Fundrise has revolutionized the real estate market with its meteoric rise that can be attributed to its invention of eREITs (electronic real estate investment trusts). These unique investment trusts give low income-bracket investors an opportunity to buy into commercial and residential properties.
The service’s diverse investment plans and nominal fees are also a huge selling point. You do, however, need to assess your tolerance to risk and liquidity before choosing Fundrise as your investment gateway.
What is Fundrise?
Fundrise is a crowdfunding real estate platform that provides small investors with opportunities to invest in real estate.
In 2015, Fundrise opened the first eREIT to allow everyone a chance to invest in real estate. You can start investing with only $500.
Before this, commercial real estate investment demanded a lot of upfront capital and an impressive mix of real estate properties (office space, clubs, casinos, etc.). This time, however, anyone can join and benefit from an eREIT investment regardless of investor status.
Types of Investors
Fundrise investments are reserved for the private real-estate market. This means that your investment in eREITs goes into debt and equities in a range of real estate properties including commercial real estate. These investments are open to accredited and non-accredited investors.
- Accredited investors are those who have a net worth in the millions, and this value doesn’t factor in the value of their homes.
- Unaccredited investors, on the other hand, are smaller investors with only a handful of savings.
So, whichever kind of investor you are, Fundrise’s eREITs have an opening for you.
Types of investment plan
Fundrise offers different plans depending on your investor type. You can choose one that is consistent with your financial goals and investment portfolio.
- Basic: With this plan, you only need $500 to invest in real estate. This is great for anyone who’s not willing to risk a lot or for someone who doesn’t have much to risk.
- Supplemental Income: Requiring a $ 1,000 minimum investment, this plan offers a payout every quarter, with less appreciation.
- Balanced Investing: Balanced investing means that your investment appreciates with dividends and gets you in touch with real estate that promises both growth and cash flow.
- Long-Term Growth: As the name suggests, this gives investors a prospect of increasing growth over time. However, investors have to trade some of their dividends for share values.
With other investment platforms, you can spend money on placement fees and brokers. However, with Fundrise, you don’t have to as this is done on your behalf, directly and quickly. Bear in mind that the eREIT charges a 0.85% asset management fee, which you’re responsible for depositing.
If you are an unaccredited investor, you also have to pay a 0.15% advisory fee. For example, if you invest $10,000 in Fundrise eREITs, you will have to pay $100 in advisory and asset management fees for the company fee to cover operational costs.
Is this right for you?
While Fundrise’s eREITs seem like a very safe investment, they are not for everyone. To decide if they are for you, here’s a couple of questions you should ask yourself.
Are you okay with illiquid assets?
The difference between a Fundrise eREIT and a traditional REIT is liquidity. Traditional REITs are traded on the stock exchange and evaluated on an MTM (mark to market) basis, meaning that your investment is calculated on a minute to minute basis. This allows investors to sell their assets in minutes.
On the other hand, Fundrise’s innovative eREITs are marked as illiquid assets and are not in a stock exchange. You can’t just sell them on a whim. At the same time, finding investors for them is not easy. This limits you to only collecting your dividends at the end of each quarter. In other words, you can’t cash in during those times when you need immediate cash.
Are you risk-tolerant enough?
Can anxious investors cash in their deposits in the company? Is Fundrise financially prepared for this coronavirus economy? These are questions that you must be able to answer with confidence before investing. In other words, you must perform a thorough risk assessment. Take into account everything from your net worth to your financial goals.
Fundrise came into existence after the 2007 economic recession and has no experience dealing with economic meltdowns of the kind we’re facing right now. Although Fundrise’s investment plans cater to a variety of investors, the company is still in its infancy so that investing in Fundrise might not be the ideal move, particularly if your risk tolerance is very low. For instance, in times such as these with coronavirus pandemic in full flow, you have to tread with caution.
Fundrise’s first eREIT is a recent innovation that has exceeded expectations. In 2018, according to Funrise’s official website, investments showed a 9.11% return to investors. In comparison, the retail REIT industry raked in an average of -4.96% in the same year. Forbes also listed Fundrise in its 4 best investments of 2018.
Fundrise is a great investment platform for both accredited and non-accredited investors. Its market performance has been top-notch and its diverse investment plans are tailored to accommodate the needs of every investor. One thing Fundrise lacks is experience dealing with economic recessions. In light of current events and with COVID-19 in full swing, it’s something to consider. Are you going to choose Fundrise as your investment partner?