Fundrise Fees: What You Need to Know Before Investing

Investing in real estate can be a great way to diversify your portfolio and earn passive income, but it's essential to understand the fees involved before getting started. Fundrise is a popular real estate investment platform that allows you to invest in a diversified eREIT, but it's not free.

Fundrise charges an annual management fee of 0.85% to 1.85% of your investment balance, depending on the type of account you have. This fee is deducted from your investment balance quarterly, and it's used to cover the costs of managing the eREIT.

The management fee is just one of the fees you'll pay when investing with Fundrise. The platform also charges a closing fee of 0.15% to 0.25% of the investment amount, which is deducted when you make a new investment.

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Fundrise's management fee is 0.85% annually, deducted from the investor's quarterly distribution.

This fee is significantly lower than what you'd pay with a traditional real estate investment, where management fees can range from 1.5% to 3% of the property's value.

Consider reading: Expense Ratio vs Management Fee

Fundrise's quarterly distribution is typically around 5-7% of the investor's total balance.

This means that for every $10,000 invested, you can expect to receive around $500-$700 per quarter.

Fundrise's administrative fee is 0.15% annually, also deducted from the investor's quarterly distribution.

The total fees, including management and administrative fees, are capped at 1% annually.

This means that for every $10,000 invested, your total fees will not exceed $100 per year.

The lower fees with Fundrise can add up to significant savings over time, especially for larger investment amounts.

For example, if you invest $50,000, the total fees would be $500 per year, or $12.50 per month.

Fundrise offers a generally low-cost investing model, with an annual advisory fee of 0.15% or $1.50 for every $1000 you have invested.

The advisory fee doesn't cover actual fund management expenses, which is where the management fee comes in. This fee is 0.85%, replacing the per-fund management fees charged by many fund managers.

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So, in total, you're looking at 1% in management costs per year. This is a relatively low fee, especially compared to other investment options.

Fundrise also has a 1% early redemption fee if you choose to redeem your fund shares after a holding period of less than five years. However, the Flagship Fund and the Income Fund don't charge any penalty for quarterly redemptions.

There's also a possibility of additional fees associated with specific projects, which will be stated in the offering documents for the project. Be sure to read these carefully to understand any potential extra costs.

Here's a breakdown of the fees:

Keep in mind that Fundrise can freeze redemptions during periods of economic stress, so it's essential to review their policies before investing.

Investing in real estate can be a lucrative option, especially with the rise of real estate crowdfunding. Fundrise is a pioneer in this space, having completed the first crowdfunded real estate purchase in 2012, raising $325,000 from 175 investors.

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Since then, the industry has matured, and real estate investing has become as safe and reliable as traditional investments. Fundrise has grown from 100,000 clients to over 2 million since 2017.

If you're interested in investing in real estate, you can consider platforms like Fundrise, Arrived Homes, EquityMultiple, Realty Mogul, and CrowdStreet. These platforms offer various investment options, including eFunds and eReits, which have fees ranging from 0.85% to 1% annually.

Here are some key features to consider when investing in real estate with these platforms:

Keep in mind that investing in real estate often involves illiquidity, meaning you may not be able to access your funds before the project completes. However, some platforms offer unique features like the "first look" program, which allows you to purchase a home before it goes on the market using your investment as a part of your down payment.

Investing in real estate can be a great way to diversify your portfolio and potentially earn higher returns. Fundrise is one of the options to consider, but it's essential to weigh the pros and cons before making a decision.

Fundrise has a wide variety of non-accredited investor funds, which can be appealing to those looking for more options. They also have one of the lowest minimums in the industry, starting at just $500.

However, sophisticated investors may find it difficult to understand what they're actually investing in before purchase. This lack of transparency can be a significant turnoff.

On the other hand, Fundrise's funds are set up with full bankruptcy protection, providing potential investors with extra peace of mind.

One of the most significant advantages of Fundrise is its ease of use. Their website is very user-friendly, making it simple to get started with investing.

Conservative investors may find Fundrise's underwriting standards unsuitable, which can be a concern.

Here are some key pros and cons of investing with Fundrise:

However, there are also some significant drawbacks to consider:

Real estate investing can be a smart way to diversify your portfolio and potentially earn passive income. Fundrise offers a range of real estate investment options, including eREITs and eFunds.

Fundrise's eREITs are non-traded securities that allow you to invest in a diversified portfolio of real estate assets. They are regulated by the SEC and are considered legitimate investments, but not risk-free.

You can choose from various eREITs, including the Flagship Funds, Strategy Funds, and Premium Funds. The Flagship Funds are the largest and most diversified, while the Premium Funds are accredited-only and have higher minimums.

Fundrise also offers eFunds, which allow you to invest directly in real estate projects. You can choose from funds like the Washington DC fund or the Los Angeles Fund, and pay an annual fee of 0.85% and a portfolio management fee of 0.15%.

One unique feature of Fundrise's eFunds is the "first look" program, which allows you to purchase a home in a specific area before it goes on the market. This can be a great option if you're looking to buy a home in a major city with a hot market.

Fundrise's real estate investment options can be a great way to invest in real estate without having to directly manage properties. However, it's essential to do your research and understand the fees and risks involved.

Here's a breakdown of Fundrise's real estate investment options:

Fundrise offers a variety of account options to suit different needs. Fundrise supports individual and joint accounts, trusts, limited liability companies, limited partnerships, C corporations, and S corporations.

You can also open a 529 plan or IRA account with Fundrise. However, investing in an IRA account through Fundrise requires an additional fee, as it's handled through Millenium Trust Company, a Fundrise partner.

The account options available to you will depend on your personal and financial situation. It's essential to choose the right account type to maximize your investment returns and minimize fees.

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Fundrise's performance is a crucial aspect to consider when evaluating their fees. Average returns are solid, but some accounts can deliver returns well below the average.

Fundrise's returns are competitive, but not guaranteed. It's essential to pay close attention to the composition of your portfolio, especially if you're using a customizable plan.

Evaluating these portfolios requires significant research and expertise.

Fundrise has some notable competitors in the real estate investment space. Fundrise's closest competitor is Blackstone, a private equity group that invests in real estate projects across the country.

Blackstone's investment model is quite different from Fundrise's, charging a flat 2% of asset value for a management fee and 20% of any profits earned. This means investors pay a significant premium for the privilege of investing with Blackstone.

Another competitor to consider is Vanguard, which offers REIT ETFs and index funds with low expense ratios. However, these funds are essentially a "wrap" on existing securities, with multiple layers of intermediaries taking a cut before the investor even gets to the real estate.

Fundrise, on the other hand, "disintermediates the public market" by reducing the number of middlemen between the investor and the real estate investments. This approach can save investors money and increase their returns.

Here's a comparison of Fundrise with some of its competitors:

Fundrise's low minimum investment and openness to non-accredited investors make it a more accessible option for many investors.

Fundrise's past performance is a key factor to consider when evaluating its investment potential. Average returns are solid, but some accounts deliver returns well below the average.

Fundrise provides detailed information on investor returns, giving you a clear picture of what to expect.

The data shows that Fundrise can deliver very competitive returns, rivaling those of public REITs and the S&P 500.

You'll need to pay taxes on your Fundrise income, just like with dividend income. Fundrise investors receive a 1099-DIV in February or March to report on their annual tax return.

The 1099-DIV form is a simple one to file with your taxes, but you'll get a separate form for each fund you own, so be prepared for multiple forms. Fundrise sends all the forms in a single PDF, making it a bit more manageable.

Investors in the eFunds may receive a K-1, which requires a bit more work to file with your taxes. Fundrise aims to simplify this process by doing composite filings for the eFunds, but it's not a guarantee.

Curious to learn more? Check out: Fundrise Income Fund

Fundrise charges a 0.15% advisory fee, which translates to $1.50 per $1,000 invested over a 12-month period.

The advisory fee is a small price to pay for the investment expertise and guidance Fundrise provides.

Fundrise's real estate funds have an annual 0.85% flat management fee, which works out to $8.50 per year for every $1,000 invested.

This fee applies to investors who choose to invest in the Supplemental Income, Balanced Investing, or Long-Term Growth Plan.

The Fundrise Innovation Fund has a steeper annual management fee of 1.85%, equivalent to $18.50 per year for every $1,000 invested.

Investors who opt for the Venture Capital Plan can expect to be allocated to this fund and pay the associated fee.

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You'll receive a 1099-DIV in February or March to report on your annual tax return for Fundrise income from eREITs, private credit funds, and Innovation Fund.

This form is simple to file with your taxes, but you'll receive a separate form for each fund you own.

You'll need to file multiple forms, but they'll come from Fundrise in a single PDF.

The eFunds are structured as partnerships, which means you may receive a K-1 and be required to file it with your taxes.

Fundrise intends to do composite filings for the eFunds, eliminating the need for individuals to file additional state tax returns, but this is not guaranteed.

REITs, like those in your Fundrise portfolio, are notorious for issuing corrected 1099s and delaying the tax filing of their customers.

You'll need to be on the lookout for any corrections to your tax documents, as these can delay your tax filing.

If you liquidated any eREIT/interval fund shares in the prior year, you should expect to receive a Form 1099-B for each fund.

Consider reading: Tax Preparation Fees Deduction

You can invest in eREITs with a starting investment of just $10.

With a starter portfolio, you'll gain access to over 20 different properties in major cities throughout the country.

The combined annual fees for a starter portfolio are 1%, consisting of a 0.85% fund management fee and a 0.15% account management fee.

You'll be invested in a 50/50 blend of the income eREIT and the growth eREIT.

You should expect to hold onto both investments for five or more years, but you will have the chance to liquidate once per quarter.

I've been writing about and reviewing investment firms and covering real estate investments for 10 years, so I have a deep understanding of the industry.

Our compliance team regularly checks and updates the facts on our reviews, ensuring that the information is accurate and up-to-date.

I've personally owned a variety of real estate investments, including single-family homes, multi-family properties, and real estate syndications, which gives me a unique perspective on the subject matter.

We're not just armchair experts; we have hands-on experience with the products and services we review.

Our 10 years of experience in the industry has given us a wealth of knowledge that we can draw upon to provide accurate and informative reviews.