Download the free deal analysis calculator which will help you accurately screen good from bad deals saving you a ton of time.
I set up my account and invested an initial $1,000 into Fundrise back in 2016. I did it just to try it out and invest a few bucks, but I loved it so much I decided to review it.
It's impossible to cover everything in this article. The The best thing to do is to go to Fundrise, set up a free account, and bang around the website and judge for yourself. Use this article as a guide.
There are 80+ crowdfunding websites, and the majority of them aren't really that good. But, most review sites simply pick the ones with the highest affiliate payout and rank them.
Because of my experience with Fundrise and others, we've created one of the most stringent sets of grading criteria on the web for crowdfunding platforms and we review as many crowdfunding sites as we can.
This strict and well-documented methodology helps us avoid any potential conflicts of interest, and you can see the methodology with the link above. We have 11 overall categories and rank every company based on the information we have and weight the responses based on what we believe is most important.
So, check out the criteria and read the review below about the company and how it stacks up against its competition.
Disclaimer: When I first wrote this article it was because I invested in Fundrise and enjoyed my experience with it. After some time I came to love it so much that I am now an affiliate. If you click on one of the links and sign-up for Fundrise, I may be compensated a small referral fee at absolutely no cost to you.
I’ve been enamored by the idea of crowdfunding since before 2012. Not only have I thought about ways to crowdfund my own investments (though I haven’t got to that level yet), but I’ve also thought about investing in other’s real estate deals as well.
I have noticed that real estate is so far behind other areas when it comes to crowdfunding. Real estate investing is still amazingly arcane with how developers find investors, syndicate deals, and then move forward on projects. Why can tech startups find hundreds of millions of dollars in funding practically overnight, even for terrible ideas, but real estate is reserved for a very small and elite group, even when the potential projects are amazing?
So, if you are an experienced investor currently and want to diversify or simplify your portfolio, online investing is a great place. On the other hand, new investors might find online investing a great place to start!
Let’s dive in:
Fundrise an investment service that allows you to invest directly in commercial real estate. Fundrise created a marketplace that is fairly transparent and their goal is to “make the process of investing in the highest quality commercial real estate from around the country simple, efficient, and transparent.” Essentially, they bridge the gap between the investor and the developer.
As I complained about above, real estate is traditionally very exclusive, and the only investors were those with direct access to the institutions that fund the deals. Fundrise (along with many others) is cutting out the middle-man and allowing us to directly invest. Also, by cutting out the institutions, it should hopefully reduce the overhead expenses and keep our fees low.
Fundrise currently has roughly 100,000 members and they have invested in nearly $3 billion worth of real estate. They let you invest as little as $1,000 at a time and you get to pick the allocation of the funds into different REITs.
Are you ready to see how they do it?
Continue reading this Fundrise review to find out.
A few years ago Fundrise was for accredited investors only. The SEC released Regulation A which made things available to unaccredited investors, but it was too complicated so most sites used Regulation D instead, which excludes unaccredited investors. The SEC surprised everyone in March 2016 and released Regulation A+ which further simplifies the process for the unaccredited investors to invest.
Fundrise really has been the pioneer in this area and being one of the first (if not the actual first ones) to use Regulation A+ to bring online offerings to the masses….again. I was browsing around their site and found they are actually available to unaccredited investors as well (us unsophisticated masses that can’t make good investment decisions). It was a welcome surprise to see the potential for normal people to get their hands on passive real estate investments.
Fundrise claims to receive over 250 submissions per week with less than 1 percent being approved. According to the Fundrise website, they have a very strict underwriting process that includes the following steps:
The first thing they look at is the company and the sponsors. They look only for companies that are well capitalized and have a history of success in top US markets. They claim that only 25% of sponsors move beyond this step.
Fundrise is focused on short-term projects that last 1-3 years. Their preferred structure is Senior Secured Debt, Mezzanine Debt, or Preferred Equity. Fundrise investors are senior to the sponsor and “Fundrise investors must get paid back their principal and any owed returns before the company is able to realize any profits.”
If the sponsor and project meet the Fundrise requirements, it moves on to the detailed underwriting. The Fundrise underwriting team completes an extensive analysis and review of all these points. The total underwriting checklist contains more than 350 different data points.
I was originally going to include a list of some of the underwriting criteria, but instead I found a cool video and linked it above. Check it out!
So Fundrise actually funds the deal before putting it on the platform. By pre-funding the deal, they take on a large amount of risk that this project will be good and investors will want it.
One thing to remember about Fundrise – you are actually investing in a bundle of real estate deals. They’ve created a revolutionary real estate platform that most of you will be comfortable with.
Simply put, you pick you broad investing objectives, and Fundrise helps choose how to allocate your money.
As you can see, it’s generally broken down into high income, balanced, and growth.
Continuing on with the Fundrise Review… As you can see, there aren’t many choices. So how do you get diversification? Simply, they have several eREITs that have invested throughout the country.
By choosing one of their options, Fundrise will suggest an allocation. You can choose if you’re focused on current income, future potential, or a balance of the two.
A Real Estate Investment Trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. – Wikipedia
a REIT has a lot of requirements in order to qualify and it needs to distribute 95% of its taxable income to the shareholders. There are also different types of REITs, such as a publicly listed REIT, non-listed REITs. These eREITs offered by fundrise are non-traded REITs as they are not listed or traded on the stock exchange.
According to FINRA, there are a number of risks associated with non-traded REITs, the biggest of which is that it can be very difficult to get your principal back. Other issues are potentially high fees, especially on the front-end and a limited secondary market to sell your shares. In fact, you can read a very scathing review of non-traded REITs if you’d like.
So I decided to do a bit of digging on this eREIT. I was able to pull up the offering circular on the SEC website. Wow, what a hard document to read!
The first thing I wanted to investigate was the fees. Here is a quick breakdown of the fees I was able to find:
Here is another complicated one. There are a few variables at play here. First, Fundrise will only redeem a certain amount of shares per quarter. Once they have redeemed those shares, you will get in line for the following quarter, and so on. Additionally, when you redeem the shares, you will incur a penalty of between 3 and 5% of the share price. Thirdly, Fundrise gets to calculate the value of the shares and it’s essentially impossible for us to determine that value on our own.
The biggest unknown appears to be the unknown value that Fundrise will place on each share. Upon purchase, each share is worth $10, but that can easily go up or down based upon their valuation. On top of that, you can only get a portion of your money back when you redeem.
Fundrise is unique with the fact that you don’t actually choose specific projects to invest in. Instead, you choose an investment style and Fundrise helps choose a portfolio allocation across their investments. Below is the actual allocation of my investment money.
Fundrise vs other crowdfunding platforms is really what it comes down to. How does Fundrise compare in this review against others.
Well, at the time of writing there are 11 categories we rank them by. Here they are:
A few months ago, Fundrise was tied in first place with 3 other platforms, but now that they have dropped their minimum investment to $500 from $1,000, now they will take first place with an overall score of 5.5 points out of 6.5 points.
Our rule is the top 5% of sites will get a 5-star ranking, so it’s still an overall tie, but Fundrise is definitely #1 now.
Now it's time to go check out Fundrise if you haven't already.
An investor that reached financial independence at the age of 30, Eric has been seen on Forbes, Trulia, WiseBread, TheStreet, and other financial publications.
I started out as a full-time student, over $60,000 in debt, and didn't even have a full-time job (two part-time jobs).
Learn the system I used to create a 6-figure passive income.
Please log in again. The login page will open in a new window. After logging in you can close it and return to this page.