The bottom line: Fundrise makes it easy to become a real estate investor, but be prepared to do your own due diligence to make sure you understand each investment's risks and underlying costs.
Pros & Cons
Low minimum investment.
Open to all investors.
IRA accounts available.
Highly illiquid investment.
Fees can be difficult to understand.
Complex investments that require investor due diligence.
Compare to Other Advisors
Fundrise is an online real estate company that lets average — read: not wealthy — investors buy into private commercial and residential properties by pooling their assets through an investment platform.
Fundrise's main products are real estate investment trusts, or REITs, which generally invest in income-producing real estate, either through buying and managing buildings or by holding mortgages. The company calls its products “eREITs.” Fundrise also offers eFunds, in which investors’ pooled money is used to buy land, develop housing and then sell it to home buyers.
Investors purchase shares of the eREIT or eFund, which is a limited liability company that conducts the deals, by buying one of Fundrise's portfolios: Starter, Supplemental Income, Balanced Investing or Long-Term Growth. Fundrise determines the mix of eREITs and eFunds in each plan, as well as the underlying properties. Fundrise also offers Advanced and Premium account levels, where investors may get access to a greater number of real-estate projects, plus other features and benefits.
Fundrise is best for
Investors with a long-term outlook.
Those seeking diversification outside of stocks and bonds.
Investors willing to do their own due diligence.
Fundrise at a glance
None. Investments are open to nonaccredited investors.
Redemption program with no penalty after five-year holding period.
Note: As of March 2020, Fundrise's redemption program is suspended due to current economic conditions.
Asset management fee of 0.85% and advisory fee of 0.15%, but other fees may apply.
Investors choose among four investment portfolios, which hold a varying assortment of eREITs and eFunds.
This is our judgement of how easy it is to find critical information on the Fundrise website, including platform fees, account minimum and redemption options (if offered).
This is our judgement of how easy it is to find critical information about investment offerings, including investment fees, risks, risk mitigation efforts, the process for vetting investments and how investment returns are distributed to investors.
Customer support options
Fundrise features you should know
Available to nonaccredited investors: While some online real estate platforms are available only to accredited investors — defined in U.S. securities law as having a net worth of more than $1 million, not including their home’s value, or annual income of at least $200,000 for individuals or $300,000 for a couple — many of Fundrise’s products are available to all investors. (Other real estate platforms open to nonaccredited investors include RealtyMogul, Rich Uncles and DiversyFund.)
Low investment minimums: If you like the idea of getting into private real estate deals but don’t have big money to play with, Fundrise might suit you.
Easy-to-use platform: Signing up takes about 10 minutes, if that, assuming you’ve already read the lengthy investor disclosures (and you should read those first). You provide your address, phone number and Social Security number, and then choose whether to fund your account via an ACH transfer (i.e., linking your bank account), by entering your bank information on your own or by using a wire transfer.
Redemptions: Fundrise offers a redemption program that allows investors to sell shares back to Fundrise for a fee. However, the company notes in its help center that "in order to protect the entire Fundrise investor community, we may suspend redemptions during periods of extreme economic uncertainty." Redemptions may also be delayed at these times.
And indeed, in late March, amid the economic fallout from the coronavirus outbreak, Fundrise notified its investors that "we’ve suspended redemptions for our mature eREITs and eFunds in order to maximize cash reserves."
When redemptions are available, the fee, which is paid into the eREIT or eFund, is calculated as a reduction to the share price value: 0% if in the first 90 days; 3% reduction if the shares were held at least 90 days but less than three years; 2% if shares held at least three years but less than four years; 1% if shares held at least four years but less than five years. There’s no share-price reduction to redeem shares held five or more years.
Non-traded REITs: Fundrise's eREITs don’t trade on a public exchange — they’re highly illiquid. That means there's no guarantee there will be buyers for investors who want to sell shares. (Check out this warning from the Financial Industry Regulatory Authority, or FINRA, for more on risks to watch for with non-traded REITs.)
There are significant risks to investing in non-traded REITs, but there can be rewards, too. The average annualized return for all Fundrise investments in 2018 was 9.11%, net of fees, assuming dividend reinvestment, according to Fundrise.
Alternatively, you can invest in publicly traded REITs, which trade on an exchange like a stock. These top brokers offer a large selection of REITs:
» Read more about how to invest in publicly traded REITs
Understand all other fees: Fundrise says it saves investors money by creating a relatively direct link between investors and real estate. There’s no broker-dealer acting as a middleman at Fundrise, and that saves on costs. However, with any real estate deal, there are costs that are difficult for investors to see. While Fundrise clearly notes its asset management and advisory fees, you need to do some burrowing into lengthy offering circulars to learn about other costs.
Here are some costs to consider:
Shares in Fundrise’s products may be sold at a premium to their value, which means you could pay, say, $10 a share for an eREIT that has a net asset value of $9.50. That differential acts as a type of sales load.
As with any real estate deal, there are organizational and offering costs to bring the eREITs and eFunds into existence. Fundrise says these run 0% to 2% of the money raised from investors. The manager is reimbursed for these offering costs out of the eREIT or eFund in monthly installments that don’t exceed 0.5% of the fund’s total proceeds.
With eFunds, there’s a potential development fee of up to 5% of total development costs, excluding land. Also, when an eFund sells a property, there may be a potential disposition fee of 1.5% of the gross proceeds, after repayment of property-level debt.
» Compare before investing: Best real estate crowdfunding platforms
Is Fundrise right for you?
There's a lot to like about real estate as a way to diversify your portfolio, and the Fundrise platform is easy to navigate.
But it's also true that crowdfunded real estate platforms such as Fundrise have yet to be tested during a downturn. For example, in the event of a housing crash, Fundrise could be forced to postpone redemptions for some investors. There are unknowns here, so if you’re risk-averse, know that there’s more than one way to invest in real estate — we outline five methods here.)
» Related: Understand different types of real estate investments
Also, investing with Fundrise means tying up your money for a while. Even if you can request to redeem shares early, you may owe a fee, depending on how long you’ve held the investment. Investors concerned about this might prefer investing through a standard brokerage account, which gives you access to a wide range of investments. (Here's how to open a brokerage account, and what to consider before you do.)
If you already have a diversified portfolio of stocks and bonds, and you have time to let your money sit for at least five years, then investing via a platform like Fundrise can be one way to add real estate to your portfolio. Just be sure you're aware of the risks and do your own due diligence.
on Fundrise's website