Fundrise Review: The Pros, the Cons and Covid-19

Welcome to a Fundrise review in the time of COVID-19. Pre-Covid, investors saw Fundrise as a way to diversify personal investments. But what about now? We wanted to consider Fundrise real estate despite the coronavirus and its related economic challenges. Not to mention we haven’t left the house since March, when the lockdown in San Diego started. So, we have a little extra time on our hands for research. Not the typical San Diego summer to say the least.

We scoured their site and reached out to their support team with questions. Most importantly, we invested $10K of our own money after all the research we did to feel confident about that.

In our Fundrise review I take you though the world of Fundrise real estate crowdfunding and share our own experience with the investment platform. I’ll also talk a bit about how this company is managing expectations in the wake of Covid-19.

Full Fundrise Review

Fundrise has over 130k active investors and over $4.9 billion in assets since launching in 2012. Any U.S. resident over 18 can invest with Fundrise. You don’t need to be an accredited investor to participate. As a result, it’s accessible to a wide range of investors.

The cool thing about Fundrise is that it offers a path to commercial real estate for smaller investors. In other words, it allows investors to diversify their portfolio with institutional grade real estate that would otherwise be out of reach.

Without the need for huge upfront capital to make a purchase, Fundrise makes investing in commercial projects possible for virtually anyone. We invest our own money in Fundrise and will probably add more to our portfolio when we can.

Check out the questions below. If you answer yes to them, Fundrise may be right up your alley. Do you want to:

• diversify your investment portfolio with a non-stock market option?
• get into commercial real estate without the typical large upfront purchase payment required for a project of that size?
• be ready for a 5 year investment timeline, at minimum?
• want to get into real estate and outsource the due diligence of identifying, acquiring and managing properties?
• want a passive income investment option?

Fundrise Historical Returns

The average annualized return for Fundrise for 2019 was 9.47%

The Fundrise site explains in detail that 9.47% is the net overall return but most investors got a little more or a little less. According to the company “on average, the historical rate of return for Fundrise investments has generally started out lower and increased over time.” 

In short, it’s probably wise to set your expectations: anticipate lower returns than the platform average for the first 1 or 2 years and plan for the potential to see higher returns in the future.

How to Get Started with Fundrise

The process is super quick. However I’m not including the time you should spend reading the fine print and offering circulars. Once you get through that part, signing up for Fundrise isa breeze. First, Click on this link to get started (note: affiliate link), enter your email and you are on your way. You will be presented with the option to choose between Starter, Core or Advanced. 

Once you choose the correct account for you, you will only have a few steps to follow which include providing your information, funding details and signing their agreement and terms. The whole process can be completed in a matter of minutes.

What Investment Plans Does Fundrise Offer?

Once you’ve decided how much you are going to invest, you get to chose how you’re going to invest. Fundrise has 3 investment plans to choose from. They are based mostly on returns you want to see and risk you are willing to take.

1) Supplemental Income: For those of you that want to make extra money on a regular basis, chose this option. You’ll invest primarily in income-oriented cash flowing real estate. You can expect consistent quarterly dividends with less appreciation. Of all Fundrise investors, 28% choose this option and the average investment is $6,142. The projected annual return in 7.8% – 8.7%.

2) Balanced Investing: With this option, you’ll invest in a mix of income and growth focused projects to yield a blend of dividends and appreciation. Forty one percent of Fundrise investors chose the balanced investing plan with the average investment coming in at $6,204. Projected annual returns are 9% – 11%.

3) Long-Term Growth. This is your option for investing in high potential growth real estate assets. You’ll see bigger appreciation and fewer dividends, resulting in greater returns over a longer period. Of the Fundrise investors, 31% chose this one and the average investment is $6,632. Projected returns are 9.3% to 12.8%.

So you basically choose if you want less money more often or more money in the long term. Choose based on your preference.

Minx Tip: You can visit this Fundrise Investments Options page to learn about each each individual eREIT and eFund that Fundrise has to offer.

As an extra tip for you, if you find one you really like you can contact Fundrise directly and let them know you want a specific eREIT or eFund purchased in your account before you deposit funds. You can’t do this during the standard sign up process though.

What Tax Documents Will I Receive?

You can expect to receive one or two different types of tax documents, depending on the funds you’re invested in. You will receive a Form 1099-DIV for each eREIT in which you own shares and a Schedule K-1 for each eFund in which you own shares.

When redemption requests are available, the fee reduces the share price value and is paid into the eREIT or eFund. The fee schedule is:

• 0% if in the first 90 days 
• 3% if held at least 90 days but less than three years 
• 2% if shares held at least three years but less than four years 
• 1% if shares held at least four years but less than five years 
• 0 if held five or more years

For example, if you sell back your shares after 1 year, you’ll get 97% of their value back. 

Plan to invest for at least 5 years.

Minx Tip: Fundrise has a cool quarterly performance update email they can send you for your account but it’s not enabled by default and can’t be enabled from the app or website (as of the time this article was written).

If you want access, send an email to support@fundrise.com and just ask them to turn on The Quarterly Snapshot email.

Fundrise Technology Review

Fundrise states their mission is to use technology to make high quality real estate investments available to everyone at a low cost. The user experience of the site and mobile app is exactly what you would expect – modern, clean and easy to use.

Both the website and mobile app are user-friendly, visually appealing and provide the full suite of features. Fundrise investors can review their portfolio anytime to invest, manage or track performance. It’s especially cool to check out real-time asset updates, photos and all. 

Security is crucial, as it is for all financial service companies, and Fundrise take this seriously. Investor information is encrypted with an AES bit symmetric key (also used by large commercial banks) and can be protected by two-factor authentication. We highly recommend you turn on the two-factor authentication which will basically send you a text with a number for you to enter before letting you in the site. 

Fundrise and COVID-19 Updates

In response to the economic challenges resulting from COVID-19, Fundrise suspended all redemption requests and new investments in mature eREITS and eFUNDS. They did this to maximize cash reserves and keep the portfolio is in a stronger position.

New investment capital will go into new funds “tailored specifically for the COVID-19 world.” Recently the company sent a letter to investors explaining what that means. Not surprisingly, their strategy for new investments in the “COVID-19 world” has three phases. (Everything seems to come in 3s with Fundrise.)

• Phase1: Maximize near term flexibility by targeting liquid and structured debt markets

• Phase II: Maintain midterm stability while seeking increased yield by targeting distressed debt and private market bridge / rescue loans

• Phase III: Capitalize on opportunities for higher potential return by targeting direct ownership of undervalued properties that fit long-term macroeconomic trends.

Fundrise investing should be considered a long term investment, even prior to COVID-19 times. In this new environment investors will need even greater patience to capture the opportunities created by the market.

If you’re interested in learning more about Fundrise is managing investments through COVID-19, review the helpful articles on their sites.

Fundrise Review: Our Experience

We currently have an account with Fundrise and Q1 2020 return was 0.5%. Our partial 2019 return was 4.1%. It’s only about 2% of our portfolio. We redeemed newly invested shares in our initial Covid related panic. Fundrise sent the redemption promptly (although they suspended mature eREITS and eFunds) but I regret that decision. I view Fundrise investments as a long term strategy and should have stuck to my plan, but that’s a post for another day…

Fundrise makes it super easy to get into commercial real estate with minimum barriers. If you’ve already got a diverse portfolio of stocks and bonds and want to try the commercial real estate investment market, this is a great avenue to start, provided you are ready to let your money sit for 5 years or more. Do your due diligence – there are lots of offering circulars to read through. Have we said that a few times already?

To sum up, we are pretty happy with Fundrise as a diversification strategy for our portfolio. We are waiting for COVID risks to go down a bit and will add into our Fundrise account. The returns are not out of this world but they seem to be consistent and stable which in this market is a really difficult thing to achieve.

If you like what you read in our Fundrise review and want to learn more about Fundrise, head over to their site and get started.

To read about other ways to diversify your portfolio, check out our experience with LexShares. Or read about some other options that don’t correlate to the stock market here.

Thanks for reading our Fundrise review.