The Complete Guide to How Does Fundrise Work and Its Investment Options

Fundrise is a real estate investment platform that allows individuals to invest in a diversified portfolio of properties with a minimum investment of $500. Fundrise offers a unique approach to real estate investing, making it accessible to a wider range of investors.

The platform allows you to invest in eREITs, which are a type of real estate investment trust that invests in a diversified portfolio of properties. Fundrise's eREITs are designed to provide a stable source of income and long-term capital appreciation.

One of the key benefits of Fundrise is that it offers a low minimum investment requirement, making it possible for individuals to start investing in real estate with a relatively small amount of capital.

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Fundrise has evolved its platform while simultaneously expanding the investment options available, all within a few years. This rapid growth is a testament to the company's adaptability and commitment to innovation.

Fundrise has a user-friendly platform that allows investors to diversify their portfolios with minimal effort. Its eREITs and eFunds offer a range of investment options, making it accessible to a broad range of investors.

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Fundrise is a non-traded REIT.

You can start investing with as little as $10, making it accessible to anyone who wants to get into real estate investing.

The auto-invest feature makes investing simple and painless, and you can use goal-setting features at each level, which become more robust as you invest more.

Money you deposit into Fundrise is automatically invested into multiple eREITs, which are essentially electronic real estate investment trusts.

Fundrise offers four investment plans, each with a unique strategy and portfolio composition.

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Fundrise offers an incredibly low minimum investment of just $10, making it an accessible option for new real estate investors.

This low minimum investment allows you to start investing in real estate with a small amount of capital.

You can invest as little as $10 in the Fundrise Starter Portfolio, which is the most popular investment plan.

The Fundrise Starter Portfolio is an extremely accessible option for new real estate investors, with no need for a large upfront investment.

Fundrise is unique in that it offers an auto-invest feature that makes investing simple and painless, regardless of the amount invested.

The auto-invest feature allows you to automate your investments, making it easy to invest regularly and grow your portfolio over time.

You can also use goal-setting features with Fundrise, which become more robust as you invest more and your portfolio value grows.

Fundrise offers both private investment accounts and IRAs, with private accounts requiring a minimum investment of just $10.

IRA accounts, on the other hand, require a minimum initial investment of $1,000 and have an annual account fee of $125, unless you contribute at least $3,000 or have a balance of over $25,000.

Fundrise supports a variety of account types, including individual and joint accounts, trusts, and business entities such as LLCs and S Corps.

Here are some of the account types supported by Fundrise:

You can also invest in 529 plans and Roth IRAs with Fundrise, although IRA accounts have an additional fee.

Note that IRA accounts are held with Millennium Trust Company, LLC, as the custodian of assets.

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Fundrise offers a range of features that make it easy for anyone to become a real estate investor. One of the best features is that anyone over the age of 18 can invest, regardless of their financial background or experience.

You don't need to be an accredited investor to start investing with Fundrise, making it accessible to a wider range of people. This is a significant advantage over other investment platforms that often require a higher level of wealth or expertise.

Fundrise supports personal and joint investment accounts, Trusts, LLCs, LPs, and C and S corporations, giving you flexibility in how you choose to invest. This is a big plus for those who want to invest with friends or family members.

You can also invest with your IRA, but you'll need to set up an agreement with the Millennium Trust Company to do so.

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With Fundrise, you can pick a goal that fits your investment style. There are three goals to choose from: Supplemental Income, Balanced Investing, and Long-Term Growth.

The Supplemental Income goal is designed for investors who want to earn additional passive income and may be planning for retirement shortly. It focuses on income-generating assets, with 70-80% of the portfolio allocated to income-focused assets and 20-30% to growth-focused assets.

For Balanced Investing, you'll get maximum diversification with a moderate to long-term investment horizon. This goal allocates 40-60% of the portfolio to income-focused assets and 40-60% to growth-focused assets.

The Long-Term Growth goal is for those who want to maximize returns over the life of the investment. It's suitable for investors with a long-term investment horizon and a comfort level with potential variability year to year. This goal projects annual returns of 9.7-11.6%, with 20-30% of the portfolio allocated to income-focused assets and 70-80% to growth-focused assets.

Here's a breakdown of the goals:

Each goal provides a clear investment strategy, so you can focus on your financial goals without worrying about the details.

Quarterly Income is a predictable feature of Fundrise investments. Fundrise doesn't guarantee dividends, but if you do earn them, they're paid on a quarterly basis.

This predictability can be helpful for building your Fundrise portfolio, allowing you to reinvest your dividends.

Private Credit is a high-yield investment that offers higher returns due to its shorter duration and private agreements.

Private Credit includes debt-related instruments like high-yield loans and fixed-income investments, which are primarily debt-based rather than equity-based.

These investments are often more profitable than publicly traded securities, such as bonds, especially in a rising rate environment.

Private Credit provides investors with the ability to invest in debt obligations, including real estate-related loans, mezzanine financing, and subordinate notes.

Fundrise uses its experience in financing real estate investors to enter this highly profitable asset class.

Its Private Credit portfolio will invest in specific projects in the form of high-yield preferred equity, offering low fees and flexible minimum investments.

Investors in Fundrise's Private Credit portfolio may even have the opportunity for quarterly liquidity.

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Ereits and Efunds are the foundation of real estate investing through Fundrise. They're a type of investment that allows you to own a portion of a larger property or a portfolio of individual properties.

An eREIT is a privately traded real estate investment trust, available only on Fundrise. It invests in equity or debt in commercial properties, such as retail space, apartment complexes, and office buildings.

eFunds, on the other hand, invest in the acquisition and/or development of individual properties like single-family homes, townhomes, and condominiums.

Here's a breakdown of the types of eREITs and eFunds offered by Fundrise:

You can choose to invest in either an eREIT or an eFund, depending on your investment goals and preferences.

The Venture Innovation Fund is a unique investment opportunity that allows you to invest in top-tier technology companies during the pre-IPO phase. This strategy focuses on capitalizing on the market trend where pre-IPO companies stay private for many years, resulting in most investment returns occurring during this time.

The fund invests in five key sectors: artificial intelligence and machine learning, modern data infrastructure, DevOps, FinTech, and PropTech. As of the last update, the fund holds an equity position in a single company, Vanta, with a $5 million investment made in November 2022.

Here are the five investment sectors focused on by the Venture Innovation Fund:

Currently, only 8.4% of the fund is invested in pre-IPO companies, with the majority invested in corporate convertible bonds, corporate non-convertible bonds, and short-term investments.

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Fundrise's performance is actually quite impressive compared to REIT ETFs. My $500 investment in Fundrise outperformed all the REIT ETFs I ran through the same total return calculator.

The results are shocking, with Fundrise's Starter Portfolio yielding an 8.40% annualized return. In contrast, the Vanguard Real Estate Index Fund ETF (VNQ) only managed a 6.24% annualized return.

Here's a breakdown of the performance of the REIT ETFs I compared:

The Schwab US REIT ETF (SCHH) performed particularly poorly, with a 1.26% annualized return.

Fundrise offers four different portfolio strategies: Fixed Income, Core Plus, Value Add, and Opportunistic. Each strategy has a unique return and risk level.

You can view the expected returns and primary sources of returns for each strategy on Fundrise's easy-to-use tables. Keep in mind that investment performances aren't guaranteed.

Fundrise also offers three goal-based investing options: Supplemental Income, Balanced Investing, and Long-Term Growth. The Supplemental Income plan is designed for those who want to earn passive income and have a moderate-term investment horizon.

The Balanced Investing plan is for those who want maximum diversification and have a moderate to long-term investment horizon. The Long-Term Growth plan is for those who want to maximize returns over the life of the investment and have a long-term horizon.

Here are the asset allocations for each goal-based investing option:

Fundrise's fees are the same for all four portfolios: 0.85% in annual management fees and 0.15% in annual advisory fees.

Fundrise offers four different portfolio strategies to choose from, each with its own level of return and risk. These strategies include Fixed Income, Core Plus, Value Add, and Opportunistic.

As you move through the strategies, both the return and risk level increase. It's helpful to understand the different strategy options to choose what best meets your individual needs.

Fundrise also offers three goal-based investing options: Supplemental Income, Balanced Investing, and Long-Term Growth. The Supplemental Income plan is designed for investors who want to earn additional passive income and have a moderate-term investment horizon.

The Balanced Investing plan is for investors who want maximum diversification and have a moderate to long-term investment horizon. The Long-Term Growth plan is for those who want to maximize returns over the life of the investment and have a long-term investment horizon.

Here are the key differences between the three goal-based investing options:

Fundrise's fees are the same for all four portfolios: 0.85% in annual management fees and 0.15% in annual advisory fees, totaling 1%. This is a relatively low-cost approach to investing in real estate.

Publicly Traded REITs are available through brokerages like Vanguard, but they often have higher minimums than Fundrise.

You can invest in REITs just like stocks, and they are registered with the SEC.

The minimums for publicly traded REITs can be a barrier for those just starting out with real estate investing.

Fundrise offers more guidance by allowing you to identify your goals and risk tolerance, and then helping you choose the investment options that best fit your needs.

Fundrise's guidance can be a welcome feature for those who feel overwhelmed by the initial investment process.

Here's a comparison of Fundrise and REIT ETFs:

To invest with Fundrise, you'll need to deposit money into their platform, which will then be automatically invested into multiple eREITs.

Fundrise is a non-traded REIT, and they brand their REITs as "eREITs" to sound cool and futuristic.

The minimum investment requirement is $500, although advanced plans require a minimum investment of $1,000, $10,000, or $100,000.

You can browse the Fundrise portfolios online and see the projects in each plan, which detail the investment's type, location, rating, and projected return.

Fundrise's fees are the same for all four portfolios: 0.85% in annual management fees and 0.15% in annual advisory fees, adding up to 1% in total.

You can redeem your shares quarterly, but you'll have a hard time getting your initial money back unless you're within the 90-day satisfaction period or you redeem your shares.

You'll receive quarterly dividends, which you can choose to reinvest through the Fundrise Dividend Reinvestment Program (DRIP) or opt out at any time.

At tax time, you'll get a 1099-DIV that details any distributions you earned, taxed at your regular income tax rate, not the 15% rate used for qualified dividends.

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Fundrise has provided impressive returns, especially in years when other asset classes are weak.

In 2022, Fundrise produced a 1.50% return when the S&P 500 was down by more than 18% and public REITs lost over 25%. This shows its ability to perform well during challenging market times.

Its performance in 2018 is also noteworthy, returning nearly 9% while both public REITs and stocks lost money.

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Returns can be a bit tricky to understand, especially when they're compared to other investments.

In 2022, Fundrise produced a 1.50% return, which is actually a decent performance when the S&P 500 was down by more than 18% and public REITs lost over 25%.

This is a great example of how Fundrise can provide a return even when other asset classes are struggling.

The same thing happened in 2018, when Fundrise returned nearly 9%, while public REITs and stocks lost money.

It's worth noting that Fundrise tends to perform well when other asset classes are weak, making it a true alternative investment option.

Fundrise's performance in 2022 and 2018 shows that it's possible to earn a return even in difficult market conditions.

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Fundrise returns can vary depending on the investment goals and what you compare those returns with. You might be wondering how Fundrise returns stack up against other investments.

In just over five years, I've seen an average annual return of 13.3% with my Fundrise investment. However, this can be tricky to evaluate without considering other options.

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To give you a better idea, let's take a look at some of the returns from other asset classes. Fundrise tends to perform well when other investments are struggling.

For example, in 2022, Fundrise produced a 1.50% return while the S&P 500 was down by more than 18% and public REITs lost over 25%. This is a stark contrast to the performance of stocks and publicly traded REITs during that year.

Here's a rough breakdown of Fundrise returns compared to other investments:

Keep in mind that these returns can fluctuate over time, and it's essential to consider your individual financial goals and risk tolerance before investing. Fundrise might be a good option for those looking for a more stable return during uncertain market conditions.

Fundrise's fees are straightforward, but it's essential to understand what you're paying for. Fundrise charges a 1% annual fee, broken down into a 0.85% asset management fee and a 0.15% advisory fee.

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These fees are in line with other real estate investing platforms, but Fundrise's fees can be misleading when compared to Vanguard's fees. Fundrise's 0.15% advisory fee is half of Vanguard's, but you don't get any personalized service with Fundrise for this fee. It's just another administrative fee.

You can invest in Vanguard index funds and ETFs without paying the 0.3% advisory fee, but if you want personalized services, you'll pay 0.3% annually. Even with Vanguard's Personal Advisor Services, the total fees are 0.4% annually, which is 60% less than Fundrise's fees.

Here's a comparison of Fundrise's fees and Vanguard's fees:

Fundrise's fees are not outrageously high, but they're not the lowest either. It's essential to consider the trade-offs, such as the fact that your investment is not very liquid, meaning you can't easily withdraw your money for five years.

Getting Started with Fundrise is a breeze, thanks to their low minimum investment requirement of just $10. You can start investing with as little as $10, making it an extremely accessible option for new real estate investors.

The Fundrise Starter Portfolio is the way to go, offering full control of your real estate investments and expert advice from the team at Fundrise. This investment plan is the most popular among Fundrise users, and it's easy to see why - it's incredibly affordable and flexible.

With multiple investment tracks to choose from, you'll have the freedom to tailor your investment strategy to fit your needs and goals.

You'll find that Fundrise's website is a breeze to navigate, whether you're a seasoned investor or just starting out. The platform is designed to be user-friendly, making it easy to understand your portfolio.

The website is available on both the App Store and Google Play, with over 25,000 reviews that give it a 4.8/5.0 rating in the App Store and a 4.4 rating on Google Play.

Users praise the platform for its smooth experience, allowing you to easily track your investment performance.

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You can start investing with Fundrise with as little as $10, making it an extremely accessible platform for new real estate investors.

The Fundrise Starter Portfolio is the most popular investment plan, and it requires a minimum investment of just $10.

This plan is perfect for those who want to dip their toes into real estate investing without breaking the bank.

Fundrise also offers other investment plans, but the Starter Portfolio is the one that requires the lowest initial investment amount.

If you're new to real estate investing, the Starter Portfolio is a great place to start.

In fact, Fundrise is so investor-friendly that you can start investing with as little as $10, which is a fraction of the minimum investments required by other platforms.

Here are the different account types supported by Fundrise:

You can also open a private investment account or an IRA account, with the latter requiring a minimum initial investment of $1,000.

The auto-invest feature makes investing simple and painless, and you can also use goal-setting features to track your progress.

As you invest more and your portfolio value grows, you can access more features and benefits, making it easier to reach your investment goals.

Fundrise offers a range of benefits and pros that make it an attractive option for investors. Fundrise has a sleek investment platform that keeps you updated on the real estate projects your shares are invested in.

One of the standout features of Fundrise is its low minimum investment requirement. You can start investing in Fundrise's starter portfolio with as little as $10. This is a significant advantage over other investment platforms that often have much higher minimums.

Fundrise also doesn't require you to be an accredited investor to get started. Unlike many non-publicly-traded real estate deals and platforms, Fundrise doesn't have income or net worth requirements, making it more accessible to a wider range of investors.

Fundrise does a decent job of investing your money in different geographies and asset classes, which can help spread risk and increase potential returns. In fact, based on the investments in my portfolio, Fundrise outperformed the most popular REIT ETFs for the time period I've been investing.

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Here are some of the key benefits of Fundrise Pro, the premium version of the platform:

Fundrise Pro also offers a range of benefits, including the ability to invest in customized portfolio allocations and access to financial content from the Wall Street Journal and WSJ Pro.

Fundrise is a real estate investment platform that allows individuals to invest in a diversified eREIT, which owns a portfolio of properties across the US.

You can invest in Fundrise with as little as $1,000, making it accessible to a wide range of investors.

Fundrise charges a management fee of 0.85% to 1.02% per year, depending on the investment level.

The platform's eREITs are designed to provide a steady stream of income through rental property cash flows.

Investors can expect to earn an average annual return of 8-12% with Fundrise, although actual returns may vary.

Fundrise offers a range of investment options, including a core fund and a opportunistic fund, to cater to different risk tolerance levels.

Investors can withdraw their funds at any time, although there may be penalties for early withdrawals.

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