange traded
Fundrise eREITs are not as liquid as their exchange-traded counterparts, but they compensate for that with a better annual return and no selling or broker commissions. Fundrise also offers eFunds, which give investors access to a portfolio of for-sale housing in core U.S. cities. The Fundrise team uses a rigorous approach to review a large number of real estate projects offered. These follow a value investing strategy and purchase assets only if they can pay less than what they believe is the asset’s intrinsic value.
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Exposure to Commercial Real Estate
Income-producing commercial real estate can be divided into office buildings, industrial, retail, restaurants, multifamily, land, hotels, hospitality and other. To compete with REITs, Fundrise combined innovative technology with new federal regulations to offer investors eREITs. You only need $1,000 necessary to invest, and a long-term investment is the best way to go.
A minimum investment of $500 can get you access to the Fundrise Starter Portfolio, which provides exposure to more than 48 real estate assets. If you want to get the full Fundrise experience, you can choose one of their advanced plans.
The first plan is called Supplemental Income and it is designed to create a consistent income stream. The projects in this portfolio are oriented toward debt investments in real estate. Balanced Investing is the name of the second plan, which has even allocation to debt and equity investments in real estate. The third advanced plan is the Long-Term Growth Plan and it is geared toward equity investments.
Fundrise shows the projected growth of $10,000 over 20 years including dividends and appreciation if you use Supplemental Income. Source: Fundrise
Fundrise shows the project growth of $10,000 over 20 years including dividends and appreciation using Balanced Investing. Source: Fundrise
Fundrise shows the projected growth of $10,000 over 20 years including dividends and appreciation if you use Long-Term Investing. Source: Fundrise
Relatively Low Fees
Fundrise charges an annual asset management fee of 0.85% and an annual investment advisory fee of 0.15%, which brings the total fee structure to 1%. This is less than what you’ll typically pay in traditional investments. There are also savings in up-front costs, which amount to 0-2% at Fundrise. Fundrise’s website states, “It would take approximately 40 years of index investing to equal the savings you get up front with Fundrise.”
Another great feature of Fundrise is the possibility to get your money back at any time within the first 90 days of your investment. If you are for any reason unhappy with the service, Fundrise will buy back your investment at the original investment amount.
eREITs and eFunds are not liquid assets. Before you redeem your shares, you’ll have to follow a redemption plan to allow your funds to become liquid on quarterly basis, subject to certain limitations. Fundrise claims that the lack of liquidity is compensated by superior return compared to its exchange-traded counterparts.
Fundrise offers a unique way for diversification in the real estate sector. The company has a positive track record, but you’ll want to be a cautious investor. Short term losses are possible, and though Fundrise advocates a long-term approach, there are no guarantees.