Fundrise: The Real Deal for Real Estate?

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Millions and millions – maybe even billions – of young people worldwide read news headlines every day about the skyrocketing price of real estate and feel a knot in their stomach. Owning real estate has historically been one of the rites of passage of adulthood and the basis for a solid financial foundation, but it is increasingly out of reach for many. But even for people whose income levels or circumstances make it likely that they will be renting for life, there are options available to have access to the reliable gains of the real estate market.

One of the crowd sourcing platforms that has emerged to solid reviews and a successful track record is called Fundrise. It offers a low barrier to entry for investors that aren’t in a position to buy their own property, and it has posted returns that more or less mirror the averages for private commercial real estate.

What is Fundrise?

Fundrise is a crowd sourcing platform managed by Rise Companies that offers its own product called an eREIT – a type of investment better known simply as a Real Estate Investment Trust (REIT). It allows you to invest in real estate with a minimum of $500, though it offers three other account types with minimums of $1000, $10,000 and $100,000. Each level offers progressively greater flexibility and access to more investment types, but even the relatively low barrier $1000 minimum account allows for some selection of REITs oriented to different real estate investment strategies (such as income vs. asset growth).

Fundrise has relatively low management fees (they typically work out to 1% of the amount invested) but despite not gaining title to the properties you invest in, funds put into the platform are still fairly illiquid, much like physical real estate. This can be a drawback for investors who are looking to invest funds that they anticipate they may need to access relatively soon. One way to get around this is to open a Roth IRA with Fundrise and only invest funds that you plan to use in retirement, which will allow you to enjoy the benefits of real estate appreciation over your working life.

Is Fundrise Legit?

With new technologies and different investment platforms everywhere you turn, it’s important to take a critical look at the legitimacy of a service or product before plopping down $500, let alone $100,000. Here, Fundrise easily passes the test – it is a legitimate tool with many satisfied users, as shown by its extremely high App Store and Better Business Bureau (BBB) reviews.

With its legitimacy established and a low barrier to entry, its well worth exploring signing up for Fundrise today to take advantage of an introductory offer that come with $10 in shares.

How Does Fundrise Stack Up?

It shouldn’t be a surprise that there are other services offering similar exposure to the real estate market for online investors. Two that warrant a comparison to Fundrise are Roofstock and RealtyMogul.

Roofstock has a much higher barrier to entry than Fundrise. Its primary purpose is actually to allow investors to purchase individual properties, typically residential ones, and it includes a number of features such as integrating home inspection reports and financing opportunities. It also helps model potential income from a property based on several factors including neighbourhood growth trends. While it is easy to find a rental income calculator online, it’s certainly convenient to have it housed in the same place as other vital documents.

While not everyone will be looking to buy an actual property, for those who do Roofstock will offer a streamlined process and straightforward fees. Investors who have bought and sold property with a real estate agent will understand the complexity of calculating their total transaction fees.

A more conventional crowd sourcing product is Roofstock One, which offers shares in rental homes. One downside of this service compared to Fundrise is that the minimum investment is $5,000.

If you are looking for exposure to commercial real estate without actually going out and buying a plaza yourself, RealtyMogul may be an option worth considering. It shares Roofstock One’s $5,000 minimum investment but it carefully scrutinizes deals before entering into agreements with your money, claiming to only accept 1% of all proposals made. It offers two core products, MogulREIT I and MogulREIT II. The first focuses on commercial real estate opportunities, while the second is geared towards investments such as apartment complexes and multi-unit housing.

Fundrise: Is It Right For You?

Investment opportunities need to be carefully considered given the stakes. While many people want to buy real estate, such as a primary residence or an investment property, the gap between prices and wages means that exposure to this sector of the economy can sometimes require creativity. Fundrise is a good solution for those looking to passively invest in real estate without the hassle of property management and the other obligations that come with outright ownership, such as purchasing Title Insurance. Its appeal is especially strong for those with minimal funds to invest; the $500 entry point is accessible to almost all investors.

It’s worth taking a look at some of the alternatives, including Roofstock and RealtyMogul, if you have a bit more cash to work with. But regardless of your circumstances, Fundrise is a solid option to begin your real estate investing career.

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