Many individuals considering investing in real estate online may have come across Fundrise and wondered, "Is Fundrise a scam?" Fundrise is a legitimate real estate investment platform that allows individuals to invest in a diverse portfolio of real estate assets. The company has been in operation since 2012 and has a solid track record of delivering returns to its investors.
Fundrise offers a low-cost and accessible way for individuals to invest in real estate without the need for a large initial capital investment. They provide transparency in their investment offerings, detailed information on property performance, and regular updates to investors on the status of their investments. Additionally, Fundrise is regulated by the Securities and Exchange Commission (SEC), which adds an extra layer of credibility and oversight to its operations.
What is Fundrise?
Fundrise is a real estate investing opportunity that allows investors to invest as little as $10. With a low-cost basis and the potential for high returns, it can be an attractive option for real estate investment portfolio diversification without purchasing individual properties.
Fundrise offers two main investment vehicles - eREITs and eFunds. Its eREITs invest in commercial real estate properties like apartment complexes, commercial shopping centers and office buildings, and eFunds purchase residential real estate, like rental properties, to create short-term cash flow and possible additional revenue through resale.
Fundrise focuses on buying assets for less than their intrinsic value, aiming to build portfolios that can withstand prolonged periods of economic distress. It has actively managed properties and partners with local operators who work to increase asset value while keeping expenses low.
While there are no guarantees in any investment, investors can access institutional-quality investment opportunities with strong diversification and investment options through Fundrise. Its software streamlines necessary real estate buying processes and offers discounts to scale, further reducing business costs.
While Fundrise's minimum investment is low, higher investment amounts offer better portfolio options and features.
The drawback of investing through Fundrise or any other real estate crowdfunding platform is the risk of loss. In addition, illiquid investments can make it difficult to redeem shares quickly. You'll pay a 1% fee if you redeem funds before the end of the holding period.
How Legitimate is Fundrise?
Fundrise was founded in 2012. It qualified as a real estate investment trust (REIT) for U.S. federal income tax purposes beginning with its taxable year ending Dec. 31, 2015. Fundrise is regulated by the U.S. Securities and Exchange Commission (SEC). It files annual SEC filings and must meet SEC disclosure and governance requirements.
As it stands, Fundrise is one of the best real estate investing apps for nonaccredited investors interested in long-term investments in real estate and venture funds. Fundrise reports an average annual return of 4% to 12%, but for 2022, the Fundrise portfolio delivered an average annual return across all client accounts of around 1.50%.
Understanding and Evaluating Fundrise
While Fundrise is a legitimate company with an excellent track record, any investment requires research into opportunities and an understanding of potential risks. Here's what you'll want to consider about Fundrise.
Investment Structure
Fundrise focuses on acquiring assets for less than their intrinsic value or replacement cost, offering investors greater value. Its investment model involves two types of investments, eREITs and eFunds, which offer investors opportunities to take on portfolio-appropriate risk.
It offers transparency of investments, including details on property selection, due diligence process and management. In addition, Fundrise offers investors innovative features like personalized software to keep overall costs down.
Returns and Risks
The potential returns investors can expect from Fundrise could be as high as 12% APY or more. However, the average across all investors in 2022 was just 1.5%, less than a high-yield savings account.
The risks associated with investing in real estate include loss of capital or low returns. That is true for any type of real estate investment. Fundrise discloses that an "investment in any issuer available on the platform involves substantial risks, including the risk of a partial or total loss of investment, and each investor should carefully consider the risk factors contained in each fund's offering circular available at fundrise.com/oc.
With any investment strategy, it's essential to diversify across asset classes and investment types. Diversification and a long-term investment horizon can increase overall returns.
Customer Support and Transparency
Fundrise's customer support services and responsiveness are mediocre compared to similar platforms and leave some investors looking for more. Email and ticket-based support is available Monday through Friday, 9 a.m. to 5 p.m. EST.
Industry Reputation and Reviews
While Fundrise has a good reputation in the real estate investment industry as a private REIT, you'll get significantly less liquidity than a public REIT. The platform may limit withdrawals during market downturns, and some funds charge a penalty if you withdraw within five years of investing. That, combined with the low customer service quality, means there are other REITs and real estate investments that can offer better long-term opportunities.
Fundrise gets just two stars on Trustpilot, but many online financial review publications, including ForbesAdvisor, rated and reviewed it more favorably.
Real Estate Investing Scams
The scam that has or could take place with real estate investing as a whole and using platforms like Fundrise usually involves scammers creating fake property listings. They promote properties that don't actually exist and entice potential investors with below-market prices or other unique features. To prevent getting caught in a scam, it's important for investors to cross-check property information with reputable sources.
However, the idea that Fundrise or crowdfunding platforms are a scam is untrue. Fundrise is a legitimate investment platform.
Should You Invest in Fundrise?
While the real estate market has been performing poorly in the past couple of years, its long-term investment horizon remains strong. With moderate management fees (you can find lower), Fundrise can offer unique portfolio diversification as part of your investment plan. Interested in other investment opportunities? Find the best ETFs or REITs here.
Frequently Asked Questions
Can you really make money with Fundrise?
Is investing with Fundrise worth it?
What happens after 5 years with Fundrise?
After investing in Fundrise for 5 years, investors typically have the option to access their funds through redemption. Fundrise offers a redemption program that allows investors to request to sell their shares back to Fundrise on a quarterly basis, subject to certain terms and conditions.
***This is a testimonial in partnership with Fundrise. We earn a commission from partner links on Benzinga.com. All opinions are our own.
About Alison Plaut
Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.
