Fundrise vs REIT - Real Estate Investment Comparison

Fundrise vs REIT - Real Estate Investment Comparison

Investing in real estate has never been easier. You no longer have to buy a rental house to diversify your portfolio. Picking between a crowdfunding platform like Fundrise or investing in REITs might be a hard choice. However, let’s dig- in to see how they compare to start your real estate investment.

In this Comparison

  • ?️ Fundrise Overview
  • ?️ REIT Overview
  • ? 3 Key Similarities
  • ? 3 Key Differences
  • ? The Final Word

Fundrise Overview

Fundrise is a company that runs a crowdfunding platform that allows anyone to invest in real estate. They buy properties and invest in REITs with the funds individuals invest.

The properties range from single-family houses to apartments, and commercial real estate. Fundrise manages the properties and pays quarterly dividends to investors. These dividends are not guaranteed but are dependent on rental income, expenses, and other factors. Investors also earn equity when the property appreciates.

Fundrise offers various account types from:

  • Personal taxable account
  • Joint account
  • Certain entity accounts (Trusts, LLC, Limited Partnerships, C or S Corporations)
  • Traditional or Roth IRA

The company was founded in 2012 and its headquarters are in Washington, DC. You can pick from five different account levels from Starter to Premium. The minimum investment levels vary from $10, $1,000, $5,000, $10,000, and $100,000

How Does Fundrise Work?

With traditional real estate investing an individual would need to buy a property on their own. Or, with the help of a bank loan. The property owner then needs to manage or outsource the maintenance and landlord functions of the property.

Crowdfunding is different. When you invest in real estate via crowdfunding you send your investment dollars to a central company. They raise funds from many investors to then invest in real estate.

Investing in Real Estate with Crowdfunding

The passage of the 2012 Jobs Act opened the door for companies to raise capital via online funding portals and crowdfunding. Title III of the JOBS Act became known as the “CROWDFUND Act” because it empowered companies to raise capital using alternative methods.

Crowdfunding is a great way for new investors to enter the realm of owning rental properties.

Fundrise Fees

Fundrise charges investors annual fees based on how much they invest. This is known as AUM - or assets under management. They currently charge 1% per year. They break down the fees into 0.15% advisory + 0.85% managing.

Fundrise Funds

When you invest with Fundrise you are investing in eREITS and actual real estate properties. An eREIT is a form of a Real Estate Investment Trust. The eREITs from Fundrise can only be bought from Fundrise. Other REITs are available to the public via the stock market.

Fundrise is considered an illiquid investment. When you invest in their funds or properties you should plan on them using the money for at least five years. A long-term perspective is definitely needed with Fundrise. Fundrise charges fees for early withdrawals.

Follow this link to try Fundrise today.

REIT Overview

A REIT stands for Real Estate Investment Trust. A REIT can be held privately or traded publicly. REITs can have different themes like commercial properties, industrial or residential.

Some popular REITs include:

  • VNQ - Vanguard’s Real Estate ETF - holds $40 billion in assets
  • PLD - Prologis, Inc - focused on Warehousing
  • O - Realty Income Corp - Commercial Properties
  • IRM - Iron Mountain - Data and record storage

Publicly traded REITs are traded on the stock market. Private REITs must be purchased directly and follow different rules. Most private REITs are less liquid than public ones.

Public REITs are usually traded on the stock market and are very liquid.

3 Key Similarities

  1. The underlying asset behind both Fundrise and REIT is real estate.
  2. Both Fundrise and REIT can be invested in by any investor. These investments are not limited to “accredited investors.”
  3. They both are set-up to pay out dividends.

3 Key Differences

  1. Fundrise is only for long-term investors as its products are illiquid. REITs can be bought and sold with ease.
  2. To purchase a REIT you must be able to afford the share price unless you are using a platform that offers fractional shares. With Fundrise however, you can invest as little as $10 and set up recurring contributions.
  3. Fundrise only has a dozen choices to invest in. When looking at REIT there are thousands of choices.

The Final Word

When it comes to real estate investing investors have more options now than ever before. The internet has brought together crowdfunding and marketplaces that we didn’t have just 10 years ago.

REITs have been around for quite some time and many companies have been stable with their dividend payouts. Many investors choose to invest in ETFs that hold hundreds of REITs at once.

Fundrise is a relatively new company using a new concept. They hope to become more liquid soon. As Fundrise grows its property choices should hopefully expand.

Fundrise is the most popular real estate investing app currently available for beginners. Fundrise does offer a diverse selection of properties and a mixture of real estate equities as well.

Check out Fundrise today or click here for more reviews and comparisons.

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