Updated October 14, 2020 2:53 PM PT

Fundrise Review: Is It Legit?

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Fundrise lets you invest in real estate with just $500. But is it any good? Find out if they can be trusted before you sign up.

Fundrise
Earn Passive Income with Real Estate

Overall Score

4.3

Annual Fee

4.0

Minimum Deposit

5.0

Customer Service

3.0

Ease of Use

5.0
5-point scale (the higher, the better)

Pros and Cons

  • Just $500 to start
  • Quarterly dividends
  • Passive investing
  • Illiquid investment
  • Unknown future returns

Bottom Line

Passive real estate investing with no income requirement

Investing in commercial real estate can be a lucrative way to expand your portfolio and grow your money. Over the last 30 years, real estate has performed better on average than stocks.

Many people think they don't have the money necessary for investing in real estate. But investing with Fundrise offers a great way for the "average" person (aka "non-accredited investors") to get started with $500. Is it the right choice for you?

Learn more in our detailed Fundrise review.

What is Fundrise?

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Fundrise is a real estate investment platform. It's a new way to invest by using crowdfunding to pool funds with other investors in order to purchase properties.

The company founder, Ben Miller, started Fundrise with the idea to make real estate investing accessible to everyone.

The investment platform is open to anyone who is a U.S. resident 18 years or older. The minimum investment is only $500.

Best Place for Beginners to Invest in Real EstateSelect your state to become a real estate investor

How does Fundrise Work?

The money you invest gives Fundrise the capital necessary to acquire, build, and manage properties. These include things like apartment complexes, single-family homes, office buildings, industrial properties, hotels, and shopping centers.

Fundrise earns returns in a variety of ways:

  • Buying undervalued real estate, and then renovating the property to raise the rents or property value

  • Collecting rental income on stabilized properties

  • Holding mortgages and collecting interest

  • Acquiring properties that have potential to appreciate in value

The profits are then distributed to the shareholders. For more details, check out the Fundrise website.

 

Two Types of Products

Fundrise's main products are eREITs (electronic Real Estate Investment Trusts) and eFunds.

  • eREIT: Fundrise's eREITs use crowdfunding to acquire, manage, and sell properties. Since eREITs aren't publically traded like stocks and bonds, they are they are less liquid than traditional REITS.

  • eFunds: This electronic fund, offered exclusively through Fundrise, is a professionally managed, diversified portfolio of residential real estate assets.

Here's a chart of some key differences between Fundrise's eREIT and traditional REIT.

eREITTraditional REIT
Not publicly tradedPublicly traded on the stock exchange
No secondary marketListed on secondary market
Not as liquid; Can only sell during certain timesCan buy and sell anytime
Sold directly by FundriseSold on the open market
Low management feeHigher upfront fees
Regulated by SECRegulated by SEC

Debt vs Equity Real Estate Investing
Real estate crowdfunding platforms offer two kinds of opportunities:

  • Debt investing means the investor becomes one of the lenders for a property owner. As the owner pays back the mortgage on that property, your investment is paid off with interest.

  • Equity investing means you own a piece—or stake—of the real estate property itself. You can earn a return on your investments through income (like rental fees) or through the property as it appreciates in value.

Making Money with Fundrise

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Investors are paid in 2 ways:

1. Quarterly dividends
This is rent income generated from the rental properties. You'll typically receive dividend distributions a few weeks after the end of each quarter. You can choose to have them directly deposited into your bank account or automatically reinvested back into Fundrise.

2. Appreciation in share value
You'll receive proceeds when a property is sold. Appreciation is only paid at the end of the investment - this can take a few years. While a few years might sound like a long time, in reality, real estate has shown to be an overall good investment.

Is commercial real estate a good investment?
While commercial real estate investments comes with risks, the average return has outperformed the stock market over the last 30 years. Historically, this type of investing has been limited to people who have enough capital to buy and manage properties. But crowdfunding through platforms like Fundrise has opened up commercial real estate to the everyday investor.

Returns and Performance

Here's a look at how Fundrise has performed for the past 6 years:

The average annualized returns (after the fees are subtracted) are calculated below:

201412.25%
201512.42%
20168.76%
201711.44%
20189.11%
20199.47%

Can you make money with Fundrise?

You can make money with Fundrise through rental income, which you'll get in quarterly dividends. The other way to earn returns is when the properties appreciate over time and then are sold. Fundrise does charge a 1% management fee. The minimum investment is $500.

The average return for Fundrise investments in 2019 was 9.47%. This assumes you reinvest dividends back into Fundrise. As always, past results don't guarantee future success. It's important never to invest what you can't afford to lose.

We do like that they've been consistent and in place for a number of years now. This isn't a fly-by-night company.

How is Fundrise taxed?
Your earnings with Fundrise are taxed as ordinary income. Dividends and distributions are reported on a 1099-DIV tax form each year.

Fees

Fundrise charges an all-in 1% management fee as follows:

  • 0.85% annual asset management fee (that goes towards operating costs of the projects)

  • 0.15% annual advisory fee (can be waived in certain circumstances)

This pricing is pretty competitive. However, some of Fundrise's potential costs are not as transparent. Read on to learn more.

With Fundrise, there is no middleman. You invest in eREITs and eFunds directly through the platform. That means you save on broker commissions.

Hidden Fees

  • Origination fee: A 0-2% acquisition fee when Fundrise buys a new asset.

  • Early redemption (or "exit") fee: 1-3% loss for redeeming shares within five years of investing. (No fee in the first 90 days.)

  • Self-directed IRA fees: An annual asset fee of $125 to Millennium Trust Company

Specific eREITs may have additional fees, including asset management, acquisition, servicing and others. For a full picture of these charges, you would need to review the few hundred-page circular that comes with each investment.

How to Withdraw Money

Fundrise investments are meant to be long term - typically five years or more. Its eREITs are not publicly traded (unlike traditional REITs) so you can't sell your shares and withdraw the funds anytime you want.

If you plan to invest in Fundrise, this is something to keep in mind.

But it does have a redemption plan to sell your shares four times a year (at the end of every quarter). Based on how long you've held your fund, this may cost you up to a 3% penalty. But this redemption program gives investors some flexibility if you want to withdraw money (with some limitations).

How do I get money out of Fundrise? To redeem your shares, you must submit a redemption request through the website. Go to Settings then Account Settings. You can find the Redemption Request Form at the bottom of the page.

Shortcut: With Fundrise, after five years you can redeem your shares without paying any fees. If you don't mind tying your money up for a while, open a starter portfolio for only $500.

The penalty for redeeming shares under this program is as follows:

  • None for the first 90 days
  • 3% if shares are owned for less than 3 year
  • 2% if shares are owned 3 - 4 years
  • 1% if shares are owned 4 -5 years
  • None for shares held for at least 5 years

Fundrise Pros & Cons

PROS:

  • No income or accreditation requirements
  • Just $500 to start
  • Upgrade to a Core plan for free with $1,000 to start
  • 90-day money-back promise
  • Portfolio of properties across the U.S.
  • Quarterly dividend distributions
  • Completely passive investing
  • Available as self-directed IRA
  • See Fundrise Deal >>

CONS:

  • Illiquid investments (typically five years or more)
  • Unknown future performance and returns
  • Tax liability—regular income tax on earnings
  • Lack of fees transparency

Read on to learn more.

How to Get Started

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Interested? Ready to get started? Follow these simple steps to begin investing in real estate through Fundrise.

1. Visit website

2. Pick a plan
First, you'll choose which account level you want (Starter, Core, or Advanced). Read more about these three choices below.

Which plan should you get? Depends on how much you have to invest. Here are our tops picks for your minimum balance.

How much do I have to invest?Fundrise Plan
$500 - $1000Starter
$1000 - $10,000Core
$10,000+Advanced

3. Sign up
The process takes 10 minutes and requires some personal information like your name, address, phone number and Social Security number.

4. Fund your account
You can link a checking account to your Fundrise account or set up a wire transfer. It may take several days for your account to fund so you can start investing.

5. Earn money
Investors are paid dividends on a quarterly basis and at the end of investments when the properties get sold. (More on that below.)

Is Fundrise Safe?

Fundrise uses bank-level security to keep your personal information safe. This includes 2-factor authentication, AES bit symmetric key encryption, and Transport Layer Security (TLS).

Fundrise portfolios are made up of qualified offerings regulated by the Securities and Exchange Commission (SEC). They must follow strict reporting requirements. So you get the same sense of transparency as required for public companies.

But investing come with some risk. Fundrise has done well since its establishment, but there is no guarantee it'll continue to do so.

See Current Offer >>

Types of Accounts

Fundrise supports the following accounts:

  • Personal taxable account

  • Joint account

  • Certain entity accounts (Trusts, Limited Liability Companies, Limited Partnerships, C Corporations, and S Corporations)

  • Self-directed IRA through Millennium Trust Company

You Should Know
Typically, real estate investments are made through taxable accounts, which require you to pay income tax on what you earn. You do have the option to invest in Fundrise through a self-directed IRA. This can provide a tax advantage when investing in private real estate.

There is an additional $125 annual fee when you invest with Millennium - Fundrise's self-directed IRA partner.

Portfolio Options

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Investors have three choices when investing. Each investment portfolio diversifies your funds differently, based on your goals. Pick the one best for your needs.

Starter Portfolio ($500 minimum)
You get a diversified portfolio of 5-10 real estate projects throughout the U.S.

90-day money-back guarantee
If you decide you aren't comfortable with your Starter portfolio, you can request your money back within the first 90 days. Fundrise will buy the investment from you for the amount you paid.

Core Plans ($1,000 minimum)
With $1,000 to start, you can upgrade for free to any one of the 3 Core plans. These are more customized goal-based investing portfolios with greater diversification across 40+ projects.

Pick the one that best fits your financial goals.

  1. Supplemental Income: This focuses on properties that generate cash flow (collecting rent or interest). You will earn more dividends.

  2. Balanced Investing: This approach creates a more balanced mix of income and growth properties. You earn money through both dividends and appreciation.

  3. Long-Term Growth: This focuses on properties that are expected to appreciate in value. You'll earn less dividends now, but the potential returns could be the highest in the long term.

Advanced Portfolio ($10,000 minimum)
This highest tier portfolio offers greater diversification across 80+ properties. You'll also get a more sophisticated strategy for potentially higher returns.

You're able to change your investment plan at any time, so you're not stuck with your initial choice. For example, if you started with Supplemental Income, you can change it to Balanced Investing. Changing will only affect future investments and will not rebalance your current positions.

How Does Fundrise Selects Projects?

Fundrise reviews thousands of real estate investment deals and selects only the top 2% of projects. Here's the process:

  1. Real estate companies submit projects to Fundrise.

  2. Fundrise conducts a basic screening to ensure it's up to company standards.

  3. Projects go through an intense underwriting process, which includes (but not limited to):
    • Credit and background check
    • Experience and track record check
    • On-site visit by member of Fundrise team
    • In-depth schedule and budget analysis
    • Market analysis (supply and demand, demographics, etc.)
    • Sale/refinance stress tests

  4. If the project passes, Fundrise approves the deal and acquires it.

Fundrise rates each of its projects with a value ranging from A1 to E3. This estimates the risk of a project, with E3 being the riskiest. For example, a project rated D will carry more risk than something rated B, but also have the potential for greater returns.

The Fundrise Platform and Features

Here's a more detailed look at how the Fundrise platform works and some of its features.

When you log into your Fundrise account, you'll see your dashboard with your:

  • Summary of returns: shows how much you've earned in dividends and appreciation, and how much was taken out in advisory fees.
  • Growth graph.
  • News feed announcing recently acquired or completed projects.

The example shown below is a Core long-term growth portfolio.

You can click into your "Portfolio" tab to see your investments in detail. This graph allows you to see your spread of projects at a glance. You can see where they lay on Fundrise's risk scale, as well as percentage of debt and equity projects.

You can also see the complete list of your projects. In this portfolio, there are 80 active projects. You can click into each one to see more details such as the projected annual return, total size, location, timeline updates, and market analysis.

This portfolio has a mix of apartment buildings and commercial real estate. The investments consist of new construction, renovations, and stabilized apartments.

You'll also get a full breakdown of your portfolio by each eREIT and their values.

In your "Performance" tab, you can see your personal returns information.

Fundrise App

Fundrise recently released a mobile app for iPhone. The app for Android is currently in the works.

screenshot from a CreditDonkey author's account

The app is a great companion to the desktop site. You can:

  • Touch ID log-in (with PIN backup)
  • Sign up for Fundrise
  • View your portfolio dashboard
  • Add funds
  • See transaction history
  • View your active projects
  • See breakdown of each eREIT's performance
  • Get project updates and photos

How It Compares

See how Fundrise stacks up against the competition, including other real estate crowdfunding platforms.

Fundrise vs Traditional REIT (such as Vanguard REIT)
There's one major difference between Fundrise's eREIT and a standard REIT—liquidity.

A traditional REIT (Real Estate Investment Trust) is traded on the public market, which means investors can sell any time the stock market is open.

Fundrise's eREIT is not publicly traded (you can only buy on the Fundrise platform) and thus requires a long-term investment.

Fundrise vs RealtyMogul
RealtyMogul is a crowdfunding platform with opportunities for both accredited and average investors. If you're non-accredited, you can invest in their REITs with a minimum of $5,000.

For the accredited investors, you can invest in Realty Mogul LLC shares, or real estate loans or debt.

 FundriseRealtyMogul
 Visit SiteVisit Site
 

Fundrise

RealtyMogul

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

SPECIAL OFFER
Access Private Market Offerings - Learn More

 

Benefits and Features

Annual Fee
1% management fee
1% - 1.5%
Minimum Deposit
$500
$5,000
DividendsChoose quarterly payouts or auto reinvestMonthly or quarterly payouts or auto reinvest
Investment TypesCommercial, single family, industrialCommercial, multifamily, office, industrial
Wealth Requirements
None
Non-accredited investors are eligible to invest in the REIT offerings; Accredited investors have access to all investments on RealtyMogul
 Visit SiteVisit Site
Terms Apply. Offering Circulars 

Fundrise vs. DiversyFund
DiversyFund also requires just $500 to start and has no income or accreditation requirements.

DiversyFund focuses on purchasing multi-unit properties (like apartment complexes) in high-growth areas and generating rental income. It directly owns all its projects. This allows them to charge no management fees.

However, despite the name, DiversyFund only has 3 projects so far. It doesn't have the nationwide diversity that Fundrise has. Another downside is that there is no dividend payouts. So it's a long term investment of at least 5 years before you get any returns.

 FundriseDiversyFund
 Visit SiteVisit Site
 

Fundrise

DiversyFund

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

 

Benefits and Features

Annual Fee
1% management fee
$0. No management fees and no commissions
Minimum Deposit
$500
$500
DividendsChoose quarterly payouts or auto reinvest
Automatically reinvested
Investment TypesCommercial, single family, industrial
Apartment buildings and condos
Wealth Requirements
None
None
 Visit SiteVisit Site
Terms Apply. Offering Circulars 

Fundrise vs. Roofstock
Roofstock works completely differently. Roofstock is not a crowdfunding platform. Instead, it's an online marketplace to buy and sell single-family homes.

You can buy a house already with tenants and immediately start earning rental income. You hold the direct title to the property. You're responsible for managing it and making repairs. Roofstock does offer property management services so you can be hands-off.

Roofstock does not have accreditation or income requirements. However, you'll need enough money to either purchase the house outright or finance it. In this sense, Fundrise is better for small investors without a lot of capital.

 FundriseRoofstock
 Visit SiteVisit Site
 

Fundrise

Roofstock

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

SPECIAL OFFER
Build Wealth Through Real Estate - Learn More

 

Benefits and Features

Annual Fee
1% management fee
No platform fee. Buyers pay 0.5% transaction fee for each purchase or $500 (whichever is greater)
Minimum Deposit
$500
House down payment usually requires at least 20% of purchase price
DividendsChoose quarterly payouts or auto reinvestRental income from your properties
Investment TypesCommercial, single family, industrial
Single family homes
Wealth Requirements
None
None
 Visit SiteVisit Site

Build Wealth Through Real Estate

Terms Apply. Offering Circulars 

Fundrise vs. Rich Uncles
Rich Uncles focuses more on collecting rent and paying monthly dividends. Fundrise also has growth properties for more long-term growth.

Rich Uncles requires a minimum investment amount of $500 for its National REIT. You'll also need an income of $70,000 AND a net worth of $70,000, so that may not be accessible to many investors.

However, the platform also offers a Student Housing REIT with no income or net worth requirements. You can start investing with just $5. While this offering may appeal to beginning investors without a lot of capital, the investments are more limited.

 FundriseRich Uncles
 Visit SiteLearn More
 

Fundrise

Rich Uncles

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

 

Benefits and Features

Annual Fee
1% management fee
3%
Minimum Deposit
$500
$5 for Student Housing REIT
$500 for National REIT
DividendsChoose quarterly payouts or auto reinvestMonthly dividends or auto reinvest
Investment TypesCommercial, single family, industrialCommercial properties with long-term recognizable tenants, student housing
Wealth Requirements
None
None to invest in Student Housing REIT
$70,000 annual income and $70,000 in net worth to invest in National REIT
 Visit SiteLearn More
Terms Apply. Offering Circulars 

You Should Know
Rich Uncles only chooses commercial projects with 50% equity and recognizable big-name tenants. Fundrise offers more developing projects.

What the Experts Say

Beginners can start investing in real estate with just a little bit of money. Find out if that's a good idea. CreditDonkey asked an industry expert to answer some of readers' most pressing questions:

  • Is real estate crowdfunding a safe or risky investment?

Here's what he had to say:

Bottom Line

Typically, investing in real estate requires large amounts of money. Fundrise gives anyone the opportunity to enter the world of real estate investing at low cost and without taking a large risk. It's also an easy way to invest as its completely passive.

Because it's a long-term investment, though, you should give this investment careful thought. Can you tie up your money for the next five years? Remember the fact that you may not be able to access it any time before that.

If you're willing to tie up your money up and start small, diversifying into real estate through Fundrise might be worth the investment.

Next steps: View portfolio plans, terms and details

Disclaimer: The information contained herein neither constitutes an offer for nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering document, and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. No money or other consideration is hereby being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Fundrise Platform neither constitutes an indication of interest in any offering nor involves any obligation or commitment of any kind.

The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

More from CreditDonkey:


How to Make Money Work for You


How to Start Investing


How to Invest $10k

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