There is no doubt that real estate continues to be a strong investment. That is likely the reason we have seen new platforms, such as Roofstock and Fundrise coming to market.
Each platform takes a solid form of investment in real estate and makes the process a whole lot easier. Not only that, but they also make real estate investing more accessible for the average investor.
Thus, this post will look at Roofstock vs. Fundrise to help you decide where you should invest your next chunk of change.
What is Fundrise?
Fundrise is a real estate crowdfunding platform that allows investors to pool their money to buy large, commercial real estate properties.
With a minimum investment of $500, Fundrise substantially lowers
the barrier to entry for commercial real estate investing. It does come with its own set of pros and cons, however, which we will cover in this post.
Fundrise has four different account levels, each with their own minimum investment:
- Starter - $500
- Core - $1,000
- Advanced - $10,000
- Premium - $100,000
Here, we’ll take a look at what you get for each investment level.
As you can likely guess, Starter is the most basic account level and offers the fewest perks. At this level, you can invest your $500, but you can’t invest in individual funds.
In other words, at this level, you can’t actually invest in properties of your choice. So while this option isn’t bad for someone who is just starting out, those wanting the true crowdfunding experience will have to upgrade.
Investing in the Core plan gives you access to a number of features, including eREITs and the choice of three different plans: Income, Balanced, and Long-Term Growth.
Thus, you’ll have the choice of investing in an eREIT that aligns with your investing goals.
You also gain the ability to open a self-directed IRA at this level. This allows you to use your IRA to invest in commercial real estate. You also get 3 months of advisory fees waived for each referral.
Advanced plans give you the option to invest in eFunds. These funds invest in for-sale housing for first-time, move-up, and active adult homebuyers in Los Angeles.
This level also allows you to allocate directly to most of Fundrise’s funds plus 6 months of advisory fees waived for each referral.
With the Premium plan, you gain priority access to Fundrise’s investments team plus 12 months of advisory fees waived for each referral.
The basic fee structure for Fundrise investments is a 0.15% advisory fee (waived with referrals), plus a 0.85% asset management fee charged by eREITs and eFunds in your Fundrise portfolio.
That adds up to a 1% annual fee, which is slightly high, though still lower than what a human financial advisor would charge.
Also note that Fundrise may charge other fees depending on the investment and circumstances. These include development costs, disposition fees, and penalties for premature redemption.
Fundrise Pros and Cons
Fundrise has its own set of pros and cons. Let’s take a look at what they are.
- Low minimum investment - only $500 required to get started.
- Fees are relatively low.
- You don’t have to be an accredited investor.
- You can choose between multiple investment strategies.
- You can’t select your investment strategy with the Starter plan.
- Fees can be complicated in some scenarios.
- Investments are illiquid despite not directly owning properties.
Get started with Fundrise to invest in its REITs.
What is Roofstock?
Roofstock is a real estate investment marketplace that allows investors to purchase single-family homes. Roofstock doesn’t actually involve pooling money with other investors; instead, you own your properties directly.
Thus, Roofstock isn’t exactly a crowdfunding platform in the truest sense of the word. Nevertheless, it has been labeled as real estate crowdfunding at times.
This certainly raises the minimum investment, but it does allow you to own investment properties directly. Plus, you are able to finance your investment properties if necessary.
Still, that does leave you with a greater minimum investment. Even if you finance your rental properties, you would likely have to make a 20% down payment.
Roofstock does offer a service called Roofstock One which is actually does work more like crowdfunding. This service allows you to buy shares in rental homes, and the minimum investment is $5,000.
The main feature of Roofstock is that it streamlines the whole process of buying investment properties. Normally, you would have to find your properties, property management company, financing, and so on, in separate places.
Roofstock also arranges inspections for you; in fact, many of the properties are already occupied. The result is that Roofstock becomes a one-stop-shop for the entire investment property acquisition process.
It also provides plenty of information on each property, including photos, projected investment performance, neighborhood ratings, and property inspections.
And because Roofstock helps you find a property management company, there’s no need to live in the city where the homes are located.
This has all been from the perspective of the potential buyer, but note that Roofstock supports both purchases of and sales of investment properties.
Fees for Roofstock are a bit simpler than they are with Fundrise. There is just one fee structure each for buyers and sellers:
- Buyers - $500 or 0.5% of the sale price (whichever is greater).
- Sellers - $2,500 or 3.0% of the sale price (whichever is greater).
Roofstock Pros and Cons
Let's take a look at the pros and cons we can expect from a Roofstock investment.
- Fees are relatively low and there are no ongoing fees.
- Thorough home inspections.
- You own your own properties.
- Large down payments (except when using Roofstock One).
- Owners pay for repairs
- Investments are not liquid (as is usually the case with real estate).
Join Roofstock to buy your first rental property.
Comparing Roofstock and Fundrise
Greater of 0.5% or $500
$5,000 (Roofstock One)
Only for Roofstock One
Both Roofstock and Fundrise have great opportunities for people who want to invest in real estate. That said, the platforms are quite a bit different and neither will be right for everyone.
Roofstock’s main service allows you to directly own your investment properties. Plus, fees are low and there are no monthly or annual fees.
That said, down payments are going to be high with Roofstock, unless you opt for Roofstock one. Roofstock one has a somewhat more reasonable minimum of $5,000, which is much lower than a typical downpayment.
Fundrise works differently in that it is more of a purely crowdfunded operation. You will likely pay more in fees in the long run with Fundrise, but the minimum investment is much more manageable at $500.
With Fundrise, you don’t actually invest in specific properties, but it does give you the opportunity to choose between different investment strategies.
Both Roofstock and Fundrise have the downside of a lack of liquidity. While this is to be expected with real estate investments, it would be nice if there was some investment option that could address the liquidity issue.
Perhaps that will happen as these platforms continue to grow.
For now, they remain strong investments and a good way to bring in supplemental income or long-term growth.