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17 February, 2020 / Mon, 3:07 am

Date: 05.08.2019.

Invest in Real Estate Through Fundrise

Fundrise is an online investment platform

fundrise
fundrise

Fundrise is an online investment platform. It was founded by Dan and Ben Miller in 2010 and it’s the world’s first eREIT (electronic/online Real Estate Investment Trust) and an online eFund platform.

Platforms like Fundrise are becoming so popular because it allows a group of people to invest in real estate properties only the amount of money they can afford and get to the level of the real estate “sharks”.

Income Potential: Medium
Difficultly: Easy (Passive Income)
Capital: Min $500

Who is it for?

Fundrise is a great platform for all real estate investing enthusiasts out there that want to compete in the real estate market, but lack the funds needed for that. It’s a great platform for both investors that look for long-term investing targets and those that want to invest in real estate without the burden of managing it through the years.

Experienced investors can also use Fundrise as a convenient way of investing to diversify their portfolio. It has a lot of products with detailed explanations on the types of properties, their prices and fees, so doing a good research to get familiar with the details is needed before investing. If you’re the type of person that runs away from paperwork, then this part won’t be something you would enjoy.

Because it’s a new type of REIT and crowdfunding platform and its success hasn’t been proven yet, it’s best for those that like to take on a bit of risk in investing. Those who prefer to have their funds safe at all times would be better off with a more traditional form of investing.

How Does Fundrise Work?

When you add funds to your account, Fundrise invests them in eREITs and eFunds.

eREIT is an online alternative to traditional REITs which provides access to investors to professionally managed portfolios that hold different real estate: apartments, retail, hotels or office buildings. The investors offer their funds to the platform, without the need of a broker.

eFund is an online investment that gives investors access to the housing market in certain US cities (in the case of Fundrise, Washington DC and Los Angeles). The investments are made in single-family housing units, with the objective of them achieving long-term growth and profiting from appreciation.

How to Start Using Fundrise?

1. Create an Account
Any resident of the US that’s over the age of 18 can create a Fundrise account. You will need to provide your address, phone number, and Social Security number upon signing up.

A minimum of $500 investment is required for the Starter Portfolio, while for the other 3 types of investment portfolios, a minimum of $1000.
2. Select an Investment Plan
Each portfolio has a set percentage of investments they make in eREITS and eFunds. While eREITs are designed with the purpose of generating profit for investors, eFunds are more oriented towards long-term growth.

There are currently 5 eREITs and 3 eFunds Fundrise invests in:

EREITs:

  • Income eREIT: debt investments in commercial properties
  • Growth eREIT: investment in commercial properties, mostly focused on multifamily buildings that will appreciate over time
  • East Coast eREIT: investing in debt and equity in the East Coast
  • Heartland eREIT: investing in debt and equity in the Midwest
  • West Coast eREIT: investing in debt and equity on the West Coast

eFunds:

  • One that focuses on the Washington D.C. area
  • One that focuses on the Los Angeles area
  • National eFund
There are 4 types of Investment Plans offered to you by Fundrise, each one designed to fit every investor's experience, investing capital and investing strategy.

  1. Starter Portfolio: the basic portfolio designed for new investors that want to check how Fundrise works. The structure of the investment is the following: 50% in eREITs and 50% in eFunds, with a minimum of $500 as a starting investment.
  2. Supplemental Income: The Supplemental portfolio is oriented towards generating profit, which is why eREITs are their prime target. Your money gets invested in the 4 eREITs: Income eREITs-commercial properties, East Coast, Heartland and West Coast, each with 25% respectively. The minimum investment is $1000. -
  3. Balanced Investing: this portfolio is oriented includes investments in every eREIT and eFund. 20% goes in the Income eREIT, 18.33% in each of three eREITs (East Coast, Heartland, West Coast), 15% in the Los Angeles eFund, and 10% in the Growth eREIT. The minimum investment is also $1000.
  4. Long-Term Growth: This portfolio is fully oriented towards growth and generating returns from asset appreciation which is why 20% of your money goes in the Growth eREIT and 20% in the Los Angeles eFund. The rest of 16.67% is split between each of the three eREITs (East Coast, Heartland, West Coast), and 10% goes in the Washington DC eFund. The minimum investment is $1000.
3. Link Your Bank Account and Fund Resources
You can set up your bank account with your online credentials. Every transaction is made through ACH (Automated Clearing House) and is mandatory for transactions under $25,000. For transaction over this limit, only bank wire is accepted.
4. Manage Your Income
The basic way you profit through Fundrise are dividends and asset appreciations. Fundrise generates dividends for its users in 2 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 means earning dividends on top of your dividends, which contributes to the growth of your portfolio and with it, the growth of your income. It’s also free of charge.

Fundrise Fees

Fundrise charges a fee of 1% in total yearly, which is split into 2 different types of fees:
  • Asset management fee – 0.85% fee that covers all expenses related to managing and oversight of the real estate investments
  • Investment advisor fee – 0.15% fee that covers all administrative costs
In comparison, traditional investments charge up to 3.8% asset management fee and up to 1.45% investment advisor fee. They also charge a fee for the management of the mutual fund that can be up to 1.2%, an expense you won’t be faced with by using Fundrise.

Fundrise Positives

  • Minimum funds needed to invest in real estate
  • Lower fees
  • Generate passive income
  • Diversified investing portfolio
  • Ability to operate remotely
Fundrise Negatives
  • Limited liquidity – there is a 60-day waiting period for withdrawing money
  • Higher taxes because the profit is treated as income instead of dividends

FAQ

How is Fundrise different from traditional investing?
The number one thing is the fees. While traditional REITs charge a membership fee and upfront commission, Fundrise charges no membership fee and only a small commission yearly.

Additionally, if you invest through a broker, they will charge a commission, usually around 4-8% which significantly lowers your potential profit. You don’t have this expense through Fundrise because everything is covered through the 1% yearly fee.
Is it safe to invest in Fundrise?
Fundrise regularly files with the SEC (Securities and Exchange Commission) and is a subject of a yearly audit. Additionally, Fundrise offers 90-day customer satisfaction guarantee on the Starter Portfolio, which means that if you’re unhappy with how things are turning out in the first 3 months, you can ask for your money back, and Fundrise will return the full sum you invested.
Can I withdraw money if I change my mind?
Yes, but you will have to wait for 2 months. Because it’s related to real estate, the funds aren’t as liquid as other investments, so there is a 60-day waiting period for withdrawing funds.
When will I receive the dividends?
Fundrise has quarterly redemption periods because the investments are long-term and can last a minimum of 5 years, which is why dividends are paid every 3 months. But, do note that dividend payments aren’t always guaranteed. The real estate market can shift and if that shift is negative for investors, it’s logical that Fundrise wouldn’t be able to pay dividends to its members.

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