Real estate is becoming increasingly 1) viable and 2) accessible to everyday consumers. REITs are easily traded like stocks, national mortgage companies allow more accessible property financing, and new services are popping up daily to crowdfund or initiate access into private equity real estate markets. Fundrise, one of the oldest firms providing real estate investment services, is also one of the most well-known.
But there is new competition every day.
Today we’ll look at some of the Fundrise competitors and how they stack up.
Fundrise: An Overview
First, let’s take a refresher course on what Fundrise offers – especially if you aren’t familiar with its long track record of excellence and service.
Fundrise is one of the most accessible services available to the everyday investor without a ton of capital looking to enter the real estate game.
Fundrise emphasizes investment in “real estate investment trusts,” or REITS, and offers four tiers of membership plan based on investing goals: Starter, Supplemental Income, Balanced Investing, and Long-Term Growth. The titles speak for themselves and describe the focus of the REIT you’ll be investing in.
Fundrise is a fantastic service offering new opportunities for real estate investment for the everyday investor. You don’t need hundreds of thousands of dollars to invest in real estate, nor do you need to take a high-interest rate loan out (like a mortgage in today’s Federal Reserve exponential rate increase environment).
Instead, you can get started with an account balance as low as $10 for the starter option. Additionally, fees are capped at 1% annually (0.85% management plus 0.15% advisory). This is very low for private equity fee structuring, although there are additional small fees if you withdraw money before agreed-upon exit windows.
In addition to the basic cost of capital, Fundrise’s platform and tier/strategy structure are intuitive and easy to navigate, especially as you learn how the real estate sector works.
Not only has the overall real estate market skyrocketed over recent years, but Fundrise has a long-term average (amongst all tiers) return in the 11% range. This return is fantastic and is especially important to offset coming stock market losses with more tangible equities and less sensitivity to stock problems.
What are some of the downsides?
- Market Risk. This isn’t just applicable to Fundrise – as we saw in 2008, the real estate market isn’t impenetrable, and crashes can still happen. Luckily, post-crisis legislation and regulation have helped mitigate the potential of future issues like we saw in 2008.
- Fees. This is a benefit we mentioned, but although baseline fees are meager, there can be complicated fee and penalty structures if you elect to withdraw money before the expiration window you agree to when investing. It’s always important to read whatever agreement you sign when investing with a new service, but the complex structure of Fundrise contingency fees amplifies the importance.
DiversyFund offers only two REITs instead of the tiered structure offered by Fundrise, and both focus on multifamily projects with 100+ units. Since these are projects in various stages of development, you can expect 5+ years before you see significant returns, and those returns are typically around 10%.
DiversyFund, like Fundrise, is available to accredited and non-accredited investors – but, unlike Fundrise, requires a minimum investment of $500.
Real estate investment trusts, or REITs, are broad, publicly-available equities that represent a firm’s stake in income-generating real estate. Think condos, malls, resorts, whatever – tons of REIT options are available.
Since REITs are traded like stocks, they have many of the same benefits and downsides. For example, when looking for an initial investment, you will be required to invest a minimum of the price of one share – which can range from $100 to $1000+, compared to Fundrise’s minimum investment requirement ($10).
You will also have to do your due diligence when selecting the REITs you invest in. You’ll need to determine and manage risk profile, risk-adjusted returns, management fees, and costs – the list is endless. Compare this to Fundrise’s wholly managed, diversified, and risk-adjusted offerings with transparent baseline fees.
CrowdStreet is a premium, exclusive, and the far less-accessible option to Fundrise. Available only to accredited investors (an SEC designation based on net worth, income, or other factors), CrowdStreet also requires a $25,000 minimum investment compared to Fundrise.
The exclusivity is a win – if you meet the terms of accredited investor status. But many don’t, especially new entrants to real estate, so the high barrier to entry is also CrowdStreet’s main drawback for the typical investor. The high account minimums, and extended project horizon, also mean that a good chunk of your capital can be tied up with CrowdStreet for a long time.
RealtyMogul, like Crowdstreet, is a crowdfunding platform. Unlike Crowdstreet, it is more accessible but requires a $5,000 minimum investment compared to Fundrise’s $10. Like, DiversyFund, it offers two REITs, with MogulREIT I investing in commercial real estate and MogulREIT II investing in multifamily apartments and similar projects. Unfortunately, the high investment costs and relative lack of track record make it less attractive to a newer real estate investor than Fundrise.
The Bottom Line
Fundrise is the real estate winner by a mile. With access to anyone, even non-accredited investors, low account minimums, and a proven record of success, Fundrise should be the number one choice for new and experienced investors alike.
No matter the macroeconomic conditions, people need places to live, work, and shop – Fundrise has that covered and can provide non-correlated market returns to offset any losses in the stock market as volatility increases.
Ready to get started? Click here to explore all of Fundrise’s exciting opportunities for investment.