Billing themselves as “the leading crowdfunding marketplace,” Fundrise helps you directly invest in top quality residential, commercial, and mixed-use real estate projects from around the country.
Compared to traditional real estate investment methods (such as REITs), Fundrise cuts out the middlemen, which provides better transparency, lower fees, and higher returns.
Ultimately, the company claims this can “give everyone the opportunity to invest in real estate”—not just the wealthiest 3% (aka accredited investors, which we’ll talk more about in a moment).
By making the real estate investing process simple, efficient, and transparent, Fundrise has acquired more than 61,000 members to date.
If you’re looking to invest in real estate projects, is Fundrise the only game in town? If not, are they the right company for you?
We’ll answer all your important questions in this review. First, let’s take a look at how the Fundrise process works.
How Does the Fundrise Investment Process Work?
Before being offered to investors, Fundrise’s underwriting team submits each investment to a due diligence process. According to the company, less than 1% of projects submitted are ultimately approved and offered to investors.
A flowchart of Fundrise’s project approval process.
Once a project is approved, Fundrise will create a company and file local public offerings with the SEC and state regulators. This allows individuals—not just accredited investors—to buy shares of the real estate and invest as little as $100.
Note: This may not always be the case. Keep reading to find out why.
After buying shares, your investment goes directly into the development of that property, which could be leased to a local business upon completion. Then, you make money on rent from the business, as well as appreciation on the real estate.
When you’re browsing the Fundrise website, you’ll find that each project listed includes a wealth of information, including risk rating, project financials, market summary, and management’s track record, which allows you to find investments that are right for your goals and overall investing strategy.
Once you’ve purchased shares of a project, you’ll be able to stay up-to-date on its performance through your personalized dashboard, where you’ll also be able to access tax documents and auto-transfer interest and earnings to your bank account.
How much can you expect to earn from your Fundrise investment?
Fundrise Investment Guidelines & Earnings
Fundrise investor accounts are free, and you’ll be able to invest as an individual or as an entity. Minimums can be as little as $5K and you’ll earn returns averaging 12-14%.
Fundrise investments also feature rolling maturity dates with an average of 1-2 years, which means you’ll have periodic liquidity instead of being locked in indefinitely.
Each Fundrise investment is handled through the company’s simple and secure online process, which includes e-sign documents and the ability to transfer funds via electronic check.
Once an investment project is complete, you’ll have the ability to reinvest your earnings in future offerings.
If you have a real estate project that requires funding, Fundrise can help there, too.
Your project will go through the same approval process noted above. Once you receive approval, Fundrise can fund up to 90% of your project, up-front, in as little as 2 weeks.
Fundrise’s projects can encompass single-family homes, mid-market commercial, and large transaction real estate projects, with annual rates averaging between 8% and 18%.
Before you get too excited though, will you even be able to invest in any of Fundrise’s projects?
Fundrise’s Accreditation Requirement
If you read through the main sections of the Fundrise website, you could certainly be forgiven for thinking that just about anyone can invest in their real estate projects.
It even seems like one of the main selling points on their About page is that Fundrise allows everyone “not just accredited investors—to invest for as little as $100.” You’ll even be able to invest in projects in your very own neighborhood!
According to Fundrise’s Blog though, “the majority of real estate companies will opt to use Regulation D Rule 506, a more traditional offering type, limited to accredited investors.”
What’s this mean? Unless you sign up for their mailing list and wait patiently for an unaccredited offer to come through, you’ll need to be accredited in order to investment in the vast majority of their projects. In fact, since opening their doors in 2010, Fundrise has only provided 1,200 unaccredited investors access to their projects (compared with 61,000 total members).
This means you’ll meet at least one of the following criteria:
- Have to earn $200K+ per year as an individual, or $300K+ per year with joint spousal income.
- Have a net worth of $1,000,000+.
- Be a “bank, insurance company, registered investment company, business development company, or small business investment company.”
- Be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.
- Be a business in which all the equity owners are accredited investors.
- Be an employee benefit plan, a trust, charitable organization, partnership, or company with total assets in excess of $5 million.
Are there any other crowdfunding investment platforms that allow unaccredited investors, though?
Other Crowdfunding Real Estate Investing Options
Despite the fact that most of Fundrise’s projects are available to accredited investors, they’re one of the only choices for those who are unaccredited.
Yes, there are several other popular crowdfunding real estate investing sites out there, such as RealtyShares, Realty Mogul, iFunding.co, and more. But all of these are only available to accredited investors, so Fundrise really is the only game in town from this aspect.
What’s everyone else saying about Fundrise?
CrowdCrux noted that the projects featured on Fundrise tend to be located primarily on the East Coast.
Although Fundrise’s rolling maturity concept might provide more liquidity and short-term returns, Ben Miller (Fundrise’s Co-Founder and CEO) was noted as saying in a 2013 Washington Post article: “[He] acknowledges that commercial real estate can be a risky business and says only people interested in holding properties for the long-term, as he plans, ought to play a role.”
Also, as OneSmartDollar notes, Fundrise’s investments—like all other kinds of investments—come with a certain level of risk. However, Fundrise’s model might tend to expose investors to even higher levels of risk and a greater number of unknowns:
“Those investing will notice that the advertised rate of return is often 15% or sometimes higher. However, those are just projected returns. The building may end up sitting vacant for months, and the return rate could be negative. There is always the risk of the project failing.”
Should You Invest in Real Estate through Fundrise?
According to several financial advisors quoted in the Washington Post article above, they would strongly recommend that their clients avoid a Fundrise-type investment because, “It has almost every kind of risk imaginable that one may have with commercial real estate. If it works and they find a tenant, you may receive some kind of return, but by taking huge risks.”
Given this, if you’re new to real estate investing, committing a lot of money to a Fundrise project might not be a wise financial decision. But in all likelihood, if you are a newbie investor you won’t be accredited, which means your Fundrise options are going to be severely restricted, anyway.
On the other hand, if you’re an experienced, accredited investor and are ready to make an investment, Fundrise seems to be a solid option. Although they’ve got some stiff competition, so it’s important that you do your research (HighYa is a great place to start!).