This post relates to US personal finance.
Fundrise is a fintech company, which began in 2010. It serves as a platform for online investment. It gained popularity when it became the first firm to fund a real estate investment through crowdsourcing.
The platform is ideal for aspiring investors who are looking for a low minimum investment in the commercial real estate market. With just $500 USD, you can start your venture. Moreover, the company has made the process more straightforward for users by making investing similar to that of mutual funds.
According to this Fundrise review, the company has a high-quality deal flow wherein only about two percent of deals are approved. It’s also considered as the best way to invest in substantial commercial real estate deals even with a small budget and limited to zero deal flow access. If you’re interested in investing your money in Fundrise, here are the steps you need to take to start your venture:
1: Choose an account level and plan
Open the company’s website and sign up for an account with Fundrise. You have to choose from three of their account levels, which are starter, core, and advanced.
The starter plan allows you to begin investing with just 500 USD up to 1,000 USD. The target diversification falls between five to ten projects. With the second type, core, you can invest up to 10,000 USD and enjoy target diversification of as many as 40 projects. Lastly, the advanced level requires an initial investment of 10,000 USD and more with 80+ projects to diversify your portfolio.
The core and advanced levels allow you to choose a plan that works with your investment goals. You can choose for the supplemental income plan, which gives you an additional and regular income stream. On the other hand, balanced investing prioritizes high diversification, while long-term growth focuses on overall returns in the long-term.
2: Know the products
You must know the assets that you’ll be investing in so that you can determine whether they’ll provide the type of return that aligns with your investment goals. You have to consider the type of investment, as well as its liquidity.
Fundrise has two primary products:
- eREITs – The company’s electronic real estate investment trusts (eREITs) take advantage of crowdfunding to buy, manage, and sell properties. The downside to this type of investment, however, is that they’re less liquid than stocks and bonds because they’re not publicly traded like the latter assets.
- eFunds – Fundrise offers an exclusive electronic fund product, which allows you to invest in residential real estate properties. The company manages and diversifies this portfolio on your behalf.
3: Determine how you’ll be paid
As mentioned above, you have to consider the liquidity of your assets before you conduct transactions with Fundrise. This factor is influenced by how long you want to see your returns.
The company pays investors through:
- Quarterly Dividends – Users that invest in rental properties will receive their cut of the profit a few weeks after each quarter ends. Investors can opt to have their dividends deposited directly into their bank accounts or reinvested back into the platform.
- Share Value Appreciation – You’ll also get a portion of the appreciation or increase in the property’s value. However, you’ll only receive the amount once the asset is sold, which can take a few years. This is ideal if you’re saving up for your retirement nest egg or some other long-term goal.
4: Understand the different fees
The platform charges a management fee at a rate of one percent. Zero point eighty-five percent is used for the annual asset management fee, which is directed toward the projects’ operating costs. Meanwhile, the remaining 0.15 percent serves as the annual advisory amount and can be waived in some situations.
The company also mentioned in their blog that they wouldn’t charge investors with sales commissions, transactions, or carried interest fees for their plans. However, there are hidden fees, such as:
- Origination Fee – Users are charged with up to two percent acquisition fee whenever the company purchases a new asset.
- Exit Fee – There’s also an exit fee of one to three percent if you redeem your shares within five years of investing with Fundrise.
- IRA Fee – Lastly, you’ll need to pay an annual asset fee of 125 USD if you’ll fund your account with your individual retirement account (IRA) funds.
Fundrise is an ideal platform to use if you want to try your hand at real estate investments because of the low minimum investment requirement. The company also allows you to choose from their account levels and plans to align with your investment goals. You have to be aware of the fees that they charge, however, and consider the net profit that you’ll receive in the venture.