Updated October 5, 2022

Fundrise Review: Is It Legit?

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Fundrise lets you invest in real estate with just $10. But is it any good? Find out if they can be trusted before you sign up.

Fundrise
Get $10 Bonus When You Invest in Real Estate with $10+

Overall Score

4.0

Minimum Deposit

5.0

Customer Service

3.0

Commissions and Fees

4.0

Ease of Use

5.0

Liquidity

3.0
5-point scale (the higher, the better)

Pros and Cons

  • Just $10 to start
  • Strong past performance
  • Passive investing
  • Illiquid investment
  • Unknown future returns

Bottom Line

Good way to invest in real estate with low fees and no income requirements

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 $10. Is it the right choice for you?

Learn more in our detailed Fundrise review.

Fundrise vs Competitors

Shortcut: Here's a quick look at how Fundrise stacks up against other popular real estate platforms.

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 in 2012 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 $10 for the Starter Portfolio.

As of October 2022, Fundrise has invested more than $7 billion in real estate projects in the country. It currently has more than 371,000 active investors and over $2.8 billion in assets under management. It has paid out over $226 million in dividends to investors.

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.

If you're looking for a short-term investment, this isn't the app for you. Fundrise is best for long-term investors who want a simple way to get into real estate. Check out their website to start investing with just $10.

Here is an in-depth overview of Fundrise's investment strategy over the next year in light of the current crisis.

Fundrise e-REIT Explained

Fundrise's main investment offering is their eREIT (electronic Real Estate Investment Trust). You may have heard of traditional REITs, but Fundrise's eREIT works a little differently.

A REIT is a company that owns and operates real estate assets.[1] With a traditional REIT, you can invest in the company like a stock (such as the Vanguard REIT). You can buy and sell shares anytime on the open stock market using a brokerage.

But Fundrise's eREIT is what's known as a public non-listed REIT. This means it's regulated by the SEC, but not listed on the open stock market. You can only buy directly through the company (in this case, Fundrise's website).

The downside of not being able to trade openly is that you can't sell your investment whenever you want. But the upside is that eREITs could have better return potential because they don't need to maintain liquidity.

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.

If you can hold your investment for at least 5 years, Fundrise is a great way to make money passively. Click here to see their current promotions.

If you want to get into real estate without tying up your money for years at a time, check out Groundfloor. They offer short-term, high-yield investments for just 6 to 12 months.

Returns and Performance

Here's a look at how Fundrise has performed for the past 5 years:[2]

The average annualized returns (after the fees are subtracted) are calculated below:[3]

201710.63%
20188.81%
20199.16%
20207.31%
202122.99%
2022 H15.52%

Can you make money with Fundrise?

Over a 5 year investment period, Fundrise averages 60.4% cumulative net return for investors. From 2017 to 2021, the average return for Fundrise investments were 10.63%, 8.81%, 9.16%, 7.31%, and 22.99%. This assumes you reinvest dividends back into Fundrise.

As always, past results don't guarantee future success. And 2021 was definitely an outlier so don't expect every year to be like this.

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.

We do like that they've had consistent positive returns every year. However, it's unclear how this kind of investment would perform in a financial crisis like the 2008 market crash.

How is Fundrise taxed?
Your earnings with Fundrise are taxed as ordinary income. Dividends and distributions are reported on a IRS 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 fee: 1% penalty when you redeem 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.

If you're looking for a no-fee alternative, check out Groundfloor. The company offers monthly dividends with and has no monthly management fees.

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). Here's how early redemption works:

  • Fundrise Flagship Fund and Income Fund: 0% penalty
  • Fundrise eREIT and eFund: 1% penalty if redeeming within 5 years

This redemption program gives investors some flexibility if you want to withdraw money (with some limitations). When you redeem, the shares you've had for the longest will be liquidated first.

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 $10.

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

  • 1% for shares owned 0 - 5 years
  • None for shares held for at least 5 years

Fundrise Pros & Cons

PROS:

  • No income or accreditation requirements
  • Just $10 to start
  • 90-day money-back promise
  • Portfolio of properties across the U.S.
  • Quarterly dividend distributions
  • Completely passive investing
  • Available as 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 much do you want to invest in real estate?

How to Get Started

© CreditDonkey

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
$10 - $1000Starter
$1,000 - $5,000Basic
$5,000 - $10,000Core
$10,000+Advanced
$100,000+Premium

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.

Being registered with the SEC also allows Fundrise to open investments to everyone, not just accredited investors. Since it's regulated by the SEC, the investment is less risky.

But all investing come with some risk. Fundrise has done well since its establishment, but there is no guarantee it'll continue to do so. Fundrise has an A+ rating with the Better Business Bureau (BBB). The BBB rating is based on customer complaints and how the business is likely to interact with its customers.[4]

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)

  • Traditional or Roth 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 five account levels. Each investment portfolio diversifies your funds differently, based on your goals. Pick the one that is best for your needs.

Starter Portfolio ($10 minimum)
You will be invested in Fundrise's Flagship Fund. This fund owns over $250 million worth of real estate assets around the US.

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.

Basic Portfolio ($1,000 minimum)
This option also lets you invest in an IRA. You also get access to the Fundrise iPO.

Core Plans ($5,000 minimum)
This lets you customize your portfolio to better suit your goals. 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.

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.

Advanced Portfolio ($10,000 minimum)
This tier portfolio offers access to Plus Plans. This is an optional add-on that allocates a portion of your portfolio to more sophisticated strategies for potentially higher returns.

Premium Portfolio ($100,000 minimum)
This option is offered for accredited investors. You get access to private equity funds. These specialized offerings periodically become available. You also get priority access to the investment team.

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 Long-Term Growth portfolio.

You can click into your "Portfolio" tab to see your investments in detail.

In this portfolio, there are over 160 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's mobile app is rated 4.8 stars on the Apple App Store and 4.1 stars on Google Play.

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 Real Estate Investment Trust - liquidity.

A traditional REIT is traded on the public market. This means investors can sell shares any time the stock market is open. Fundrise's eREIT is not publicly traded. You can only buy on the Fundrise platform. Thus, it requires a long-term investment.

As for returns, let's see how it compares again the popular Vanguard Real Estate ETF - VNQ. VNQ had an astonishing 40.33% return in 2021, compared to Fundrise's 22.99%. In 2019, it returned 28.89%, vs 9.16% for Fundrise.

However, VNQ had negative returns in both 2018 and 2020 (-5.97% and -4.64% respectively). While Fundrise returned 8.81% and 7.31% in those years.

Even though VNQ had stronger returns some years, Fundrise has had more consistent positive returns every year.

Fundrise vs Groundfloor
Groundfloor is a good option if you're looking for short-term real estate investments. The projects last only 6 to 12 months.

Just like Fundrise, the minimum to start is only $10. There are no income requirements.

Groundfloor works a little differently. Instead of investing in equity, you are lending money to borrowers for quick fix-and-flip housing projects. When the house is renovated and then sold, you'll get your investment back (along with interest).

So far, the average returns to date is 10.5%.[5] Each loan has a fixed interest rate and projected term, so you know beforehand what to expect.

You can pick your own loans, or you can even set up automated investing and Groundfloor will invest for you based on the portfolio profile you create.

Fundrise vs Crowdstreet
Crowdstreet is one of the largest commercial real estate marketplaces. This platform is only open to accredited investors (unlike Fundrise, which is open to everyone).

They focus on high quality commercial real estate deals. You can either choose your own deals, or invest in a fund that includes multiple projects. Most of the deals require a $25,000 minimum investment.

Crowdstreet is popular because of its impressive returns. Since 2014, it has averaged a very strong annualized IRR of 17.5%.[6]

Fundrise vs Yieldstreet
Yieldstreet is a platform for alternative investments. Instead of only real estate, you can also invest in other alternative assets like art, luxury vehicle leasing, and litigation financing.

Non-accredited investors can invest in Yieldstreet's Prism Fund. This is a collection of a lot of different alternative assets. It's an easy way to get a little of everything with only one investment.

If you are accredited, you can pick your own individual offerings. They usually start at $10,000 minimum. Yieldstreet's investments have an average IRR of 9.61%. [7]

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.

As part of our series on real estate investing and passive income, CreditDonkey asked a panel of industry experts to answer some of our readers' most pressing questions:

  • Is real estate crowdfunding a safe or risky investment?
  • What is the best way for beginners to invest in real estate?

Here's what they 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.

References

  1. ^ Wikipedia. Real estate investment trust, Retrieved 4/3/2022
  2. ^ Fundrise Track Record, Retrieved 12/29/2021
  3. ^ Fundrise. Explore client performance over time, Retrieved 9/10/22
  4. ^ Better Business Bureau. Fundrise BBB Rating & Accreditation, Retrieved 4/3/2022
  5. ^ Groundfloor. Groundfloor for investors, Retrieved 9/10/22
  6. ^ Crowdstreet, Marketplace Performance, Retrieved 9/10/2022
  7. ^ Yieldstreet's Historical Performance, Retrieved 9/10/22
Fundrise

Get $10 Bonus When You Invest in Real Estate with $10+

  • No wealth or income requirements
  • Get a diversified portfolio of real estate projects across the US
  • Low fees to maximize long-term returns
CrowdStreet

Invest in Private Equity Real Estate

  • Access to institutional grade commercial real estate deals
  • Choose your own projects or invest in a fund
  • $25,000 minimum investment
GROUNDFLOOR

Invest in Real Estate with $10

  • Short-term real estate investments lasting just 6-12 months
  • Open to non-accredited investors
  • No investor fees
Yieldstreet

Online Alternative Investments

  • Exclusive access to private market investments
  • Wide range of alternative investments like art, real estate, legal financing, and more
  • Goal-based investing for growth or income
  • Minimums starting from $2,500
Arrived Homes

Invest in Rental Homes with $100+

Browse rental home investments for free. No bank account required

Write to Anna G at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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.

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How much do you want to invest in real estate?
27% Less than $500
21% $500 - $1,000
20% $1,000 - $5,000
14% $5,000 - $10,000
18% More than $10,000
Source: CreditDonkey poll of 1,541 respondents
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