Is Fundrise a Scam?

Jeremy BiberdorfBy: Jeremy Biberdorf

June 20, 2023June 20, 2023


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

Investors like yourself may be searching for new ways to invest in the real estate market and one attractive option that has recently emerged is Fundrise. But, like with any investment opportunity in today’s digital age, you must be cautious and do your due diligence before diving in.

You don’t want to risk your hard-earned money on a scam or a platform that’s not trustworthy. In this article, we’ll dive into the details of Fundrise to determine if it’s a legitimate platform and if it’s worth the investment. So, let’s tackle the burning question: is Fundrise a scam?

For an in-depth look into Fundrise check out our full review.

Learn More About Fundrise

Company Background

Fundrise is a real estate investing platform that was founded in 2010 by Ben and Dan Miller. The company is headquartered in Washington, D.C. and has since grown rapidly to become one of the most popular real estate investing platforms in the industry.

Fundrise allows investors to pool their money together to invest in a range of real estate projects, typically commercial and residential real estate properties. These properties are managed by Fundrise, and investors can expect to receive returns in the form of rental income, interest payments, and appreciation.

Fundrise is a legitimate investment platform that is registered with the US Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). These regulatory organizations ensure that Fundrise meets certain standards for investor protection and transparency.

Features and Benefits of Fundrise

Here are some key features of Fundrise that show it’s a legitimate platform:

  1. Investment Portfolio Customization: With Fundrise, investors can customize their real estate portfolios to fit their individual investment goals and risk tolerance.
  2. Low Minimum Investment: Investors can start investing in Fundrise with a minimum investment of just $500, making it accessible to a wide range of individuals.
  3. Transparency: Fundrise provides extensive information about each of the properties it manages, including location, tenant details, and projected returns.
  4. Diversification: Through investing in Fundrise eREITs and eFunds, investors gain exposure to a diversified range of real estate properties, not just single projects.
  5. Performance: Fundrise claims to have consistently outperformed private and public equity REITs since its inception.

Refuting Claims from a Negative Customer Review

“I feel like a total fool for investing with Fundrise. They seemed to be returning a decent rate – not great but okay, until the day I wanted to liquidate my shares and make a withdrawal. Little did I realize that 50% of my “investment” went into something they called an “Illiquid IPO”, which they now describe thusly: “Fundrise iPO investors should be prepared to hold the investment indefinitely”, and also: “redemption may be limited or suspended, or there may be no possibility of redemption”
Hold the investment Indefinitely? How is that even an investment? It’s a DONATION.
In other words, I just donated money to Fundrise with no way to get it back. That’s quite an investment scheme! This fact wasn’t brought to my attention at the time I invested several years ago. I’m now reporting them to the Federal Trade Commission and the Attorney General for fraud.”

In the negative review provided above, the investor claims they were not informed of the “illiquid IPO” situation when they initially invested several years ago. Let’s address this issue:

  1. IPO Illiquidity: Illiquidity is a known factor when investing in private market assets, including real estate projects. Prior to investing, Fundrise provides detailed disclosures explaining the risks and potential limitations associated with investing in these types of assets.
  2. Redemptions: Fundrise states in its investment terms that they may limit or suspend redemptions in certain situations. These restrictions exist to protect the stability of investments and ensure fairness to all investors.
  3. Information Availability: The information pertaining to illiquidity and restrictions on redemptions is made available to all potential investors through the platform’s offering materials and is not hidden or obfuscated.

Drawbacks of Fundrise

While Fundrise presents an attractive investment opportunity for many, it might not be suitable for certain types of investors. Some drawbacks include:

  1. Liquidity Limitations: As mentioned earlier, investments in Fundrise can be relatively illiquid compared to investments in publicly traded securities.
  2. Limited Control: Investors do not have direct control over the underlying properties in their portfolios; decisions are made by Fundrise’s management team.
  3. Fees: Although Fundrise fees are lower than many other investment platforms, the platform still charges a 0.85% annual asset management fee and a 0.15% annual investment advisory fee.

Security and Privacy

Fundrise takes the security and privacy of its users very seriously:

  1. Encryption: Fundrise uses bank-level encryption to keep user data and information safe.
  2. Two-Factor Authentication: Fundrise offers two-factor authentication, adding an extra layer of security to user accounts.
  3. Account Protection: As a member of FINRA, Fundrise must adhere to strict standards for ensuring investor protection and transparency.
  4. Privacy Policy: Fundrise has a clear and transparent privacy policy; the platform doesn’t sell user data to third parties or share information with advertisers.

Final Verdict: Is Fundrise a Scam?

After evaluating Fundrise’s background, features, drawbacks, security measures, and addressing the claims made in the negative customer review, we can conclude that Fundrise is not a scam. It is a legitimate real estate investment platform that offers opportunities for investors to diversify their portfolios and potentially achieve attractive returns.

However, it’s important to understand the risks involved and research the platform thoroughly before committing any funds. Make informed investment decisions based on your financial goals, investment timeline, and risk tolerance.

Click here to learn more about Fundrise.

If you’re still unsure if Fundrise is a scam, you might want to check out First National Realty Partners.

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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