Fundrise crowdfunded investment is revolutionary technology connecting investors with the private-equity real estate market. A once unreachable market is brought directly to you, via the Internet. We’ll explain how it works.
There are some differences when comparing Fundrise vs REITs, primarily in the fees you pay and the returns you can expect to receive.We cover them all in this article.
Fundrise Returns are above industry averages because their funds are engineered to outperform public market investments like traditional REITs, municipal bonds, and ETFs. Read on to find out how you can incorporate them into your portfolio.
How To Revolutionize Your Portfolio With Fundrise Crowdfunded Investment
What is Fundrise, Fundrise is the future of crowdfunded investments. It combines the power of crowdfunding with private-market real estate and delivers it directly to you via the Internet. This marvel of technology is made possible by Federal Regulations allowing US citizens to engage in crowdfunded investments. Fundrise is a private equity group that forms and manages private-market Real Estate Investment Trusts, REITs, and sells them to investors. Over the last four years, Fundrise and its investor base have invested more than 1.4 billion dollars in dozens of US real estate markets and delivered an average 11.2% annualized return to investors.
- What are crowdfunded investments? Crowdfunded investments are private-market investment projects in which funds are drawn from a large group of people. It is a form of alternative investing that allows non-accredited investors (an investor with less than $1 million of investable assets) access to markets they would otherwise be denied.
Is Fundrise safe? Fundrise is as safe as any other REIT and bound by the same laws that govern them. The difference is the direct-access business model which allows investors to profit from technological efficiencies. Not only are management costs much lower, up to 40% when compared with traditional REITs, those savings equate to enhanced returns. Fundrise investments have delivered annualized returns 33% better than comparable public market assets when viewed over a 20-year time horizon. What this means for investors is simple; easy access to real estate markets, reduced costs and enhanced returns if you can stay the course.
Most Fundrise REITs and funds have a 4 to 6-year time horizon. The time horizon is the amount of time you can expect to hold the asset in order to reap anticipated returns. With this in mind, the $10,000 theoretical investment used to create the fundrise model would have to be reinvested 4 or 5 times before reaching their target. Regardless, lower fees to buy these REITs will equate to enhanced returns provided the underlying investments perform as expected.
The platform says it saves you up to 40% in upfront costs when compared to a traditional REIT, serious savings for investors that means bigger profits at liquidation time. The savings are in the form of broker fees and commissions but come with a caveat; they do not account for other fees like origination and management fees that may be charged by fund managers.
Fundrise Vs REITs, A Real Estate Portfolio Made Easy For You
Should I invest in Fundrise? Only if you want exposure to the real estate market, are looking for a means of diversifying away from traditional stocks and bonds, or both. How to invest In Fundrise is the more pertinent question we are here to answer. The way it works is simple. The team at Fundrise, which includes dozens of real estate investing professionals, scour the market looking for new real estate investing opportunities. When the team is ready to put together a new portfolio, to start a new REIT, they list it on the platform and sell shares to investors.
Investors can choose from funds based on two types of products or pick one of three investment strategies for a custom portfolio designed by Fundrise. The two types of products offered by the company are E-REITs (™) and E-Funds (™). Both types have 4-6 liquidity horizons, but very different investment approaches. Each fund has a limited enrollment period, when it closes another fund with the same investment objectives is started for new investors.
The E-REITs are focused on ownership of income-producing properties and are most similar to traditional REITs. Funds within this segment target markets like the Seattle Luxury Rental Townhome market and Washington D.C. Luxury Mid-Use markets looking for income from rent, interest from bonds and capital appreciation from equity ownership of real estate. Dividends are distributed quarterly and paid out based on the funds net-income, capital gains are realized at the end of the investment period when it is liquidated. Returns are reported on IRS tax form 1099-DIV and easily included on an individual tax return.
The second type of investment is the E-Fund. These funds are focused on the purchase, development, and sale of real estate properties for profit. They pay quarterly distributions, but the distributions are small compared to the E-REIT because the goal here is capital appreciation. They have a similar time-horizon, about 4-6 year, and tend to make most of their money on the back-end of that time frame as projects are completed and sold. These funds are of particular interest to us as they use demographic trends to target the highest demand markets in an undersupplied real estate environment and offer the greatest opportunity for our readers.
Data shows 80% of millennials value home ownership as part of their long-term goals. The data also shows those same millennials, more than 50%, prefer to live in or near cities and metropolitan areas providing ample opportunity for the E-Funds to deliver profits. Buildable land of sufficient size in and near the cities is scarcer, making it hard for the large-cap homebuilders to compete; if they can’t build hundreds of homes in one area, it isn’t worth their time. Smaller operators like Fundrise E-Funds can target smaller plots of land in high demand areas close to city centers where demand is strongest.
- Data from the National Association of Realtors, the National Association of Homebuilders and the Census Bureau concur; there is a massive shortage of homes for sale in America. The shortage is driving prices to all-time highs as demand outpaces supply, and helping Fundrise E-Funds deliver market-beating returns.
Profits and losses for the eFunds are reported on an annual form K-1. This form lists profits and losses for S-corporations and partnerships like the eFund and also easily incorporated into any tax return.
The eREITs and eFUNDs are sold to investors by shares, just like a traditional stock or REIT, with their value determined by net asset value, NAV. The NAV of a fund is the total of all assets minus liabilities and will change over time. As assets within the fund appreciate and proceeds are reinvested the NAV of each fund will grow, providing a vehicle for capital appreciation.
How To Get Unparalleled Fundrise Returns
There are three types of managed investment plans offered by Fundrise. These are the Supplemental Income, the Balanced Investing plan, and the Long-Term Growth plan. They are portfolios of investments that purchase eREITs and eFUNDs based on specific objectives. Investors who chose one of these plans own a managed portfolio of real estate investments that evolves, alleviating the need to reinvest as individual funds reach maturity.
The Supplemental Income plan focuses on income-producing assets to deliver returns to shareholders. The portfolio currently has 54 active assets that are primarily debt in the form of senior secured loans. This is important to note because senior secured loans are the first to be paid in the event of a default, offering an element of protection for investors. The portfolio is diversified across the US and pays investors in two ways, dividend, and capital appreciation.
Assets in the Balanced Investing plan blend income and growth strategies to deliver current income and capital appreciation for enhanced total returns. It is allocated evenly across the debt and equity sphere, relying on rents, interest and asset appreciation for income. In addition to ownership of cash producing properties, this portfolio reinvests a portion of its earnings on improvement to its properties to enhance shareholder value. Properties in this portfolio see an average 24% increase in rental value after remodel, a substantial return for investors.
The Long-Term Growth plan focuses primarily on capital appreciation and delivers the best total returns, dividends plus capital appreciation, over the long term. It is focused primarily on equity assets in high growth, high demand markets and makes money by purchasing, improving and selling under-developed and outdated properties. These include multi-family developments, condominiums and apartments in the US’ fastest growing urban areas like LA, Seattle and New York.
Fundrise Returns Are An Easy Choice For Your Portfolio
There is a minimum investment to get started with Fundrise managed portfolios that may turn off some investors. The minimum is $1,000, a far cry more than the $20, $50 or $100 per share an investor may pay for a publicly listed REIT but far less than what you may be required to invest with a private equity fund. Initial investments can be added to at any time so a systematic (regular purchases) investment approach can be employed. The only catch is that each fund has a limited enrollment period so you may have to choose a new fund with each new investment.
Smaller investors, or those who want to give the platform a try at low cost, may be interested in the starter portfolio. The starter portfolio has a minimum investment of $500 that can be upgraded at any time. It gives investors instant exposure to multi-family properties across the US with a blended strategy targeting income and growth. The fund pays a quarterly dividend with an annualized total return of 7.29% over the trailing twelve month period, more than double its benchmark Vanguard funds.
Fundrise also has a dividend reinvestment plan or DRIP. The DRIP can be applied to any portfolio with the caveat that only funds open to enrollment can be purchased. If you enroll in the DRIP, your dividends will automatically reinvest in new funds according to your investment goal.
Expand Your Portfolio Now With Fundrise Returns
Fundrise is one of the best-crowdfunded investments we’ve seen. It combines the power of crowd-sourced funding with the high-profit world of real estate investing in a way average investors can easily incorporate into their portfolios. Ease of use, cost efficiencies, diversification and cost are only a few of the reasons why we like it. If you are looking for a way to boost your returns and diversify away from traditional stocks, bonds and REITs, Fundrise and Fundrise returns are well worth a look.