Fundrise Income Fund: A Comprehensive Investment Guide

The Fundrise Income Fund is a unique investment opportunity that allows you to earn a steady stream of income through real estate investing.

It's designed to provide a predictable and stable source of returns, with a focus on cash flow rather than long-term capital appreciation.

The Fundrise Income Fund invests in a diversified portfolio of eREITs, which are a type of real estate investment trust that focuses on income-generating properties.

This allows investors to benefit from a steady stream of income, with the potential for long-term growth and appreciation in value.

Fundrise breaks down its investment types into three high-level categories: Real Estate, Private Credit, and Venture Capital. As of January 2024, these categories include equity investments in multifamily apartments, industrial properties, or single-family rentals, as well as real estate loans and fixed-income products.

The Fundrise Income eREIT, for example, allows investors to purchase a diversified portfolio of commercial and residential real estate, including apartment buildings, office buildings, retail centers, distribution warehouses, and single-family developments. Fundrise uses a proprietary algorithm to identify and select investment opportunities.

Here are the three main investment types offered by Fundrise:

Fundrise's early growth was a remarkable story. By May 2014, the company had facilitated $15 million in investments involving over 1,000 investors.

The company's platform allowed conventional real estate investments from commercial developers across the United States. This expansion helped Fundrise tap into a wider market.

In January 2015, Fundrise began offering bonds for the construction of 3 World Trade Center in lower Manhattan. The initial offering was for $2 million of the $5 million worth of bonds purchased by Fundrise for the financing of the $1 billion project.

These bonds offered a 5% tax-free gross annual return for five years, making them an attractive investment opportunity. Each bond was priced at $5,000.

Fundrise also raised $38 million in its first-round of Series A investment, which was led by Chinese social networking company Renren who invested $31 million. Additional investors included Guggenheim Partners, Justin Elghanayan of Rockrose Development Corporation, and James Ratner of Forest City Enterprises.

By February 2015, Fundrise had commitments from six institutional investors for an additional $100 million in investment into the company's real estate offerings. This significant influx of capital helped Fundrise further expand its platform.

In October 2015, co-founder and president Daniel Miller left the company to begin his new venture, Steward, an online lending platform for regenerative agriculture.

Fundrise is a unique investing platform that allows you to own real estate and venture capital funds without directly buying stocks.

These funds are non-traded, making them suitable for buy-and-hold investors who are looking for a long-term investment strategy.

To start investing with Fundrise, you'll need to go through a questionnaire to establish your investor profile and strategy, and then connect your bank accounts and deposit funds.

Fundrise will then automatically allocate your new deposits into the most appropriate funds for your individual investment goals.

Fundrise manages all the real estate funds on its platform, so you won't have access to external investments.

The properties held by Fundrise's funds range from $1 million to $50 million or more in value, each with a stated strategy and target investment horizon.

You can modify your investment strategy or upgrade your account to invest with a more manual approach if you prefer.

Fundrise's eREITs (electronic Real Estate Investment Trusts) allow you to invest in a diversified portfolio of commercial and residential real estate, including apartment buildings, office buildings, retail centers, distribution warehouses, and single-family developments.

Fundrise uses a proprietary algorithm to identify and select investment opportunities, and actively manages the properties after acquisition.

You can track your Fundrise portfolio and performance through the online dashboard, giving you a clear view of your investments.

Consistency matters with investing. Fundrise has had three consecutive positive return years, which is a significant advantage over other investment options.

The company's ability to deliver consistent returns is impressive, especially when compared to Vanguard, which had a 6.093% average annual return over a three-year period. Fundrise, on the other hand, averaged 8.1% over the same period.

In 2022, Fundrise delivered a 6.4% return, while Vanguard's VNQ lost a staggering -28.86%. This highlights the importance of consistency in investing.

Here's a comparison of Fundrise and Vanguard's returns over three years:

As an investor, it's essential to consider the consistency factor when evaluating investment options. Fundrise has demonstrated its ability to deliver consistent returns, making it an attractive option for those seeking a reliable investment.

To set up your Fundrise account for success, Fundrise asks new investors questions to build an investor profile and an investment strategy. This helps to onboard novice investors and formulate an investment portfolio, even if the investor is limited in investment knowledge.

You'll go through a questionnaire to determine the best strategy for you, which can be modified later. They ask questions such as your primary reason for investing, whether you're an accredited investor, how much you typically invest in a year, and what best describes your investing style.

Your selection doesn’t limit what you can invest in; it’s only used to create an initial portfolio.

Fundrise has streamlined the onboarding process, making it easy for anyone to invest.

To manage your account, you can withdraw any investments made in the Flagship Real Estate Fund or Income Fund without penalty.

Flexibility is key when it comes to investing with Fundrise. You can withdraw any investments made in the Flagship Real Estate Fund or Income Fund without penalty.

Ongoing fees add up to 1% annually, which is relatively low for this type of investment. This fee structure is straightforward and easy to understand.

You can choose to automate your investments by setting up a weekly, bi-weekly, or monthly transfer. This option allows you to invest a fixed amount regularly, which can help you stay on track with your financial goals.

If you want to take advantage of tax benefits, you can open a Traditional or Roth IRA with Fundrise for a $125 annual fee. This fee can be waived if you meet certain criteria based on the amount invested.

Fundrise also allows you to reinvest dividends and distributions, which can help your investments grow over time. This option is available for both the Flagship Fund and Income Fund.

Here are the liquidity rules for Fundrise investments:

Keep in mind that liquidity may be limited during a financial crisis, and Fundrise may suspend its redemption program to take advantage of real estate deals.

Setting up your Fundrise account is a breeze, thanks to their streamlined onboarding process. Fundrise asks new investors questions to build an investor profile and an investment strategy, making it easy to get started even if you're new to investing.

These questions help determine the best strategy for you, and you can modify it later if needed. Fundrise asks about your primary reason for investing, whether you're an accredited investor, your typical investment amount, and your investing style.

Your selection of investing style doesn't limit what you can invest in, it's only used to create an initial portfolio. The options are:

Fundrise has made it easy for anyone to invest, and as your account matures, you'll have more control with options like Fundrise Pro. For now, it's best to go with the flow and set up your portfolio.

The portfolio breakdown is where you'll find a high-level view of your investments, with a dropdown showing specific funds. It's a great place to see how your investments are doing and make adjustments as needed.

When you log into your established account, you'll see your account value, net returns, portfolio composition, and account value over time.

The dashboard gives you a clear picture of your account's performance, including your account value, which is the total worth of your investments.

As of January 2024, my account value is $29,851.59, which is a significant increase from my initial contribution of about $21,618.44.

You can also view your net returns, which show the profit or loss on your investments over time. In 2021, my net returns jumped by 23% due to strong performance across all Fundrise investments.

The dashboard also allows you to break down your long-term returns by year or quarter, giving you a detailed view of your investment performance.

My portfolio is currently 83% real estate, with the remaining allocation in the Venture Fund and Other, which includes the Fundrise iPO.

You can click on the orange links to get more details about your account, such as setting goals or enabling automated investing.

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

The platform's real estate funds have an annual 0.85% flat management fee, equating to $8.50 per year for every $1,000 invested.

Liquidity remains a downside, and if you may need the money in a year or two, Fundrise is not the right platform for you, as there are penalties on early withdrawals, now just 1%.

Income from Fundrise dividends is non-qualified, meaning they are taxed as ordinary income, and incur taxes if held in a non-retirement account.

Fundrise is not suitable for active investors who want to perform due diligence on individual properties, as the platform manages investments for you.

The investments are passive, but reliant upon management, which may be a concern for some users.

Giving up control, however, can be beneficial for novice investors with no experience in real estate, as it allows them to earn good returns.

Liquidity remains a downside, and if you may need the money in a year or two, Fundrise is not the right platform for you.

Penalties on early withdrawals have declined to just 1%, but the real benefits of real estate investing come from long-term holds.

Income from Fundrise dividends is non-qualified, meaning they are taxed as ordinary income, and incur taxes if held in a non-retirement account.

The platform has undergone several changes, including the transition from Fundrise 1.0 to 2.0, which may be frustrating for some users.

However, the platform is close to a permanent user interface now, and innovating to stay in leadership positions is a necessary part of being a successful startup.

You may lose money investing in Fundrise, as you would in the stock market or anywhere else, but many of these investments provide housing to people, and those people will always need a place to live.

You'll need to pay taxes on your Fundrise income, just like with any other investment.

The 1099-DIV form is relatively simple to file with your taxes, and Fundrise will send it to you in February or March.

You'll receive a separate form for each fund you own, so be prepared for multiple forms.

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

Fundrise is working on composite filings for the eFunds, which could eliminate the need for additional state tax returns, but this isn't guaranteed.

The eFunds have become less available due to the K-1 being a more challenging tax form for retail investors.

Fundrise charges a 0.15% advisory fee, which means investors will pay a $1.50 advisory fee for every $1,000 they have invested with Fundrise.

Their real estate funds have an annual 0.85% flat management fee, which translates to $8.50/year for every $1,000 invested.

You can expect to be allocated to these real estate funds if you choose to invest in Fundrise's Supplemental Income, Balanced Investing, or Long-Term Growth Plan.

Fundrise also charges 1% of your account value in fees every year, making it a relatively low fee structure compared to other investment platforms.

Here's a breakdown of Fundrise's fees:

Keep in mind that these fees are subject to change, so it's essential to review Fundrise's fee structure before investing.

Fundrise offers a range of investment options, broken down into three main categories: Real Estate, Private Credit, and Venture Capital.

Fundrise's investment types have evolved over time, but as of January 2024, they include equity investments in multifamily apartments, industrial properties, or single-family rentals, as well as real estate loans and structured investments that aim to deliver higher yields with lower risk.

These investment types are designed to provide diversification and potentially attractive returns, making them a great option for those looking to add real estate exposure to their portfolio or generate consistent cash flow.

Here are the three main investment categories:

Fundrise offers a range of investment options, but let's take a closer look at the investment types they provide.

Fundrise breaks down its investments into three main categories: Real Estate, Private Credit, and Venture Capital.

Real Estate investments are typically equity investments in multifamily apartments, industrial properties, or single-family rentals. This can be a great option for those looking to diversify their portfolio.

Private Credit investments usually involve real estate loans, fixed-income products, or other structured investments that aim to deliver higher yields with lower overall risk. This can be an attractive option for those seeking higher returns with reduced risk.

Venture Capital investments are made in pre-IPO private companies, providing an opportunity to invest in early-to-late-stage startups.

If you're interested in exploring other real estate crowdfunding platforms, you have several options to consider.

Fundrise isn't the only game in town, and there are other platforms that offer similar opportunities, such as YieldStreet, which offers investments in commercial real estate and alternative assets like marine loans and artwork.

Groundfloor is another platform that invests in commercial real estate, but with a twist - they focus on short-term financing for projects, and you can invest with as little as $10.

DiversyFund is a platform that invests in large apartment complexes, which they believe are better long-term investments, and you can start investing with as little as $500.

RealtyMogul is another close competitor to Fundrise, but you'll need to meet certain financial criteria to qualify as an accredited investor, and you'll need to invest at least $1,000.

Here's a quick rundown of some other platforms to consider:

The competition among these platforms is driving innovation and better investment offers for customers, so it's worth exploring your options to find the one that best fits your needs.

Fundrise income fund is known for its attractive returns, but how do they stack up against other investments? According to the author's experience, a 10.8% IRR over five years is a respectable return, comparable to the long-term returns of the stock market.

However, it's essential to consider the fees associated with Fundrise, which include a 0.15% annual advisory fee and a 0.85% management fee, totaling 1% per year.

To put these returns into perspective, the author's average annual return with Fundrise is 13.3% over five years. But what if you had invested in something else?

Comparing Fundrise returns to other real estate investments, the author notes that their five-year average return on Fundrise was 6.9% net of expenses. Let's take a look at how Fundrise returns compare to real estate exchange-traded funds (ETFs), such as the iShares Global REIT ETF (REET).

Here's a comparison of the author's Fundrise returns with REET's performance over the past few years:

As you can see, Fundrise outperformed REET in some years, while REET had a better year in others. The author notes that they're not having any buyer's remorse over their decision to invest with Fundrise, as it outperformed REET over a three-year period.