Fundrise is an investment platform that gives investors access to private assets that are typically only available to accredited and institutional investors. This article examines the advantages and disadvantages of the Fundrise app, as well as how the investment app functions and the investment opportunities available through the platform. From venture capital to REITs, you’ll discover how Fundrise is giving retail investors greater access to alternative assets and diversification.
Fundrise, founded by Ben and Dan Miller in 2010, is a platform that lets users invest in private assets like venture capital, private credit, and real estate. Following the JOBS Act’s passage, which made this investment opportunity possible, Fundrise was among the first platforms to provide crowdfunded real estate investing.
Originally focusing on providing retail investors access to real estate investment opportunities, Fundrise’s mission has since grown to include empowering individuals to improve the financial system. In addition to residential and commercial real estate investments, Fundrise now provides investors with venture capital and private lending options. Fundrise oversees $2.87 billion in equity on behalf of nearly 400,000 investors.
Fundrise operates by facilitating crowdsourced investments into venture capital, private credit, and real estate funds. Fundrise offers a variety of eREITs (electronic real estate investment trusts) to real estate investors and funds that target particular geographic areas, such as the East Coast, or long-term growth. Depending on their investment goals, investors can use Fundrise to choose funds for them or customise their approach with eREITs.
Additionally, investors have the option to invest in private credit, or private lending, through the Income Fund, which finances residential real estate projects with the goal of generating income yield. Lastly, the Innovation Fund, a venture capital investment offered by Fundrise, makes long-term growth investments in private businesses like Anduril and Anthropic.
The platform provides investors a straightforward investing experience by allowing them to choose and make investments via its desktop and mobile applications.
Understanding REITs and eREITs
An investment trust that owns residential and commercial real estate and generates income and capital growth is known as a real estate investment trust (REIT). Around 90% of REITs’ taxable income must be distributed to shareholders annually as dividends, per the law. Both privately held and publicly traded REITs enable investors to purchase real estate portfolios without actually owning the properties.
Retail investors can obtain exposure to real estate markets by investing in REITs, regardless of whether they want to buy single-family homes or other types of real estate, storage facilities, cell towers, or in particular regions.
Fundrise provides its users with eREITs, which are private investment vehicles that are only accessible through their platform and are not publicly traded. Fundrise manages eREITs’ assets, which offers a more efficient direct investment process and reduced fees. Like other private REITs, eREITs experience less price volatility than public REITs.
Fundrise uses cutting-edge technology to give retail investors a smooth real estate and alternative investing experience. Investors can directly invest in eREITs, real estate funds, and venture capital funds using desktop and mobile applications, eliminating the need for third-party apps or intermediaries. For hundreds of thousands of users, Fundrise’s proprietary internal systems, including Cornice and Basis, streamline asset management, reporting, and account management.
Fundrise provides a wide range of investment options, such as venture capital, private credit, and real estate funds, for investors who want to access opportunities that are typically unavailable to non-accredited investors.
Particularly in regions like the Sunbelt, the investment platform’s real estate funds and eREITs provide income and capital appreciation through the construction of single-family homes, multifamily apartments, and commercial properties. The Income Fund by Fundrise offers gap financing specifically for multifamily housing and distributes income generated from real estate investments. Additionally, investors can achieve long-term returns by investing in private companies like Databricks and Canva through the Innovation Fund, which is a venture capital fund.
Comprehensive guide to Fundrise
Fundrise charges an annual advisory fee of 0.15% to cover services such as customer support, dividend distribution, and reporting. Real estate funds such as the Flagship Fund and eREITs charge a management fee of 0.85% for portfolio management and growth.
Fundrise’s 1% annual fees are relatively low compared to the 9% to 10% charged by many private REITs. If investors decide to use Fundrise to make venture capital investments, the Innovation Fund charges an annual management fee of 1.85%.
Fundrise provides several advantages that help make venture capital and real estate investing more affordable, accessible, and effective for individual investors. Fundrise simplifies alternative investing through an intuitive app and process.
Since 2012, Fundrise has been a major force behind making investing more accessible. Private real estate investing has traditionally been limited to accredited investors or those managing their own properties, which is prohibitively expensive and time-consuming for most people.
Fundrise fills the information gap by offering podcasts, articles, and memoranda on the state of venture capital and real estate. Other investors have followed Fundrise’s lead in accessibility, such as the Autopilot app, which makes it simple for investors to monitor and invest in hedge fund and politician portfolios.
With Fundrise, investors can begin investing with as little as $10 in real estate and $1,000 in venture capital. Historically, much larger initial investments are needed for venture capital and private real estate investments. Whether they are just starting out in investing or evaluating Fundrise’s returns before making a larger investment, these low minimums enable investors to obtain exposure to alternative investments without making a sizable investment.
Whether an investor wants to invest in real estate, venture capital, private credit, or a particular real estate market, Fundrise offers a wide range of options for diversifying their portfolio. Investors can invest in venture capital through the Innovation Fund, increase the income in their portfolio by investing in the Income Real Estate Fund, or diversify their real estate holdings by investing in the Flagship Real Estate Fund. Investors can choose to invest in East Coast, Heartland, or West Coast eREITs, among other eREITs, for more focused real estate investing.
The desktop and mobile apps from Fundrise are incredibly well-designed and user-friendly. These apps allow users to manage and invest, monitor performance, and assess the status of the projects they fund. Fundrise makes it easy to access tax records and review detailed breakdowns of fees and performance. Users can also use the app to automate contributions, determine possible returns based on their choices about contributions, and obtain helpful information about venture capital and real estate investing.
Retail investors can benefit greatly from Fundrise, but as with any investment opportunity, there are risks that prospective users should be aware of. Due to its inherent volatility, real estate is susceptible to declining interest rates and the state of the economy. If Fundrise’s managers make mistakes with the use of funds and portfolio management, there is also platform risk.
As previously stated, the value of investments and distributed income may be impacted by the economic and real estate risks associated with Fundrise’s real estate holdings. A downturn in the economy, a high-interest rate environment, or a decline in the demand for a particular kind of real estate in a particular location can all have a negative impact on real estate investments. Before investing in Fundrise and real estate in general, investors should evaluate their risk tolerance.
Liquidity is one risk associated with Fundrise compared to publicly traded investments made through the Acorns app. During specific times, like a recession, Fundrise retains the right to limit or postpone withdrawals. Investors should consider this when deciding how much to invest with Fundrise.
Given the essentially long-term nature of Fundrise’s venture capital and real estate investments, money that might be needed within five years shouldn’t be invested. Because private REITs are known to fluctuate less in price than publicly traded REITs, this potentially reduced liquidity may be advantageous for account values.
Understanding risks
Investors should be aware that, like any other investment, there is a chance of losing money when thinking about investing in Fundrise. Notwithstanding Fundrise’s goal of producing large returns, there is a chance that venture capital or real estate investments made through the platform could result in the partial or complete loss of invested capital. Prior to investing in Fundrise or the real estate market in general, investors should evaluate their investment horizon, risk tolerance, and knowledge of market volatility.
In the market for real estate investment platforms, Fundrise’s main rivals are RealtyMogul and CrowdStreet. Similar to Fundrise, these platforms offer user-friendly platforms aimed at increasing access to retail investors and concentrate on real estate investments. In contrast to RealtyMogul, which has a $5,000 minimum investment, and CrowdStreet, which has a $25,000 minimum investment, Fundrise has a low $10 minimum investment.
While RealtyMogul provides Fundrise and other non-accredited real estate investment options, CrowdStreet caters to accredited investors. RealtyMogul provides REITs and individual investment opportunities, CrowdStreet provides direct investment into individual commercial real estate opportunities, and Fundrise provides eREITs and eFunds. For non-accredited, more entry-level investors, Fundrise is the best option; for accredited investors looking to invest in individual projects, CrowdStreet is the best option; and RealtyMogul provides a middle ground with opportunities for higher-net-worth investors, accredited or not.
With low investment minimums, an easy-to-use interface, and the ability to personalise your real estate investments through eREITs, Fundrise may be worthwhile for non-accredited investors looking for exposure to real estate, private credit, or venture capital investing. With Fundrise, investors can access alternative investments that are typically inaccessible to non-accredited investors, increasing the overall diversification of their portfolio holdings.
If you are uncomfortable with the volatility of the real estate market, have a shorter time horizon for your investments, or are worried about diminished liquidity during economic downturns, Fundrise might not be the best choice for your investment strategy.
When evaluating Fundrise as an alternative investment option, it’s important to consider how comfortable retail investors are with market volatility and liquidity constraints. The platform offers a straightforward and efficient way for investors to engage with private assets that are focused on long-term growth.
For those seeking passive income, portfolio diversification, and exposure to previously inaccessible markets, Fundrise presents a compelling entry point. However, success depends on understanding the risks, staying invested for the long term, and using the platform’s tools to make informed decisions. Fundrise bridges the gap between Main Street investors and institutional-grade opportunities.