FinanceBuzz is reader-supported. If you aren't an accredited investor, then you can only use Fundrise. The information on Investing Simple could be different from what you find when visiting a third-party website. Depending on your goals (income versus equity growth) and time horizon, one platform may be a better fit for you. In addition to pioneering the eREIT, Fundrise has also created another real estate crowdfunding vehicle called the eFund. Fundrise does have support for private REITs, while RealtyShares does not. These investments are very liquid and you can buy or sell at any time. Before getting into more detail, here is a quick overview of Groundfloor and Fundrise. This allows the investment to avoid the double taxation that C Corporations face, however this will likely cause your gains to be taxed at your normal income tax rate instead of your capital gains rate. Learn more about REITs. Lastly, if you are on the fence about investing in a REIT, their 90-day money-back guarantee is a great way to get your feet wet with no risk. With an eREIT you're able to access a growing portfolio of real estate projects by pooling your money with other investors. Fundrise has taken a new approach to the traditional REIT structure with the introduction of the eREIT. Professional management, lower minimum investment, and diversification are just a few of the benefits of these real estate investments. There are two major points that make this an attractive investment: It uses […]. You simply invest your money and let the experts lend their expertise. A REIT is a company that owns and operates income-producing properties on behalf of real estate investors. On the positive side, the price of your shares is not subject to the volatility of the stock market. Just keep in mind that any money you invest with Fundrise may not be accessible for several years until the fund issues distributions, liquidates a property from its portfolio, or approves of your withdrawal. Fundrise is like private REIT; and private REITs have a horrible long term track record due to conflicts of interests and higher fees. eREITs are unique to Fundrise, and they offer a number of benefits that are not typically offered by a traditional non traded REIT or publicly traded REIT. REITs work like this: the REIT as a whole owns the real estate, but individual investors own REIT shares. Here are the returns from the Vanguard VNQ REIT over the last 5 years compared to the returns of Fundrise. Long-term investors who want a diversified real estate portfolio customized to their needs. REITs are attractive investments because of the relatively high dividend yields along with the ability to provide passive exposure to real estate. In some cases, it’s my view these are not true apples-to-apples comparisons.At virtually every step along the way, the fund's managers have the capacity to collect anot… Most of the investments in this eREIT are commercial real estate assets along with commercial real estate debt. Non-traded or private REITs may require an investor to be accredited. © Copyright 2018 - 2020 Investing Simple LLC. A REIT will be more correlated with the stock market than Fundrise because it trades on the exchange. Specifically, Houston, Dallas, Chicago, and Denver metro areas. If you’re an accredited investor, you can invest in individual property offerings. By qualifying as a REIT, it can deduct all shareholder dividends from its income to reduce its taxable income to zero. All Rights Reserved. Ryan Scribner is a personal finance YouTuber that is approaching 500,000 subscribers on his channel. Real estate crowdfunding platforms like Fundrise allow individual investors to participate in larger real estate transactions normally reserved for accredited investors. Fundrise builds the eFunds using a slightly different structure compared to traditional REITs. If you're optimistic about a particular area, taking advantage of an eFund can provide you with significant concentration there while still diversifying your investment across dozens of different projects. Groundfloor. Mutual funds generally can be purchased directly from the mutual fund company that runs the fund. That term refers to the fact that banks typically don’t open until 9:00 AM, and then close their doors by 5:00 PM. We have not included all available products or offers. Publicly-traded REIT stocks, mutual funds, and ETFs can be purchased through a brokerage account. Fundrise vs REIT Comparison Fundrise is an online platform that matches investors with real estate investment opportunities. Top 13 Robo Advisor's Fee Comparison 2021: Which Is Best? Then Fundrise is able to scout out new deals and add them to the portfolio. Examples of REIT property specialties include: It depends upon the type of REIT you are investing in. So you might be wondering is Fundrise a REIT? This eREIT focuses on acquisition of commercial real estate assets with a goal of value appreciation over time. Your money is pooled with other investors to fund these real estate deals, similar to how Kickstarter might fund the launch of a product. Historically, Fundrise has less return volatility when compared to Vanguard. Both platforms definitely have their benefits. A real estate investment trust (abbreviated as REIT) is a company that owns, finances, or operates income-producing real estate and may operate across various property sectors. The Washington DC eFund is one of two market-specific eFunds currently offered by Fundrise. Compared to many of the best real estate crowdfunding sites, Realty Mogul fees are rock bottom.. From stock screening and charting, to investment research and portfolio construction, Stock Rover provides a robust all-in-one platform for the do it yourself investor. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee. A diversified investment portfolio may include a combination of stocks, bonds, real estate, and other asset classes. Choosing the right product and service is essential for your investing. Learn more about how we make money and our editorial policies. It’s a curious case where stocks tend to take the stairs up, but the elevator down. 6 Surprisingly Simple Moves To Boost Your Credit, 5 Must-Have Apps That Will Completely Change How We Invest, invest in real estate without buying property, 7 important differences between Fundrise and REITs. Ultimately, you are responsible for your financial decisions. Some REITs do require investors to be accredited, however, the Vanguard Real Estate ETF does not. The primary distinction between the two is that instead of paying out dividends like a REIT or eREIT, eFunds are structured as partnerships and pay out distributions to investors. Similar to the DC eFund, this fund aims to generate returns through appreciation rather than income. Fundrise is a real estate investment platform that allows investors to buy shares of non-publicly traded eREITs and eFunds that hold real estate projects. For investors looking to capitalize on the large millennial population in LA migrating from apartments to owning their own homes, the Los Angeles eFund could provide an effective way to do so. Fundrise vs Vanguard REIT (VNQ) 2021: Which Is Better? No, you do not need to be an accredited investor to invest with Fundrise. It is important to understand the difference between Fundrise and other publicly traded real estate investments like this Vanguard REIT. People have been investing in traditional publicly traded and private REITs since their invention in the 1960’s. With Groundfloor, you choose individual projects to invest in and how much money you wa… For example, consider American Tower Corporation. When it comes to traditional REITS, there are many different types for investors to choose from. Fundrise is a real estate crowdfunding platform allowing non-accredited investors. This is simple to do and can all be done online. Fundrise allows for a well-diversified portfolio of commercial and residential real estate at a low minimum investment. When you invest with Fundrise, your money gets invested into different funds that acquire commercial real estate. The simplest way is to invest in REITs that are available on the public market. One of the most popular providers of these traditional REIT investments is Vanguard. Diversifying your investments to include real estate and other non-correlated assets can help reduce risk and improve returns. FinanceBuzz is not a financial institution and does not provide credit cards or any other financial products. Let’s take a look at the performance of these investments over the last few years. Though we certainly don’t want to say […], How To Retire Early With Dividend Investing, How Much Invested To Retire Off Dividends, How to Value a Stock Fundamental Analysis, Top 11 Real Estate Crowdfunding Platforms, Top 13 Real Estate Crowdfunding Platforms For Accredited Investors, Top 8 Real Estate Crowdfunding Platforms For Non-Accredited Investors, 7 Ways To Diversify Your Real Estate Investments, 45 Part Time Jobs To Make Some Extra Money, Fundrise is a new crowdfunded real estate platform offered to both non-accredited and accredited investors, Vanguard is a pioneer of the discount fund company and one of the first to offer, Fundrise has a more consistent return history with, Fundrise has a 1% annual fee for managing your portfolio and managing the real estate assets themselves, Vanguard has no fee for buying or selling the VNQ ETF, which is offered on a variety of brokerage platforms. Fundrise has created a new investment called the eREIT, which is a non traded REIT offered on the platform. One of the main differences between Fundrise's eREIT and a traditional REIT is the level of liquidity. Yes, you can make money with Fundrise. Fundrise is a unique real estate investment, where most traditional REITs contain real estate that has already been purchased. Evaluate your options before you agree to invest. However, in all other years, Fundrise has had significantly better performance than the Vanguard REIT. The way it works is simple. The downside is that these are long-term investments and it may be years before you can liquidate your investment without a penalty. This is a low fee REIT that gives you exposure to a diverse collection of real estate. FINRA . Because of the risks involved in investing, you should have a long-term view, but there is peace of mind in knowing that most publicly-traded REITs and real estate mutual funds can be liquidated at any time. There is the potential to lose money even if you invest with a well-known name like Vanguard or professionals that have over 100 years of experience like Fundrise. To sign up with Fundrise, you'll need to provide some personal information for identification and tax purposes, select your investment objective, and fund your account. For non-traded REITs, you must speak with an investment advisor or someone who operates the REIT. This eREIT focuses on purchasing commercial real estate equity and debt along the East Coast of the US. This eREIT focuses on debt and equity commercial real estate investments in the West Coast region of the US with a focus on certain cities and metro areas. You can buy the stock of a public company that is operating as a REIT, a mutual fund or ETF that owns REITs and properties, or a closed-end REIT that is not publicly traded. Realty Mogul also offers REITs, but private placements as well. Another advantage is that non traded REITs are less correlated to the overall stock market, as they are not traded on an exchange. Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Here's our free guide that covers the basics of getting started with this investment. Since this is a private real estate investment, there is no secondary market. Although both Fundrise and traditional REITs offer diversification and a relatively low investment to start, these two real estate investments are not equal. This new provision in the securities act allows unaccredited investors to purchase up to $5 million worth of a security over a 12 month period. Fundrise Review 2021: Best Passive Real Estate Investment? With a minimum required investment of $500, investing in a well-diversified portfolio of real estate properties through Fundrise is open to everyone. Compensation may impact where offers appear. The only requirement is that you are a U.S. resident who has at least $500 to invest in one of its funds. These investments change hands just like stocks, and as a result the performance of the asset is heavily correlated with the overall stock market. Publicly traded REITs are very similar to a dividend stock. The dividends that shareholders receive are taxed as ordinary income; therefore, it makes sense to invest in REITs through a tax-advantaged account like an IRA or 401(k). Becoming an accredited investor requires a lot more money than the average investor has. There are many types of REITs to choose from. Early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return. You should only invest if you are comfortable with this liquidity and have a minimum time horizon of 5 years. Unlike publicly traded REITs, Fundrise and DiversyFund are private funds. Even though you can't individually pick and choose which projects you want to be invested in, an eFund will allow you to restrict your investments to a particular market. REITs can be a valuable addition to your investment portfolio. Most significantly, as the name implies, shares of non-traded REITs do not trade on a national securities exchange. These real estate investments generate income that is distributed to investors as dividends. Keep reading to learn whether Fundrise vs. REITS is the better real estate investment for your situation, and whether investing is just a personal finance goal or you have a dream to become a realty mogul. Publicly traded REITs trade on a major exchange like the NYSE or the NASDAQ. 1. Is this Vanguard REIT a better investment? So, why do investors buy these REITs? Not only are there plenty of independent robos, but nearly every major brokerage firm as at least one of their own. The primary objective of this eREIT is cash flow generation from purchasing real estate debt on commercial properties. Should I invest in Fundrise? Fundrise's second eFund contains 31 active projects in the Los Angeles area. Fundrise claims in its marketing that it saves investors “0.37-5.45%” annually on fees, in addition to savings of “23-40% up-front” compared to competing REITs, but investors should be mindful of the potentially high fee load and cost burden borne by its non-traded REITs. Why Invest In Fundrise vs. REITs. These demanding and high-value services are much more commonly characteristic of a private equity fund or other private market players. This is truly a passive real estate investment, unlike owning individual rental properties or becoming a wholesaler. The growth eREIT looks for opportunities in affordable housing complexes. Fundrise Vs REITs, A Real Estate Portfolio Made Easy For You. You may think of Fundrise as a private real estate investment trust (REIT) without the inclusion of fees associated with hiring a “middleman”. In order to be classified as a REIT, at least 90% of the taxable income needs to be passed along to shareholders in the form of dividends. There are two core types of real estate investment trusts; publicly traded REITs and non traded REITs. In this article, we will be comparing the "new school" investment which is Fundrise to the "old school" investment which is Vanguard REITs. Fundrise Fees vs Realty Mogul Fees Realty Mogul Fees. Specific cities include Los Angeles, San Francisco, San Diego, Seattle, and Portland. Although there are many benefits to investing with Fundrise, there are some downsides. Sourcing, underwriting, and closing new debt and equity real estate investments are not common practices of public REITs. While this platform is new, the concept of passively investing in real estate is not. An eFund is similar to an eREIT in that there is a pool of real estate investments that are split up and sold to investors. Fundrise released many of its eREITs over the last few years under a new provision of Regulation A. Only if you want exposure to the real estate market, are looking for a means of diversifying away from traditional stocks and bonds, or both. REITs can invest in a variety of real estate types. In this comparison guide, we'll look at the differences between Fundrise and REITs in general. Fundrise allows you to invest in a diversified portfolio of real estate projects and Fundrise’s teams manage these real estate portfolios. Fundrise has a quarterly redemption period, but they cannot guarantee liquidity. handful of entrepreneurial real estate firms have attempted to channel the “crowdfunding” model into the real estate investing world Fundrise takes a venture capital approach where they are constantly purchasing and selling real estate assets and debt. These REITs are less common because of their exclusivity, liquidity and often high front end load fees. Yes, Fundrise investors may receive quarterly dividends based on the performance of the real estate owned in their eFunds and eREITs. This fund's objective is to create appreciation by purchasing distressed houses, fixing them up, renting them out, and then selling the home at a higher price. That’s why I think comparing Fundrise to an actual REIT (one that is inside VNQ, no doubt) is the better comparison. When it comes to having support for private REITs, there is a clear division between Fundrise and RealtyShares. Fundrise vs. REITs Fundrise is a real estate investment platform that allows investors to buy shares of non-publicly traded eREITs and eFunds that hold real estate projects. Top 6 Brokerages For Pre-Market/After Hours Trading In 2021, Before online banking became a thing, people often complain about “banker’s hours." For more information, please read our. We only have a few years of returns to go off of, and that is not a large amount of data. Typically, a REIT will specialize in a certain niche depending upon its employees' expertise or opportunities in the real estate market. The stock market was extremely volatile in 2018, correcting by almost 20% in the fourth quarter alone after a 10% correction in February. All products are presented without warranty. By submitting this form you agree to receive emails from FinanceBuzz and to the privacy policy and terms. What is Fundrise? Fundrise has created a new investment called the eREIT, which is a non traded REIT offered on the platform. Fundrise’s mobile app is among the best investment apps that allows you to start investing and monitor the growth of your portfolio. Simply Put: Fundrise allows individual investors to invest in commercial real estate online through an eREIT (Real Estate Investment Trust) or an eFund. You are not typically required to be accredited and the minimum investment amounts vary. Today, over 70 million people in the US alone invest in REITs. This eREIT purchases senior to mezzanine level debt, which can be converted into equity in the asset or company at a later date. For REIT stocks and ETFs, you can usually start with one share. You can invest in publicly-traded REITs and REIT mutual funds and ETFs through a brokerage account. A traditional REIT requires 90% of the taxable earnings to be distributed to the investors in the form of dividends. However, investors need to be familiar with the liquidity of Fundrise before investing. When comparing real estate investment options, DiversyFund’s approach is unique. REITs in E*Trade. DiversyFund Liquidity. When it comes to traditional REITS, there are many different types for investors to choose from. For example, a share in a Fundrise eREIT (a non-traded REIT), does not change in value in response to a stock market spike or fall because its performance isn’t correlated with that of the stock market. One con with investing with Fundrise mentioned in our full review is the limited operating history. .12% annual expense ratio (as of Aug. 27, 2020), Stocks of REITs and companies that buy real estate, Self-directed brokerage accounts within company retirement accounts, Separate 1099-DIV and K-1 for each fund you invest in, 1099-B for sale of shares (if applicable). Not provide credit cards or any other financial products before you can buy into funds... Investment of $ 1,000 or more but the elevator down called the eREIT, Fundrise also! Had significantly better performance than the Vanguard real estate transactions normally reserved for accredited investors were only... And selling real estate investment trusts ; publicly traded REITs are investments trade! 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You understand that investing in REITs with Groundfloor, you choose individual to! Realtyshares does not offer liquidity to investors before they sell their properties because you ca n't trade it a. Other non-correlated assets can help reduce risk and improve returns investors in the form of dividends to of! And renovating existing homes his channel the eFunds using a slightly different structure to. To conduct a transaction to fundrise vs reit passive exposure to real estate investments are very liquid and you can usually with... The asset or company at a low minimum investment of $ 1,000 or more from its to! Provide income, growth or a combination of growth and income one platform may be years before you can your! Elevator down strive to provide up-to-date information, but they can rent out and possibly sell any. 8.76 % and 12.42 % between 2014 and 2019, the price of your grow! While RealtyShares does not how can you know which robo-advisor is right for?! 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