Fundrise lets anyone invest in real estate regardless of their income or net worth. It's an online investing platform and their website says, "Invest in million-dollar deals without writing million-dollar checks."
It's an interesting concept and platforms like Fundrise are becoming very popular. Understandably, because they let you invest in real estate with very little capital.
However, how does it work and is it a safe investment? That's what we will cover.
- Capital: Min $500
- Income Potential: As of 2019, Fundrise has avereaged a 7.75% yearly returm on investment. Also keep in mind each investment comes with 1% in fees
- Difficultly: Easy (Passive Income)
How Does Fundrise Work?
Fundrise invests in real estate properties by pooling money from many investors (like yourself).
Pooling money from multiple investors to buy real estate is not a new idea. Many companies do this but usually they are private and you need to be an accredited investor to get in (net worth of over $1 million). Fundrise is one of the first platforms to create this for nonaccredited investors.
So if you invest the minimum of $500, you get a diversified portfolio of various private real estate properties.
On their website you can see exactly which properties you are investing in and choose from different portfolios based on your risk tolerance. The investments are mostly apartment developments and commercial properties.
Who Is It For?
You should learn more about Fundrise if you want to:
- Get into real estate but lack the large amount of capital
- Commit to a long term investment (3-7 years)
- Have passive income (potentially)
- Get diversification outside of stocks and bonds
Other important things to know:
- You don't need to manage the properties. It's as passive as it gets
- At the time of this writing Fundrise is only available in the USA
How Much Can You Make?
The average return for all Fundrise investments in 2017 was 11.44% and in 2018 was 9.11%. There is however a 1% yearly fee. This fee isn't high at all compared to other investments but you should be aware of it.
The basic way you profit through Fundrise are dividends and asset appreciations. Fundrise generates dividends for its users in two ways:
- Rent payments from apartments and commercial leases owned by the eREITs
- Interest payments from real estate debt investments owned by Fundrise
One way to increase your profit is through the DRIP, which is the Dividend Reinvestment Program. Through this program, the dividends you earn get reinvested in your portfolio, which is called compounding dividends. This contributes to the growth of your portfolio.
- $500 minimum lets almost anyone get into real estate
- Potential source of passive income
- An interesting alternative to the stock market
- Could be a good way to diversify your investments
- Low fees only 1% per year
- Limited liquidity. There is a 60-day waiting period for withdrawing money
- 3% fee if you want to withdrawal your money early
- Higher taxes because the profit is treated as income instead of dividends
- Won't get you rich quick. Real estate is a long term investment
- Not available in every country but there might be something similar in your area with a Google search
Is Fundrise a Safe Investment?
For any investment out there, you can never say it is 100% safe. Here are some important notes about Fundrise though: Fundrise regularly files with the SEC and is subject of a yearly audit. They offer a 90-day customer satisfaction guarantee on the Starter Portfolio. So if you’re unhappy with how things are turning out you can get your money back in this time frame. Make sure to do your own research always and never rely on one source of information.
Can I withdraw money if I change my mind?
Yes, but you will have to wait 60 days. Since it's real estate, the funds aren’t as liquid as other investments. You will also be charged a 3% penalty if you withdrawal early.
When will I receive the dividends?
Dividends are paid every 3 months.
How to Invest With Fundrise
Thanks to platforms like Fundrise you can enter the real estate market without huge amounts of capital.
For $500 you can get a diversified real estate portfolio however you should always do additional research before you decide to invest in anything.
Any resident of the USA that’s over the age of 18 can create a Fundrise account. A minimum of $500 is required for the Starter Portfolio.
You will also have the ability to choose some options based on your investing experience, amount of capital and preferred strategy.