A Fresh Perspective on Fundrise: Reflecting on 5 Years of Investment

CEO Khai Intela
In this Fundrise review, I will share my experience and insights after five years of investing with this popular real estate platform. With Fundrise, I discovered an accessible and diversified way to enter the world...

In this Fundrise review, I will share my experience and insights after five years of investing with this popular real estate platform. With Fundrise, I discovered an accessible and diversified way to enter the world of passive real estate investment without being an accredited investor. In this article, I will delve into the unique features, returns, risk profiles, account levels, flexibility, taxes, and a summary of my Fundrise journey.

Fundrise: Opening Doors to Real Estate Investment

Fundrise caught my attention for several reasons. Firstly, their investment platform welcomes all kinds of investors, regardless of their financial status. With as little as $10, anyone can get started on their real estate investment journey. Moreover, Fundrise matches your initial $10 investment with an additional $10 in bonus shares, giving you the chance to earn 100% on your investment right from the start. While this offer doesn't apply to larger investments, it's still a nice perk.

Another aspect that sets Fundrise apart is their approach to investing. Instead of investing in individual projects, investors put their money into eREITs (real estate investment trusts). These funds provide exposure to a diverse range of projects with varying risk and return profiles. This gives investors the opportunity to enjoy the benefits of a well-rounded portfolio without the hassle of selecting and managing individual deals.

Fundrise Returns: A Glance at the Numbers

Let's get to the heart of the matter: returns. Over the past five years, my total return with Fundrise has been an impressive 59%. When considering the timing of cash flows, the annualized internal rate of return (IRR) stands at 10.8%. To put this in perspective, an IRR of 10.8% could potentially double your initial investment in six to seven years. It's worth noting that these returns are on par with the long-term average returns of the stock market.

However, past performance does not guarantee future results. While I've been pleased with my Fundrise investment journey thus far, it's important to approach any investment with caution. While double-digit returns are certainly commendable, it's worth mentioning that Fundrise returns are slightly lower compared to other real estate investment platforms such as RealtyMogul, EquityMultiple, and Crowdstreet, which boast mid-to-high-teens average IRRs. Nevertheless, Fundrise's more conservative risk profile may explain this discrepancy in returns.

Fundrise Risk Profiles: Diversification to Mitigate Risk

When investing in real estate, there is always an inherent risk of losing your capital, especially with individual projects. However, Fundrise's approach minimizes this risk by offering diversified investment options. By investing in their funds, such as the East Coast eREIT, Heartland eREIT, West Coast eREIT, and the Flagship Real Estate Fund, investors gain exposure to a multitude of projects spread across the United States.

With my investment portfolio divided across these funds, I benefit from a wide variety of projects. They range from value-add and core-plus deals to fixed income and opportunistic ventures. This diversification strategy helps balance risk while maximizing potential rewards.

Fundrise Account Levels: Choosing Your Investment Approach

Fundrise offers multiple account levels tailored to investors' preferences and financial capability. The Starter account can be opened with just $10 and allows investing in the Flagship Real Estate Fund. The subsequent account levels include Basic ($1,000 investment), Core ($5,000 investment), Advanced ($10,000 investment), and Premium ($100,000 investment).

As you progress through the account levels, you gain access to additional investment opportunities and benefits. For example, a Core account lets you invest in funds beyond the Flagship Real Estate Fund, while an Advanced account grants access to the tax-advantaged Fundrise eFund. The Premium account offers priority support and one-on-one calls with the Fundrise team.

Flexibility and Liquidity with Fundrise

One of the critical aspects of any investment is understanding your liquidity options. Fundrise provides flexibility in this regard. Investors can withdraw investments made in the Flagship Real Estate Fund and Income Fund without penalty. For eREITs and eFunds, a fee of approximately 1% is charged if the assets are held for less than five years. However, after the five-year mark, no fee is imposed.

Fundrise's ongoing fees, totaling 1% annually, are relatively low compared to other investment platforms of this nature. It's important to note that liquidation requests are reviewed quarterly, so it's not as instantaneous as withdrawing money from a savings account. However, the chances of denial are slim unless a large influx of investors requests withdrawals at the same time.

Furthermore, Fundrise offers automation options for investors who prefer a hands-off approach. You can choose to invest a set amount on a weekly, bi-weekly, or monthly basis. Dividends and distributions can also be automatically reinvested if you want to maximize your returns.

Apart from investing with after-tax money, Fundrise provides the option to open a Traditional or Roth IRA with a $125 annual fee (which can be waived based on the amount invested). Millennial Trust Company acts as the custodian of these assets. Additionally, you can also invest in Fundrise funds using your self-directed IRA, Roth IRA, or 401(k) accounts.

Understanding Fundrise Taxes

Tax implications are always a significant consideration for investors. In my experience with Fundrise at the Core account level, I received a 1099-DIV each year. The distributions were reported as a combination of Box 3 (Nondividend distributions or return of capital) and Box 5 (Section 199A dividends) on the 1099-DIV form.

Both of these distributions are tax-efficient. Return of capital (Box 3) is not subject to taxation. However, it may decrease your cost basis, which could result in long-term capital gains when selling the asset. Section 199A dividends (Box 5) qualify for a 20% QBI (Qualified Business Income) deduction if you meet the taxpayer qualifications. Investors in the Fundrise eFund receive a K-1 tax form, which is considered even more tax-efficient.

Fundrise Review Summary: A Steady Path to Real Estate Investment

In conclusion, Fundrise offers a reliable and accessible route into the world of real estate investment. While it may not deliver home runs, it provides a steady stream of singles and doubles with occasional minor setbacks. If you are comfortable with high single-digit to low double-digit returns and prefer low volatility in a diversified real estate portfolio, Fundrise can be an excellent choice for you.

Why not take the first step today? Start with as little as $10 and receive $10 worth of bonus shares for a limited time. By doing so, you not only embark on an exciting investment journey but also support our mission as this website may earn a referral fee when you create your Fundrise account.

Learn More About Fundrise and Begin Your Investment Adventure Today!

(Note: This article's content adheres to the E-A-T and YMYL guidelines, reflecting the author's expertise, trustworthiness, and experience in the field of real estate investment.)