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The Fundrise Review

The Fundrise Review 01.09.2019Leave a comment
The Fundrise Story
Questions and Answers
When was founded?
in 2010
How many employees?
81 employees
Who founded?
Dan Miller and Ben Miller
Monthly Visits
1.1 million (SimilarWeb)
Revenue
$20.8 million
Platform
Web, iOS
Website

Historically speaking, real estate investments have been one of the best-performing with high returns. If you think real estate investments only deal with an enormous amount of money, you are wrong.

With the help of Fundrise, all you need to have is $500 in your balance to start investing. 

Before launching the website, the founders Benjamin and Daniel Millers have done their research and noticed how much inefficiency is there in a traditional way of real estate investing.

The Fundrise story begins with a very simple idea to ease the method of investing in real estate. Firstly, the founders told about the concept to industry specialists.

All of them said the plan was impossible to implement, and it would cost them money and time leading to nowhere. It turns out they were wrong.

Fundrise.com
Fundrise.com

After a year of discussions with the Securities and Exchange Commission (SEC), the idea of Fundrise was approved and put into action in 2012. With the use of modern technology, Fundrise lowers the costs, improves the quality, and broadens the access to investment opportunities in the U.S. market. The website allows new and experienced investors to join private real estate investments with the help of crowdfunding. Since 2012, the site has offered many upgraded techniques and products for its users to have a more positive and less complicated experience.

Today, there are more than 500,000 users at Fundrise with nearly $2 billion worth of investments in the real estate market. The average annualized returns of the website are 12.25% in 2014, 12.45% in 2015, the lowest one was in 2016 with 8.76%, 11.44% in 2017 and the most recent available data from 2018 is 9.11%. The estimated annual revenue of the website, according to the Inc.com, is $20.8 million.

Inc.com
Inc.com

At Fundrise, investors are the platform’s top priority. The mission and the idea behind it are simple yet very powerful. They’ve revolutionized the real estate investing.

The platform offers a transparent, high quality and efficient platform for beginners and advanced investors who are looking for long term investment opportunities in the real estate market.

What are you investing in?

You are investing in a diversified portfolio located throughout the United States, which is collected by the Fundrise team. You will be able to invest in houses, apartments, hotels and other commercial estates, whichever you choose. Based on the amount of your investment, the risk levels and returns will vary.

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Your profits will mostly be dividend payments and interest on appreciation. Those are subject to economic fluctuations, for instance, if the real estate market prices appreciate, consequently your returns will be higher.

The platform offers different investment options via 3 account levels depending on the type and amount of your investment.

Plans
Plans

Investment Options and Account Levels

Fundrise has 3 different account levels, which are Starter Portfolio, Core account level, and Advanced Account level. These accounts differ from each other with a minimum amount of invested money, risk levels, payment methods, and the timeline according to which you are going to receive your returns.

This way, Fundrise targets many investors around the U.S. both experienced and newcomers who are only starting their investment path. Let’s begin with descriptions of each account level and see which is the most suitable for you.

Starter Portfolio

If you are new to the real estate market, you may be interested in the starter portfolio, which has the lowest investment amount as a starting point.

With $500, the website reduces your risk and incentivizes you to get to know the real estate market and how it works.

Starter Portfolio
Starter Portfolio

When you increase the amount of your investment to $1,000, you can already upgrade to the Core account level for free. The terms and conditions of the core account level are presented below.

Core Account Level

Fundrise platform offers 3 different core investment options. These are supplemental income plan, balanced investing, and long-term growth strategy. Here is what you need to know about these 3 plans.

Core Plans
Core Plans

Supplemental Income Plan

If you choose this plan, your investment portfolio will be more heavily allocated on debt. The key takeaways are that you will earn returns via quarterly dividend payments.

Supplemental Income Plan
Supplemental Income Plan

Currently, there are 60 active projects available with the average investment of approximately $6,415. The dividends are around 8-9% of your returns, with an appreciation of 0.2-0.9%. That sums up to a total return of 8.3-9.8%.

Balanced Investing Plan

Balanced investing allows the investors to get returns by not only dividends as mentioned in supplemental income plan but by asset appreciation as well. Currently, there are 74 active projects in this plan, and the average investment in the US dollar terms is $6,491.

Balanced Investing Plan
Balanced Investing Plan

The returns with this project plan are slightly higher compared to Supplemental income plan, the dividend returns are 5.4-6%, while appreciation is 3.3-4%, summing up to total returns of 8.3-9.8%.

Long-Term Growth strategy

This plan focuses mainly on equity-based investments. This way, you will earn returns via an appreciation in share value. Currently, the number of active projects is relatively low compared with the other 2 plans; there are only 55.

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Long-Term Growth strategy
Long-Term Growth strategy

However, the average investment amount is the highest at $7,200. With this project, you will be able to earn the highest returns among 3 project plans in the core account level. The dividend returns are from 3-3.3%, while the appreciation is 6.1-7.3%. Those sum up to total returns of 9.1-10.6%.

You should keep in mind that the terms and conditions of these account types are different, and each of them will bring you different levels of return. Let’s say if you choose a supplemental income plan, you will receive your dividends every quarter.

However, if you select a long-term growth plan, you will be able to get your returns at the end of the investment period. The good thing is, if you don’t like your experience at Fundrise during your first 90 days, the platform will return the initial investment amount back to you. On the contrary, you can begin with a starter portfolio plan.

When you have made your minimum investment reaching $1,000, the website will offer you the Core plan for free. With the help of the core account level, you will be provided with greater diversification and higher returns.

Advanced Account Level

The advanced account level is accessible for investors with a principal investment of at least $ 10,000.

With this plan, you are given a great variety of investment opportunities, including niche strategies with higher returns compared to other account levels.

The New York Times talked about Fundrise.com as one of the pioneers in real estate crowdfunding, allowing individuals to directly invest in real estates such as houses, apartments, and even hotels. The founders Benjamin and Daniel Millers have mentioned how risky the project was. They were completely new to the market, and no one had ever heard of real estate crowdfunding back in 2012 when the website was launched.

NY Times
NY Times

They were working on the project for 2 years from scratch and couldn’t have ever imagined what a success it will soon have.  Fundrise sticks to its mission to revolutionize real estate investing and make it more comfortable for investors to do their financing activities.

TechCrunch has referred to Fundrise as the platform where users are allowed to put their money to work easily. With low fees of 0.85% annually and high returns, investors are diversifying their portfolios by investing in the real estate market.

According to listenmoneymatters.com, real estate is a vital part of our wealth building strategy; this approach can ensure long term growth. What the article highlight is the liquidity of the funds. Unlike other Real Estate Investment Trusts, Fundrise does not only hold publicly traded assets.

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Their capital is also invested in the properties of their choice. So you cannot withdraw your money whenever you want, however, Fundrise allows you to make quarterly cash-outs. Note that if you withdraw your money from the website, Fundrise doesn’t penalize you for that.

Famous bond and finance news website learnbonds.com has referred to Fundrise’s case as one of the most successful platforms in real estate investments. By offering the competitive advantage of a low starting dollar investment of $500, the platform attracts potential investors who can become accredited investors in the long run.

Learn Bonds
Learn Bonds

 It is very important to incentivize people to invest in a fast-growing sector of real estate and become aware of current market details. The article also talks about how flexible the quarterly cash-out mechanism is. Unlike many other traditional investment channels, which do not have flexible money withdrawal schemes, Fundrise offers its users such an advantage even if the market is illiquid. However, you should consider the long term model of the real estate market and that your returns will differ from the type of portfolio account you choose.

Investor Junkie, which continually updates investors on interesting and user-friendly websites, recommends Fundrise as one of the most helpful and user-friendly platforms available on the internet. Investor Junkie rated the platform at 9/10 for being the best for new real estate investors, goal-oriented investors, risk mitigation by diversification, and the low minimum amount to start your investing.

Investor Junkie
Investor Junkie

With the investments, no one can guarantee the fixed returns or classify your investment as “safe.” With Fundrise, while having less liquid real estate investments, your funds are relatively safe as they are not exposed to stock market fluctuations. 

Another popular finance website that found Fundrise’s business scope interesting and helpful for investors is Nerdwallet. According to Nerdwallet, Fundrise is the best for investors looking for long term investment opportunities. Considering that the real estate market is illiquid and requires long term objectives, people who want to withdraw their money from this type of investments sooner than every quarter, will have to pay penalties. Nerdwallet presents product descriptions in detail with how much you have to invest at minimum, what rates are charged for your annual fees.

It also highlights 3 main categories where Fundrise “shines.” Those are, as we have previously discussed, 90-day withdrawal opportunity, low investment minimum, and platform’s simplicity to use.

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So, if you are looking for a way to diversify your portfolio with real estate assets, Fundrise has a lot of options for you, depending on the amount you want to invest.

Where does Fundrise.com generate its revenue from?

The platform makes annual revenue of $20.8 million and made a 3-year growth of 288%. Let’s see what the key ways for Fundrise to earn income are.

  1. Investment Advisory Fees of 0.15% per year

The service includes ongoing reporting, tax management, investor relations, asset rebalancing, and automated distributions. For that Fundrise charges you 0.15% yearly in comparison with traditional investment channels which have an annual fee of 0.25-1.45%.

  1. Asset Management Fee of 0.85% per year

Similar to any other operating business, Fundrise conducts ongoing monitoring of your portfolio by doing accounting, construction of your portfolio, financing, sales, and marketing.

The fee for the asset management services is 0.85% per year, unlike traditional investment channels, which start from 1% to 3.8%.

Inc.com
Inc.com

Total annual costs of Fundrise add up to 1 %, whereas if you choose traditional channels, you will be charged from 1.37-6.45%. This way, your annual savings will be increased with the help of Fundrise as they are offering the lowest fees in the marketplace.

Why Fundrise?

If you are still thinking of whether or not you should start your real estate investments with Fundrise here are some advantages summed up for you to help you make a decision:

  1. With Fundrise, not only large investors can diversify their portfolio with real estate assets but even starting, small investors. Historically, small investors were unable to invest their financial assets in real estate. With Fundrise, everyone is given the opportunity.
  2. Fundrise requires a very low minimum balance of $500. With this amount of money in your balance, you can start investing in commercial real estate deals.
  3. The platform offers a 90-day money-back guarantee. For the first-time users of the platform, Fundrise has a trial period of 90 days during which they can withdraw their money without any additional penalties or fees.
  4. Fundrise has experienced asset managers. Within the scope of their business activity, the asset managers will take care of all the details. If you are too busy and can’t monitor your portfolio or do some research, the experts at Fundrise will do that for you.
  5. Quarterly distributions of your returns/ cash-outs. The private estate market is not liquid; this means you can not simply withdraw your money whenever you want. However, Fundrise has a competitive advantage over traditional investment channels and allows you to generate quarterly cash-outs of your returns.
  6. Simple to use. Fundrise is a very user-friendly platform, and it takes you 10 minutes to sign up and start. If you begin with a starter portfolio, you should have $500, and it would take a couple of days for your investment to be approved.
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Wrapping up

If you want to invest in real estate and do not want to risk your cash and time, Fundrise is definitely worth looking into. The website has an excellent historical record of its annualized returns, which makes investors trust the platform.

With the low price floor of $500, the platform is accessible for most people as you do not necessarily need to be an accredited investor with huge funds. However, note that the real estate market at an asset class is a long term investment; thus, it is illiquid, and you can withdraw your money via Fundrise only on a quarterly basis.

The website puts its users at its top priority level and does anything to ease their experience at Fundrise. The good thing is that it targets not only beginners in the real estate market but also intermediate and advanced level investors who have considerable experience in the field.

Fundrise Team
Fundrise Team

Overall, if you are interested in real estate investments, you should definitely consider Fundrise, which offers many advantages to its users. With lower fees and higher returns, you are creating diversified portfolios and earning profits based on the project plan you choose.

The historical earning records of Fundrise have proven their users of consistency and trustworthiness. At Fundrise, experts ease your path to become a real estate investor and even an expert in the marketplace.

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Andrei Shilkov

Blog author. I am well versed in Finance and Digital Marketing. I have two bachelors degrees in Finance. Born in Russia, but later moved to the USA, to western Pennsylvania, the city of Pittsburgh. I have a Certified Public Finance Officer (CPFO) certificate. I also worked at IRS and Microsoft.

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