Fundrise Review [2024]: Invest in Real Estate with Only $10

Investing in the real estate market might seem like something best left to the pros. After all, you have stock and bond markets to invest in. That should help you keep a diversified portfolio, right? Maybe not, according to Fundrise.

While traditional investing practices have been limited to asset classes like public stocks and bonds, Fundrise changes all that. Now you can learn how to invest in real estate like the pros. This platform is an option worth considering if you're interested in building a diversified investment portfolio.

So, let’s find out how Fundrise works, who it's right for, and how to start investing.

What is Fundrise?

Fundrise is a financial tech company based out of the Washington, D.C. metro area that operates an SEC-registered crowdfunded real estate investment platform. Founded in 2010 by a group of longtime investors, it gave people a new option for investing in high-quality real estate deals without having to struggle with all the high costs associated with conventional real estate investing.

Today, more than 2 million investors use Fundrise, investing in real estate across the country.

Who should use Fundrise?

There can be a significant barrier to entry for real estate, but one of the main draws of Fundrise is that it allows you to invest with as little as $10. I really appreciate the platform’s goal to democratize real estate investing. However, it still may not be for everyone. Here are the types of people I might recommend look into Fundrise:

• Investors who want to diversify their portfolio outside of stocks and bonds
• Those who don’t have a large enough sum of money to invest in traditional real estate
• Investors who know they will likely not need to access their money for five or more years

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How does Fundrise work?

When you invest with Fundrise, your funds are allocated across a diversified mix of Fundrise’s offerings, known as eREITs and eFunds, both of which are professionally managed portfolios of private real estate assets located throughout the United States. The platform also offers venture capital investments, giving investors the opportunity to invest in private technology companies.

What Fundrise does well

• Low minimum investment: For alternative investment platforms in particular, I always evaluate the minimum investment. You can start investing with Fundrise with as little as $10, which is extremely low. This opens up opportunities to a number of investors and makes your decision to invest relatively low-risk.
• Open to nonaccredited investors: Many real estate platforms are only open to accredited investors, so the fact that Fundrise is open to nonaccredited investors stands out to me. Again, this opens up opportunities for investors across the board.
• Alternative options: I also appreciate that Fundrise offers venture capital investment opportunities as well as retirement options. This is not necessarily guaranteed with other platforms and is a nice perk.

Drawbacks of Fundrise

• Illiquidity: One of the most significant aspects I would keep in mind with Fundrise is the illiquidity of your investments. For most investments you make through the platform, you should plan on keeping your money there for at least five years. Otherwise, you will pay a roughly 1% penalty fee to liquidate your shares. That is not something I would recommend to many people unless you absolutely had to.
• Fees: Depending on your investment plan, you will pay a different set of fees. I would recommend fully understanding these fees before investing with Fundrise. It’s also important to note that most of these fees don’t seem extremely high to me, but they are certainly higher than many low-cost index funds.
• Limited customer service options: Fundrise operates its customer service almost exclusively via email. While this isn’t necessarily a problem, if you are someone who would prefer instant feedback via phone call, Fundrise may not be the platform for you.

Investment plans

Fundrise offers four different investment plans that each provide a different investing strategy and risk and return profile. Therefore, you can choose the plan that aligns best with your personal investment goals after learning about each one.

Who can use Fundrise?

Currently, U.S. citizens or permanent residents currently residing in the U.S. and over the age of 18 can learn how to invest in real estate with Fundrise. You do not need to have a certain net worth or be an accredited investor to use the platform. With different portfolios to choose from, there’s an option suitable for most everyone.

However, if you are an accredited investor or have a high net worth, it may be worth your time to consider Crowdstreet, which offers investment opportunities in commercial real estate without the fees of other platforms. You can see how Fundrise and Crowdstreet stack up and choose the platform best suited to your investment goals.

How much can you earn with Fundrise?

As the saying goes, past performance is not indicative of future results. However, from 2017 to 2022, Fundrise investments saw average annualized returns of 10.63%, 8.81%, 9.16%, 7.31%, and 22.99%, respectively. To compare, the S&P 500 — a benchmark for U.S. stocks — saw average returns of 21.61%, -4.23%, 31.21%, 18.02%, and 28.47% for the same years.

As an investor with Fundrise, you can earn passive income through a combination of interest payments, property income, and the potential appreciation in value of the properties themselves. The timing and exact amount of your return will vary depending on your selected plan and the investments within your portfolio.

It’s important to keep in mind that Fundrise investments are illiquid in nature and are designed to be long-term investments held for at least five years.

However, Fundrise does have a redemption plan where you can sell shares monthly. You’ll have to wait a minimum of 60 days after submitting your request to redeem your shares, though. Also, early withdrawals may be subject to a liquidity penalty of 1% of the proceeds, depending on the length of time you owned the shares.

You can expect potential returns for your investments to be paid out either via quarterly distributions or, for any appreciation in asset value, at the end of the asset’s investment term (which is typically at least five years). All distributions will be deposited right into your bank account unless you opt into the Fundrise Dividend Reinvestment Program (DRIP). This will reinvest any dividends earned back into open offerings — without fees — instead of being deposited into your bank account. Be aware that these reinvested dividends are taxed the same as if you actually received the cash.

What is an eREIT?

An eREIT, short for electronic real estate investment trust, is a type of online investment available exclusively on Fundrise. An eREIT focuses solely on commercial real estate assets, so your investments will be in properties such as apartments, hotels, shopping centers, and office buildings. Similar to an exchange-traded fund (ETF) or mutual fund, eREIT investments give you the chance to easily diversify across many properties at a relatively low cost.

Fundrise offers a range of eREITs for its real estate investors. Each eREIT has a corresponding objective of either income, growth, or both income and growth. eREITs with an income objective focus on potential cash flow, and eREITs with a growth objective focus on properties with the potential for appreciation, or increasing in value. Those with an income and growth objective take a balanced investing approach, focusing on both cash flow and appreciation potential.

Fundrise eREIT options as of January 2022 include:

• Income eREIT: This eREIT focuses on debt investments in commercial real estate assets. Its objective, not surprisingly, is income. It's available to investors with a Core account or above.
• Growth eREIT: This eREIT focuses on commercial real estate with the potential to appreciate. Its objective is growth, as the name indicates, and it's available to investors with a Core account or above.
• Heartland eREIT: This eREIT is one of Fundrise's options that focus on a specific region of the U.S. (in this case, the Midwest). It has a broad definition of the Midwest, however, with properties in Dallas, Texas; Denver, Colorado; and Las Vegas, Nevada. Its objective is both income and growth, and it's focusing on both residential multifamily and commercial real estate investments. It's available to Core account members and above.
• Development eREIT: This option has an income objective and is focused on multifamily and commercial properties that are in various stages of renovation and development. To find out availability, you'll need to inquire with Fundrise.

Costs associated with eREITs

Fundrise eREITs have no brokers or selling commissions. Since eREITs cut out the middlemen and are sold directly to the investor, they also have lower fees compared to other REITs.

One significant thing to keep in mind, though, is that since eREITs are non-traded — meaning they aren’t publicly traded on the stock exchange — they have less liquidity than REITs, which are publicly traded.

Said simply, this means cashing out your eREITs could be more difficult. As with any investment, make sure to do your due diligence before you invest.

Another aspect to consider and that certainly stands out to me is that you must hold your eREIT (or eFund) shares for at least five years before liquidation. If you don’t, there is an approximate 1% penalty fee. If you’re not expecting to be able to hold your shares for that long, Fundrise may not be the best spot for you to invest.

You can compare Fundrise vs. REITs side-by-side to better understand how Fundrise differs from traditional REITs.

What is an eFund?

An eFund is similar to an eREIT but focuses exclusively on residential real estate assets, such as single-family homes, townhomes, and condominiums.

Traditionally, when you wanted to invest in the housing market, the primary opportunity was via publicly traded homebuilders — think Toll Brothers or D.R. Horton, both companies you can buy stock in. These companies are subject to “double taxation,” however, which makes them a less efficient investment than Fundrise’s eFunds. Double taxation is when a corporation is taxed on its earnings (profits), and shareholders are also taxed on the dividends received from those earnings.

Unlike those residential homebuilders, which are publicly traded and structured as corporations, Fundrise’s eFunds are structured as partnerships, so they’re not subject to the same double taxation. In other words, you and every other investor in Fundrise are considered partners with Fundrise. So any cash distributions you receive are not considered income and won’t be subject to double taxation.

However, just like with eREITs, you will be subject to that early penalty fee if you withdraw your eFund shares before five years.

Fundrise Real Estate Interval Fund

While the liquidity issue certainly gives me pause, there is somewhat of a solution that Fundrise came up with. It’s called the Fundrise Real Estate Interval Fund.

This fund was rolled out by Fundrise in December 2020. It had a target initial offering of $1 billion with no cap on its offering capacity. It offers quarterly liquidity, which gives you more ready access to your funds, and it's priced daily (eREITs and other funds are typically updated quarterly or semi-annually). Funds are allocated to the Interval Fund whenever you invest new funds, and the allocation is based on your account level and plan type.

Maximizing your earnings with Fundrise

Your potential earnings with Fundrise will vary depending on your portfolio and the investments within it. But there are a few things you can do to help maximize your earnings. Consider these tips before jumping in:

• Look at your options: Fundrise doesn’t offer one catch-all portfolio but rather a handful of options tailored to your specific investment style. I would recommend exploring each of these plans before you begin so you know you’re choosing the best option for your situation.
• Reinvest your dividends: It might be tempting to take your earnings and do with them what you want, but reinvesting your dividends puts that money straight back into open offerings with Fundrise. There are no fees to reinvest your dividends.

How to stay safe investing with Fundrise

Because of the nature of the investments, Fundrise eREITs and eFunds have a lower correlation to the broader market and could potentially offer greater protection from market volatility.

Fundrise doesn’t invest in just any real estate, either. The company’s real estate team only goes after high-quality investments that can potentially earn income and safeguard against losses. So you can rest easy knowing your money is only going toward sound investments, not the riskier forms of real estate investment. Fundrise also uses bank-level security to ensure your information is safe while using the platform.

FAQs

Other investments to consider

If investing with a real estate crowdfunding platform like Fundrise doesn't sound quite right for you, there are several other options for investing money, including Ark7, Wealthsimple, and Stash:

Ark7

Ark7 is a fractional real estate investing platform where you can build passive income by investing in shares of rental properties. The company offers a simple way to add real estate to your portfolio without investing in REITs or buying a whole rental property yourself. Ark7 investors have earned 5%+ annualized distributions¹ from monthly income alone².

Visit Ark7 to learn more.

Wealthsimple

Wealthsimple is an online investment manager that focuses on ETF investments — primarily, low-cost index funds. There are no account minimums, and Wealthsimple handles many of the complexities of investing, such as portfolio rebalancing, dividend reinvestment, and tax-loss harvesting. You can expect to pay 0.5% in management fees on investments up to $100,000 and 0.4% on investments over $100,000.*

Read our full Wealthsimple review.

Stash

If you’re looking for a platform that makes investing approachable to new investors, you may want to consider Stash. With plans ranging from $3 to $9 per month, you can start investing with as little as $1. Stash also provides options for banking where you can get rewarded with stock on your normal day-to-day spending.

Read our full Stash review.

Bottom line

Fundrise is an intriguing option for those interested in real estate investing who maybe don’t have the amount needed for a downpayment. The platform also has interesting options for those hoping to invest in individual retirement accounts or wanting to make venture capital investments.

But it’s also important to keep in mind the platform’s fees and the fact that your investment will be very illiquid. Make sure to do your due diligence before investing and only invest money that you won’t need for at least five years.