Fundrise vs Rental Property 2023

If you’re thinking about investing in real estate, you might wonder which investments offer the best returns.

When it comes to real estate investments, there are usually plenty of choices and it can be a little confusing.

Two of the most popular choices are crowdfunding platforms and purchasing a rental property yourself.

Each one comes with its own unique pros and cons.

Fundrise Is Better For:Rental Property Is Better For:
Moderate-Risk InvestingAsset Appreciation
Balanced InvestingShort Term Investments
Passive IncomeDirect Ownership
The Average InvestorIndividual Investment Decisions

When comparing Fundrise vs a rental property there are a few factors to consider. One of the biggest is upfront costs.

The everyday investors aren’t likely to have a spare $20,000 – $50,000 lying around for a home deposit.

Today there are many ways to purchase an investment property that don’t require huge upfront investments.

Let’s take a closer look at the crowdfunding platform Fundrise and how it stacks up against a traditional rental property.

Let us look at some comparisons:

Rental Property
Minimum Investment $10 Typically 20% Deposit ($20,000 - $50,000+)
Securities Analyzed Commercial Properties, Apartment Complexes, Real Estate Investment Trusts Real Estate
Fees 0.15% - 0.85% Annual Management Fee Variable
Horizon Considered 5+ Years 1 - 20+ years
Modest Money Overall Rating
4.6 rating based on 5 ratings
4.2 rating based on 5 ratings

Fundrise vs Rental Property: Determining Factors?

There are always going to be pros and cons for both. Choosing the right investment for you will depend on your circumstances and investing strategy.

Below are three important determining factors when comparing Fundrise vs rental properties.

Factor 1: Investment Minimums

Upfront costs for any investment will vary depending on the real estate investing platform you’re looking at.

If you don’t have a large deposit for a rental property then getting started with Fundrise for $10 is your best bet.

Fundrise Is Preferable To Rental Property

  • Fundrise lets you invest in real estate for a minimum investment of $10.
  • Fundrise allows you to build a diversified portfolio through real estate investment trusts.

Fundrise: Investment Minimums

Where else can you get started investing in real estate for a minimum investment of $10?

Compare this to traditional real estate investments that would require tens of thousands of dollars for a down payment, you can see why so many people love real estate crowdfunding platforms.

Fundrise actually offers users five membership levels.

  • Starter ($10)
  • Basic ($1,000)
  • Core ($5,000)
  • Advanced ($10,000)
  • Premium ($100,000)

If you can afford to get started on a higher membership level then you should. Fundrise is a legit platform that rewards its users and allows you to invest in alternative investments at higher membership levels.

Read more about Fundrise here.

Rental Property: Investment Minimums

Rental properties will typically require you to put down a minimum 20% deposit. With the price of homes continuing to rise, this can equate to $20,000 – $50,000 depending on your area.

This is significantly more than the Advanced package Fundrise offers.

Factor 2: Returns

Everyone expects a return on investment and investing in rental properties is no different.

Where it gets tricky is being able to accurately determine exactly what your expected returns are going to be.

There are just so many variables.

With real estate crowdfunding platforms, all the guesswork is usually taken out and you will have a clear idea of your expected returns.

Fundrise: Returns

From 2017 through to 2022 Fundrise has an average annual return between 5% and 23%.

Fundrise has a good track record and currently boasts over 370,000 active real-estate investors who contribute around $7 billion in transactions and $226 million in dividends.

Rental Property: Returns

If you’re looking for a long-term investment, buying rental properties might be more profitable than buying properties through crowdfunding sites.

Rental properties often offer a positive annualized rate of return (returns expressed as an interest rate). This can range anywhere from 10% – 20% on average.

But truthfully, it’s quite complex to estimate and is far from 100% certainty.

When it comes to buying real estate for investment purposes, there are no guarantees when it comes to making a profit. It’s important to conduct thorough research before investing.

Renting out property can be profitable in multiple ways.

You could generate rental revenue, increase the value of your house, lower your monthly payments, and gain rental appreciation.

There are many factors that determine whether a rental house will be a financial success, including such things as location, and market conditions.

Other factors are:

  • Purchase price
  • Rental income
  • Appreciation of equity values
  • Operating costs (rent, utilities, repairs)
  • Operating losses (such as occupancy loss, late fees, and damage charges)

There are many reasons why old-school investors will swear to buy traditional rental properties.

Many are likely to have previous success or know someone that has. But as time goes on, market conditions change and it’s not so clear cut.

There are lots of factors to consider so make sure to spend the time and do your research.

Factor 3: Investor Experience

Investing in a crowdfunding real estate platform like Fundraise requires little to no market knowledge.

If you’re new to real estate investing, starting out with a low-barrier-of-entry platform like Fundrise may be a better choice than an established property management company.

Rental properties can require more time and effort to manage, and they don’t always rent easily leaving you high and dry.

Also, consider that you’re a newbie and there is a higher potential to make a mistake that can cost you money.

Managing your own property isn’t easy.

Fundrise: Investor Experience

Fundrise is incredibly easy to use and you don’t have to spend time searching through thousands of houses to find ones that are likely to turn a profit.

The application enables investors to browse listings they can invest in to make a passive income.

If you’re looking for fast profits (less than 12 months), then Fundrise may not be the best choice for you.

As Fundrise typically holds their investments for around five (5) years, they want you to keep your money invested for that long.

Since real estate developments take time to materialize, Fundrise imposes a 1% penalty on early exits.

This may pose a problem for investors with short-term goals.

Learn More About Fundrise

Rental Property: Investor Experience

Managing a rental property requires a lot of time and effort to be successful.

You’ll be responsible for finding and vetting potential renters, fulfilling their needs, and collecting rent payments.

You could consider hiring a property management company, which would take some stress away. But, it will also eat into your profits.

This alone might be enough for you to go with a crowdfunding platform.

Fundrise vs Rental Property: The Bottom Line

Both Fundrise and rental properties will allow an investor to profit from real estate investment by leveraging the value of the underlying assets (real estate) through ownership.

But each has its own unique advantages and drawbacks when compared to one another.

If you’re willing to put forth extra effort into making sure the investment works out well, owning a rental property may be the better choice for you.

If you’re looking for a way to generate passive revenue without working too hard, then Fundrise might be right up your alley.

It’s likely that most people choose to invest using Fundrise because they want access to a diverse set of investments without having to manage them themselves.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.