Fundrise

What is Fundrise?

Fundrise is a Real Estate Investment Trust.

Real Estate Investment Trust (REIT)

A company that owns, operates or finances income producing real estate

Reit.com

Fundrise is professional real estate investment company that buys cash flowing properties such as apartment buildings or single family homes.

These properties are grouped based on performance and market. These groups (called funds) are designed to accomplish specific investment goals.

You can purchase shares of these funds for as little as $10. The process is similar to buying a stock, and your investment may appreciate in value or earn dividends, or both. What you are actually buying is a small piece of the real estate holding in that fund.

Here is our Money Gouge portfolio. We invested the first $100 from the website into Fundrise in September of 2021. In return, we’ve received a (small) dividend and 12% return on a completely passive investment.

Fundrise is an REIT that allows you to buy shares of cash flowing real estate. These shares are purchased in as little as $10 increments. They give you ownership of the real estate in the fund you invest in.

How is Fundrise different?

Availability

Until recently, investing in commercial real estate was primarily available only to accredited investors.

Accredited investor:

Having a networth of over $1M not including your primary residence or an annual income that exceeds $200,000 individually or $300,000 combined.

Investor.gov

The SEC limits investor participation in private real estate projects because they are often difficult to understand and harder to stay current on. An investment in these types of projects involves buying shares in a company that will own and operate the building.

Fundrise operates it funds as REIT’s. This makes them an investment that is accessible to everyone.

Affordability

A common way to invest in real estate is buying a rental property or participating in a syndication.

Syndication: A professional investor leads an investment of a large apartment building or commercial property among multiple investors.

Millionacres

Syndicates work with multiple investors because they are buying large, expensive properties. The price is high enough that they gather multiple investors to help make the down payment. In exchange, you get ownership in proportion to the amount you put in. An example would be Upward Capital.

The problem is that down payments or syndications can easily require over $30K. These are great investments to work towards, but not a good place to start investing.

Fundrise offers you the same high quality properties in an affordable way. Buying shares offers you an affordable way to get similar cash flow and appreciation from your dollars without the large upfront savings.

Passiveness

One of the purposes of investing is to allow you to enjoy and take control of your time. This is why passiveness is an important goal when choosing which assets you will invest in.

Real estate is very involved if you are working on closing on a rental property. In addition, even with a property manager in place you will still need to deal with occasional maintenance or tenant issues. I have personally experienced this many times with the two rental properties I own.

Large commercial properties have a full time property manager who works onsite. This removes you from the management side of real estate. Fundrise removes you even further because their staff manages the acquisition of properties.

As an investor, all you need to do is select a fund that fits your investment goals. There is even an option to have your dividends deposited directly to your bank account.

A Third Party Review of Fundrise

If you are interested in Fundrise, here is a third party review. This video was one of the most helpful we’ve seen.

FAQ

What is the minimum holding period?

Fundrise is a long term investment. This is because you are buying illiquid real estate properties. Generally, five years is the minimum holding time. However, you can request to withdraw prior to five years and the early withdrawal fee is currently 1%.

Can I sell my shares?

If you sell your shares after the initial five years there is no withdrawal fee. You have the opportunity to sell as many shares as you want at quarterly intervals.

What is Fundrise’s Fee?

Fundrise has a 1% fee. It’s broken into two parts:

• .15% advisory fee: This fee goes towards running your account.
• .85% fund fee: This fee goes towards management and acquisition of the real estate in their funds.

How does this compare?

1% may sound like a lot for those of us who are use to low fee index funds. However, in the real estate world this is quite competitive. If you want to buy a rental property, closing costs are typically 3-6% of you entire purchase price, and property management is around 10% of your annual rent.

For a syndication, generally there is a 1-2.5% acquisition fee and management fee of 1% of monthly rent. This is the closest comparison because this is really the only other way to buy commercial properties like Fundrise offers.

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