Fundrise Review: Is It Legit?
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.
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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 | ||
Pros and Cons
- Just $10 to start
- Quarterly dividends
- Passive investing
- Illiquid investment
- Unknown future returns
Bottom Line
Passive real estate investing with no income requirement
- What is Fundrise?
- How does Fundrise Work?
- Making Money with Fundrise
- Returns and Performance
- Fees
- How To Withdraw Money
- Pros & Cons
- How To Get Started
- Types of Accounts
- Portfolio Options
- How Fundrise Selects Projects
- Fundrise Platform Walkthrough
- Fundrise App
- How it Compares
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.
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Minimum Deposit | $500 minimum for the Prism Fund; Individual investment offerings typically starts at $10,000 | ||
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Investment Types | Commercial, single family, industrial | Residential & commercial real estate, sports car leasing, art financing, marine vessels and deconstruction, supply chain financing, litigation financing | |
Investment Period | 5 years for Prism Fund (with opportunities to liquidate on a quarterly basis); Varies for individual offerings | ||
Annual Fee | 1.5% management fee for the Prism Fund; Fees vary for individual investment offerings (usually 1-2%) | ||
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Terms Apply. | Terms Apply. | ||
GROUNDFLOOR: Investments carry risk and may lose value. Not an offer or solicitation to purchase securities. Please consult the Offering Circular and related SEC filings before making an investment decision. |
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 $10 for the Starter Portfolio.
Since its founding in 2012, Fundrise has invested more than $4 billion in real estate projects in the country. The company is valued at $800 million. It currently has more than 150,000 active investors and over $500 million in assets under management.
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.
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.
Invest in Real Estate with $10+
Become real estate investor with as little as $10
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.
eREIT | Traditional REIT |
---|---|
Not publicly traded | Publicly traded on the stock exchange |
No secondary market | Listed on secondary market |
Not as liquid; Can only sell during certain times | Can buy and sell anytime |
Sold directly by Fundrise | Sold on the open market |
Low management fee | Higher upfront fees |
Regulated by SEC | Regulated by SEC |
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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© CreditDonkey |
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.
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 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]
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The average annualized returns (after the fees are subtracted) are calculated below:
2017 | 10.63% |
2018 | 9.11% |
2019 | 9.47% |
2020 | 7.31% |
2021 (through Q3) | 16.11% |
Invest in Real Estate with $10+
Become real estate investor with as little as $10
$0 Advisory Fees for 3 Months
3 Months of Advisory Fees Waived for Each Friend You Invite
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 $10.
The average return for Fundrise investments was 9.47% in 2019 and 7.31% in 2020. 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. However, it's unclear how this kind of investment would perform in a financial crisis like the 2008 market crash.
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.
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
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). 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).
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.
- 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 to Get Started
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© 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 - $1000 | Starter |
$1,000 - $5,000 | Basic |
$5,000 - $10,000 | Core |
$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.
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.[3]
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)
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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© CreditDonkey |
Investors have five account levels. Each investment portfolio diversifies your funds differently, based on your goals. Pick the one 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.
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.
- Supplemental Income: This focuses on properties that generate cash flow (collecting rent or interest). You will earn more dividends.
- Balanced Investing: This approach creates a more balanced mix of income and growth properties. You earn money through both dividends and appreciation.
- 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 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:
- Real estate companies submit projects to Fundrise.
- Fundrise conducts a basic screening to ensure it's up to company standards.
- 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
- Credit and background check
- 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.
Invest in Real Estate with $10+
Become real estate investor with as little as $10
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.
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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.
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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.
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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.
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In your "Performance" tab, you can see your personal returns information.
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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.
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Fundrise | RealtyMogul | |
---|---|---|
Invest in Real Estate with $10+ - | Access Private Market Offerings - | |
Summary | ||
offers real estate investment opportunities to both accredited and non-accredited investors. Accredited investors have access to private placements, while everyone is eligible to invest in their REIT offerings with a minimum of $5,000. | ||
Benefits and Features | ||
Annual Fee | ||
Minimum Deposit | $5,000 for REITs; $25,000 for individual deals | |
Phone Support | ||
Live Chat Support | ||
Email Support | ||
Dividends | Choose quarterly payouts or auto reinvest | Monthly or quarterly payouts or auto reinvest |
Investment Period | ||
Investment Types | Commercial, single family, industrial | Commercial, multifamily, office, industrial |
Wealth Requirements | REIT offerings open to everyone; Accredited investors have access to private placements | |
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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.
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Fundrise | DiversyFund | |
---|---|---|
Invest in Real Estate with $10+ - | Earn Passive Income with Real Estate - | |
Benefits and Features | ||
Annual Fee | $0. No management fees and no commissions | |
Minimum Deposit | ||
Phone Support | ||
Live Chat Support | ||
Email Support | ||
Dividends | Choose quarterly payouts or auto reinvest | |
Investment Period | ||
Investment Types | Commercial, single family, industrial | |
Wealth Requirements | ||
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Terms Apply. |
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.
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Fundrise | Roofstock | |
---|---|---|
Invest in Real Estate with $10+ - | Earn Passive Income By Purchasing Single-Family Rental Homes - | |
Benefits and Features | ||
Annual Fee | No platform fee. Buyers pay 0.5% transaction fee for each purchase or $500 (whichever is greater) | |
Minimum Deposit | House down payment usually requires at least 20% of purchase price | |
Dividends | Choose quarterly payouts or auto reinvest | Rental income from your properties |
Investment Types | Commercial, single family, industrial | |
Wealth Requirements | ||
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Terms Apply. |
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.
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Fundrise | Rich Uncles | |
---|---|---|
Invest in Real Estate with $10+ - | ||
Benefits and Features | ||
Annual Fee | ||
Minimum Deposit |
| |
Dividends | Choose quarterly payouts or auto reinvest | Monthly dividends or auto reinvest |
Investment Types | Commercial, single family, industrial | Commercial properties with long-term recognizable tenants, student housing |
Wealth Requirements | None to invest in Student Housing REIT $70,000 annual income and $70,000 in net worth to invest in National REIT | |
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Terms Apply. |
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.
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
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Typically, investing in real estate requires large amounts of money.
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.
Invest in Real Estate with $10
- Short-Term High Yield Real Estate Debt Investment
- Open to Non-Accredited Investors
- No Investor Fees
Next steps: View portfolio plans, terms and details
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
- ^ Wikipedia. Real estate investment trust, Retrieved 4/3/2022
- ^ Fundrise Track Record, Retrieved 12/29/2021
- ^ Better Business Bureau. Fundrise BBB Rating & Accreditation, Retrieved 4/3/2022
Get Up to $3,000
The minimum qualifying deposit to receive a cash bonus is $10,000. Accounts will be reviewed 60 days after account opening to determine the total qualifying deposit. Corresponding cash bonus will be credited to the account within 10 business days. Once the bonus is credited to the account, the bonus and qualifying deposit (minus any trading losses) is not available for withdrawal for 300 days. If the qualifying deposit is withdrawn, the bonus may be revoked.
Deposit or Transfer | Cash Bonus |
---|---|
$10,000 - $24,999 | $100 |
$25,000 - $99,999 | $250 |
$100,000 - $249,999 | $300 |
$250,000 - $499,999 | $600 |
$500,000 - $999,999 | $1,200 |
$1,000,000 - $1,999,999 | $2,000 |
$2,000,000+ | $3,000 |
Write to Kim P 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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