Fundrise vs VNQ: Which real estate investing platform is better?

Jeremy Biberdorf
By: Jeremy Biberdorf
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Disclosure: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on Modest Money.

Fundrise is an online platform that invests in real estate projects that allows ordinary people to invest in private commercial properties for as little as $10.

While online real estate investing platforms are relatively new, earning passive income via investment in real estate is not.

Over 145 million American investors have purchased shares of REITs. One of the most well-known and trusted providers of these REITS is Vanguard (VNQ).

Fundrise Is Better For:VNQ Is Better For:
Moderate-Risk InvestingShort-Term Investors Who Value Liquidity
Private Real Estate InvestmentHigh Volatility
Long Term Investors (5+ Years)Liquidity

Both of these are great options for investors and each offers unique opportunities compared to their competitors.

Let’s take a closer look at comparing the Fundrise vs Vanguard REITs.

Let us look at some comparisons:

Fundrise VNQ
Minimum Investment $10 Cost Of 1 Share
Securities Analyzed Commercial Properties, Apartment Complexes, Real Estate Investment Trusts Stocks. Bonds. Mutual funds, ETFs. Options
Fees 0.15% - 0.85% Annual Management Fee No closing, inactivity, or transfer fees.$20 annual account service fee for all brokerage accounts and IRAs
Horizon Considered 5+ Years Short or Long term
Modest Money Overall Rating
4.6 rating based on 5 ratings
4.2 rating based on 5 ratings

Fundrise vs VNQ: Determining Factors?

Private REITs and Publicly Traded REITs allow you to invest in a diversified set of real estate properties without having to manage them yourself.

Here are some things to think about when investing in Fundrise or Vanguard REIT.

Factor 1: Investment Minimums

Lower investment minimums open the door to all investors to invest in real estate and REITs.

Below are the investment minimums for Fundrise vs a Vanguard REIT.

Fundrise Is Preferable To VNQ

  • Fundrise is only $10 to get started and beginner friendly
  • No need to go through a broker service

Fundrise: Investment Minimums

You can get started with Fundrise for as little as $10 and start investing in real estate.

Fundrise is a legit way to build your real estate investment portfolio without being too hand on.

For those looking into investing in alternative investments, then go for one of the higher membership levels.

Read more about Fundrise here.

VNQ: Investment Minimums

Investing with Vanguard will require buying a minimum of one share.

Most Vanguard retirement plans and the Vanguard STAR fund require an initial investment of at least $1000, and other Vanguard plans require an initial investment of $3000.

Minimum investment amounts of $1000 to $3000 may be too high for most beginners investing in stocks.

Factor 2: Performance

Previous performance history is important when considering where to invest your money.

Keep in mind, no one can guarantee that past performance will equate to future performance.

Below is the performance of Fundrise vs VNQ (Vanguard REIT).

Fundrise: Performance

From 2017 through 2022 Fundrise averaged an annual return between 5% and 23%.

Fundrise has over 370,000 active members who collectively invest around $7 billion in real estate properties and receive an average of $226 million in annual dividends.

Although relatively new, Fundrise has previously outperformed VNQ and may continue to do so.

Fundrise cannot guarantee these returns though.

Vanguard REIT: Performance

Over the past 10 years, VNQ has returned an average annual rate of return of 4.91%, comprising 168 equities with dividend yields of 3.02%.

Here are the results from a Vanguard REIT over the past five years compared to the results of Fundrise.

  • 2014: VNQ returned 30.4% vs Fundrise – 12.3%
  • 2015: VNQ returned 2.4% vs Fundrise returned 12.4%
  • 2016: VNQ returned 8.5% vs Fundrise returned 8.8%
  • 2017: VNQ returned 5.0% vs Fundrise returned 10.6%
  • 2018: VNQ returned -6.0% vs Fundrise returned 8.8%
  • 2019: VNQ returned 28.9% vs Fundrise returned 9.2%
  • 2020: VNQ returned -4.7% vs Fundrise returned 7.3%
  • 2021: VNQ returned 40.4% vs Fundrise returned 23.0%

Factor 3: Investor Experience

Investors should have a good experience using a platform to make their investments. No one wants a clunky, lengthy, difficult process.

Thankfully, both Fundrise and VNQ make it easy enough to start investing without any hassle. It’s now easier to build a diversified portfolio without having to leave your home.

Fundrise: Investor Experience

Fundrise is extremely user-friendly and doesn’t require you to sift through thousands of homes to find ones that are most likely to be profitable.

If you’re looking to take profits quickly (less than 12 months), then Fundrise may not be the best choice for you. That’s because Fundrise typically holds their investments for around five (5) years.

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

Overall, investors will have a very positive experience investing with Fundrise.
Learn More

VNQ: Investor Experience

An online investing platform isn’t for everyone and some investors like the idea of investing through a REIT Index Fund that’s been around for what feels like the dawn of time.

You can invest in a REIT Index Fund through an online broker or via VNQ brokers.

There are many to choose from, including

  • Vanguard Real Estate ETF (VNQ)
  • Vanguard Real Estate Index Investor (VGSIX)

One of the advantages of investing with VNQ is that you can sell your positions whenever you want, unlike Fundrise.

Fundrise vs VNQ: The Bottom Line

VNQ is suitable for investors seeking dividend income and long-term growth through targeted exposure to the Real Estate industry.

Fundrise eREIT investments are lower in cost for investors than those of the Vanguard REIT ETF (VNQ) and also come with the potential for better returns.

If you’re a new real estate investor and you have limited funds available, go for Fundrise. Fundrise is also a good choice for experienced investors looking for something different that can potentially bring higher returns than VNQ.

Happy investing!