By: Jeremy Biberdorf
March 29, 2022
Disclosure: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on Modest Money.
Fundrise is marketed as one of the easier ways to get into the real estate market, but are the returns worth it? The platform looks great on the surface, with low minimums and an easy-to-understand process, but there has to be a catch, right?
Most of us invest in order to reap the returns, so let’s take a look at what Fundrise’s average returns are, then dive deeper into Fundrise’s performance so you can decide for yourselves.
Fundrise at a Glance
Real estate investing has been synonymous with wealth (and expanding said wealth). This is no longer true because platforms like Fundrise aim to eliminate the high barriers of entry that used to hinder the average person from getting a piece of the pie.
Fundrise’s main product is real estate investment trusts (REITs, or eREITs as the platform calls them). You would purchase one of Fundrise’s plans, which are: Starter, Supplemental Income, Balanced Investing, and Long-term Growth. The title of each plan speaks for itself.
You can also choose from 2 account levels (Advanced and Premium), which will help you gain access to even more real estate investment opportunities.
Fundrise Pros and Cons
It sounds amazing, because now every average Joe in a middle-class income bracket (or even lower) will have an entry point into real estate investing, but are there any downsides to opening these doors, in other words, do the pros outweigh the cons?
Pros
- Do not need to be an accredited investor to use
- Very low investment minimum
- Investment selections
- Easy-to-use platform
- Redemption options
- Decent returns
Cons
- There are some fees involved, which are complicated
Fundrise Average Returns
As time goes on, Fundrise’s average returns will change. What we can do is look at past Fundrise performance’s over the years to find an average. Let’s take a look at its annualized return figures by year.
The real-time return chart (which is updated daily) shows a 10% return is pretty standard after each year. After two years, an account sees a rough 19.4% return, then 32% after 3 years, 45.7% after 4 years, 57.9% after 5 years, and an impressive 74.7% after 6.
The growth we see illustrated in the charge is gradual but considered exponential. While it is a very encouraging visual of what your Fundrise account can do for you, it’s important for us to remind investors that past performances are not indicative of the future.
That being said, real estate is a pretty strong market to invest in as there will always be a demand, and some cities have seen drastic growth (with room for more) over the past decade or two. Imagine if you had invested in real estate in these cities before the market boom, your net worth could have grown by millions (we’re looking at you Sydney, Tokyo, and Vancouver).
You can also see the annualized return of client accounts split into all clients on Fundrise, public U.S. REITs, and public stocks. It’s an overview from the year 2017 to 2021, with returns of 10.63%, 8.81%, 9.16%, 7.31%, and an amazing 22.99% respectively.
Fundrise VS REITs
What’s the real difference between Fundrise REITs and standard REITs? Well, one of the biggest elements is that Fundrise REITs are not publicly traded, which means they are also highly illiquid. However, the benefit of not having to do too much work yourself because Fundrise has tailored profiles that can meet your needs can outweigh the illiquidity.
Fundrise offers low minimum investments, unlike regular REITs, which makes the barrier of entry much more realistic for many. We mentioned that there may be a catch, and unfortunately, there is. Fundrise charges fees that soar past that of regular REITs. You will be slapped with a 1% annual fee of your total, which encompasses an 0.85% asset management fee and the rest of that 1% is for advisory services.
Compared to regular REITs, which charge 0.50%, the fee difference can be enormous depending on your asset values. As for the returns, Fundrise private eREITs may not see the same high returns as public standard REITs, which can sometimes outdo the S&P 500!
Is there a right answer for Fundrise VS REITs? If you have the funds, then the answer is quite clear. However, not many people have enough assets to get accreditation, which makes Fundrise the best and only choice.
Final Thoughts
From the data we gathered for Fundrise between 2017 and 2021, the annualized returns instilled our confidence within the platform. Even if past performance is not indicative of the future, it can be used as a gauge, and that of Fundrise happens to be a rather positive one. If you don’t have the funds and want to add real estate investments into your portfolio for diversity, Fundrise is an excellent choice.
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