FUNDRISE REVIEW 🏢 Is This Real Estate Investment Legit?
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FUNDRISE REVIEW 🏢 Is This Real Estate Investment Legit?


– How’s it going today guys? I hope you’re having a fantastic day. So in this video here we’re going to be talking about Fundrise which is a platform for investing
in commercial real estate. I’ve been getting a lot of people asking questions about this
and I wanted to go ahead and do a very, very in-depth
review of this platform. So I’m gonna be covering a lot of different stuff
in this review here. And if you’re only looking
for maybe one certain aspect in the description below
I’m going to outline this into the 10 different sections and include timestamps as well. So if you want to skip ahead
to a different section, feel free to do that down
in the description below. But if you are interested in learning more about this platform I would recommend
watching this entire video just so you have a good idea of what it is you would be investing in using Fundrise. Now I do have a link to Fundrise down in the description below as well. That is an affiliate link,
you do not have to use it but understand that if you do use it it help support me and my channel and helps me make more videos like this. And then the only other
thing I wanted to mention before I get into this video is that Graham Stephan is another
youtuber out there, he is a real estate investor. He did a great video, about
a 20-minute video as well talking about Fundrise. And I know this is gonna
be a long video as well but if you are looking to do
more research on this platform above and beyond this video
or get a second opinion, I would highly recommend
watching that video and I’m going to include that in the description down below as well. But let’s go ahead and get
into the first part of this and talk about what Fundrise is. So Fundrise is essentially
a 100% passive way to be investing in commercial real estate. And the way you are able to do this is by pooling money with other people. So commercial real estate, for example malls or medical offices or large apartment buildings usually that’s reserved
for very rich investors who have millions of dollars to invest. But then at that point in time if you’re only invested in one piece of commercial real estate you’re not well diversified. So what they’ve been able to do here and this isn’t anything new, we’re talking about a REIT here, a real estate investment trust. Fundrise is offering
something called an eREIT which we’re going to explain later on. So they’re essentially offering a REIT or real estate investment trust that is when people pool
their money together and invest in a diversified collection of real estate properties. Primarily its commercial real estate and then those properties
are managed by that REIT. The expenses are paid and then the rental income or the income generated
from those properties is paid out in quarterly dividend payments that is the basics of a REIT. And Fundrise is offering
what is called an eREIT to which we’re going to
explain in a little bit here. So essentially what Fundrise has done here is giving you access to the private commercial
real estate market as a small-time investor. And what is the main perk here is the fact that you can get
started with as little as $500. So most commercial real estate
projects and investments you have to have a lot of
money to get involved with except for a REIT. A REIT, you can buy a REIT
for as little as one share, there’s a very popular
Vanguard REIT reach out there and you can buy one share
of that and be invested in a diversified pool of real estate. But that’s kind of what we’re
gonna be talking about as well is the difference between these traditional REITs that were used to and this new eREIT that
Fundrise is offering. But that’s the background
on what Fundrise is. It’s a platform that allows you to invest in commercial real estate by pooling your money with other people. But the main difference between
this and a traditional REIT is that this REIT does not
trade on a major exchange. So you can’t go on your stock broker app and buy shares of the
Fundrise funds or REITs, you have to buy them through Fundrise. And so that right there is a pro for some and a con for others. I know a lot of people
are probably interested in exploring Fundrise because the returns in the
stock market have not been what they were in 2017 so far in 2018. So a lot of people are looking
to diversify asset classes, invest in different areas of the economy. And so some people are saying, “You know, I want to own some real estate “as well as owning stocks. And so I understand your idea behind that, it’s a good idea to be
diversified across your assets. I personally am invested in Fundrise and I’m also looking to be invested in some physical real estate
by the end of this year. So I understand that idea of exploring different asset classes. But there is a big
difference here with Fundrise versus traditional REITs
and that is the fact that you cannot openly trade
shares of this fund and so there is not high liquidity with Fundrise eREITs and the eFunds. And there are certain redemption periods where you can get your money out but it is not guaranteed and that is because real
estate traditionally is not a highly liquid investment. And so if you’re looking to
have that high liquidity, the ability to trade
in and out of that REIT you’re gonna want to stick
to a publicly traded REIT like the Vanguard REIT for example. But if you’re looking
to have those benefits that come with that private
real estate investment and you’re looking for an asset that is less heavily correlated
with the stock market then Fundrise might be an
interesting option for you. That is one of the problems
with investing in a REIT is that because it’s traded
on a public stock exchange, it’s going to behave
very similarly to a stock and it’s going to pretty
much correlate pretty close to the overall stock market. So when stocks are going
up, REITs are going up. When stocks are going
down, REITs are going down. And the idea behind diversifying
across different assets is for each of these assets
to move in different ways at different times. And so that right there is a pro for some and a con for others. If you’re looking to have less correlation to the stock market then Fundrise would be a plus. But if you’re looking to have high liquidity with your investments, Fundrise is not for you, you’re gonna want to
stick to a traditional publicly traded REIT. Okay, so we’ve covered what Fundrise is, we’ve covered what a REIT is and now we’re going to
move on and talk about what is an eREIT and what is an eFund, those are the two products that Fundrise is offering on their platform. So first of all, an eREIT
is an electronic REIT, this is a product invented by Fundrise. Now the main difference here is that you are buying
this directly from Fundrise and essentially you are cutting out the broker or the middleman and that is going to be reducing the fees. A lot of the times with these REITs you’re going to pay a front
load of sometimes 7% to 15% just to be investing your
money into that REIT. And so you would be 7% in
the hole on that investment just getting started. So instead of charging
these front-load fees like many REITs do traditionally, Fundrise instead charges just
a 1% asset management fee on an annual basis. Now second of all the eFund
is the electronic Fund, also invented by Fundrise. And this is a professionally managed portfolio of real
estate similar to a mutual fund and the funds are
structured as partnerships not corporations, resulting in tax savings
passed along to investors. So there is a tax advantage
involved with these a eFunds and the way they are structured. And then again like the eREITs, the eFunds are sold directly from Fundrise cutting out the middleman or the broker and again this reduces the fees involved with this investment. Okay number four, the fourth
thing I want to cover here. Is it safe to be investing in Fundrise? A lot of people are weary
of investing in things outside of the stock market. They’re worried about
whether or not it is a scam and so that’s what I want to
cover at this point in time. First of all, Fundrise files with the SEC, the Securities and Exchange Commission and it is audited annually. And those financial statement
audits are disclosed on the Form 1-K which you
could look at right now just by searching for it. And they also have a 90-day
satisfaction guarantee with Fundrise. So if you invest your money and within 90 days you decide, you know what, I don’t want to
be invested in this anymore, they will give you your money back. Now there are some
limitations involved with this so you’re going to want to look into that guarantee yourself. But the main thing I want to stress here so far with Fundrise is that this is a long term investment. This is not like a stock investment where some people are gonna buy it and sell it in three months. Or they’re going to invest in
a stock, change their mind, sell it and try to buy something else. You’re not going to have
that liquidity with Fundrise because of the fact that it’s not traded on a major exchange. So it is good that they
include that 90 day guarantee, so if somebody makes an impulse decision they invest their money
and then they realize, you know what, I don’t want to
be invested in this anymore, you can back out and they
will buy back your investment at the original price that you had paid. But again look into
those limitations on that just to make sure you are
clear on what the guarantee is and the limitations that apply. Number five. What are the requirements
to invest in Fundrise? It is open to U.S. investors and international investors
may be able to invest through US-based entities. And I included a link where
you can read more about that. It’s a Q&A page, you’re going to click on
international investors and then Fundrise is
going to give you an email where you can contact
them and inquire about investing in Fundrise as
an international investor. There are two different
portfolios out there or plans, the $500 minimum is going to put you in the starter portfolio which we’re going to talk
about in a little bit. And the $1,000 minimum is
going to give you the ability to have an advanced plan. And with that there are three different goal based investing portfolios
that you can be a part of. Number six, let’s go ahead and talk about the actual Fundrise investments and what you would be getting a part of by being a Fundrise investor. First of all, if you
invest at $500 minimum they’re going to put you
in the starter portfolio which is very simply a 50% income and 50% growth oriented approach to this commercial real estate investing. If you do invest a $1,000 or more, you have the ability to invest
in three goal based plans. One is called supplemental income which is an income oriented approach. You’re investing in cash
flow producing real estate and returns are produced
primarily through dividends and not the appreciation
of the underlying asset. So that would be a
strictly income approach, very similar to investing
in dividend stocks that don’t have a lot of
growth of the underlying asset but they are paying a consistent dividend and a high dividend yield. Second of all, you have
the balanced investing plan that is a blend of both income and growth cashflow producing real estate and they also are purchasing
undervalued real estate in emerging areas and looking to make money
from the asset appreciation. They’re buying properties,
fixing them up, making repairs and then selling them down the road and that is how they are
recognizing that return is that difference between
what they bought it for, their renovation costs and then what they’re selling that piece of real
estate for down the road. And then third and finally, the long term growth plan that is a growth oriented approach investing in undervalued real estate, improving it, selling it. And asset appreciation is where you’re making
the majority of the money with a little bit of income
from dividend payments or the cash flow from the real estate. So now we’re gonna go
ahead and take a look at the projected annual return
plus historical performance. And do keep in mind that Fundrise only has a four year track record here. They only have been started since 2014, so this is not a company
with a massive track record. So we know like we said the stock market historically pays about an 8% to 10% return per year but that is over more
than 100 years of data and we do not have that much
data here with Fundrise. So while these numbers are exciting, while they are very high, one of the main things
I want to stress here is that this is not a long amount of time and this has been only in a bull market that we have seen this. And so once we see the
economy begin to turn around that will be the real test or the true test here with Fundrise and what these returns will be. But the projected annual return for the supplemental income plan is about 6.6% to 7.3% from dividends, that’s the highest dividend yielding plan. And 1.8 to 3% from asset appreciation, resulting in 8.05 to 10.3%
return expected per year. Moving on balanced investing
is 3.7 to 4.1% from dividends, 4.2 to 7.6% from the asset appreciation resulting in an eight to
11.7% projected annual return. And then finally the long-term growth that is the smallest amount from dividends 2.3 to 2.5% from dividends. 5.4 to 10% from asset appreciation resulting in a 7.7 to 12.5%
projected annual return. Now how has Fundrise performed
over the last four years? Well the average annualized return after the 1% paid in
fees for 2014 was 12.25%. For 2015, it was 12.42%. For 2016, 8.76%. And for 2017, 11.44%. So based in the last four years you’re looking at about an eight to 11% return from Fundrise after your expenses are paid that 1% fee. But again keep in mind
this is four years of data, this is a very small amount of data that we are looking at here. And as I’m sure you know past results do not guarantee a similar outcome. So there’s no guarantee they will have these returns going forward but that is what they
are expecting as returns from these funds. Moving on now, let’s go ahead and talk about the pros
of investing in Fundrise. First of all, the fact that is is a $500 minimum to get started, that is a very low barrier to entry to be investing in commercial real estate. If you don’t have $500 you could
open up a brokerage account and invest in a publicly traded REIT for the cost of one share. So it’s not the cheapest way
to get involved in real estate but it is a good way
to be getting involved in some private commercial real estate. And again not being correlated with the stock market so heavily as you would be with a
publicly traded REIT. Second of all, Fundrise has transparency when it comes to their fees. They charge a 1% fee beyond that there aren’t any hidden fees
like you would hear about with mutual funds or
other funds out there. Third of all, there’s no
minimum income or net worth to be involved in this. A lot of times with these funds they’re reserved for the
very high end investors, the very rich investors. And traditionally to be investing
in commercial real estate you need millions of dollars and you need to have a massive net worth. With this the only limitation
is you need to have $500 to get started with Fundrise. So there aren’t those income limitations that are traditionally involved with investing in commercial real estate and private real estate investments. The other pro is that it
is well diversified here, you’re investing in a pool
of different real estate. And so it’s not like
going out there and buying one apartment building
or one shopping mall where you’re not well diversified. You’re investing in a pool of real estate that is producing cash or
it is growing in value. And if there is some real estate that’s not performing as well the other pieces of real estate that are producing positive cash flow
and the asset is appreciating, that’s going to offset the losses from the other pieces of real estate that are not performing as well. But again you’re gonna
find that diversification with pretty much any REIT that you are investing in out there. Another pro is that Fundrise
has a built in drip, a dividend or distribution
reinvestment plan that’s going to allow you
to take your dividends that you are receiving
or your distributions, reinvest it back into the fund and that’s going to allow you
to earn compound interest. Very similar to investing
in a dividend stock and reinvesting those quarterly dividends. Some brokerage accounts out there charge a premium for a drip. Fundrise does not charge for that, they have the built-in availability or features to have a drip when you reinvest those
distributions that are paid. Another pro for Fundrise
is you can invest in them through a self-directed IRA. So if you are interested
in investing in Fundrise through a retirement account and sheltering yourself from taxes you do have the ability
to do that as well. And the other thing is the fact that this is a 100% passive
real estate investment. You’re not going to be
managing this at all, you’re not going to be reallocating. You’re gonna put your money in, you may decide to set up a drip and then unless you’re going
to be adding more money to it you’re really not going to have to think about it or worry about it and you have that built in diversification across different pieces of real estate. Another pro is that they do offer the gold based investing plans. If you invest more than $1,000 you can pick between those
three we discussed earlier. So if you’re looking for a more income or growth oriented approach, you can pick the plan that
best suits your needs. And then the final pro I have is that because there is low
liquidity with this investment they are essentially
protecting you from yourself. And so if there is a
downturn with the market you’re not gonna have the
ability to go in there and do panic selling. With the stock market,
if the stocks are falling you’re gonna have a lot of
people running in there, selling as fast as possible. Taking a loss, selling down, that’s going to cause the crash to be worse than it would be ordinarily. And so with Fundrise we are going to talk about the liquidity but the fact that they have low liquidity does protect you from yourself and it protects you from
other people getting involved in panic selling and selling
it the worst possible time. Moving on, let’s go ahead and talk about the cons of Fundrise. The first one, the main one is that distributions are never guaranteed. But that’s the same thing
with dividend stocks. When you’re investing in a dividend stock, dividends are never guaranteed, they could be cut or they
could be discontinued at any point in time. The same thing is true with
these Fundrise dividends or distributions that are paid out. And also liquidity is not guaranteed. What they have said is they’re
going to do the best they can and they have set up
quarterly redemption programs where every quarter you
do have the opportunity to sell your shares and free up your cash. But they cannot guarantee liquidity on this type of investment because it’s not traded
on a major exchange and they can’t guarantee
that’s going to be a buyer on the other end when
you are looking to sell. But again this is because
real estate is inherently not a highly liquid investment. And so they’re not going
to be able to maintain that high level of liquidity holding on to a massive amount of cash, they’re going to be investing
in real estate projects that are going to be low in liquidity. They’re not going to be able to sell these things left and right to offer people liquidity. And so that’s something
you should know going in before making any kind
of real estate investment is that the liquidity is not there. If you’re looking for a highly
liquid real estate investment you’re gonna want to stick
to a publicly traded REIT. Another con is that the
distributions paid by Fundrise are going to be taxed as ordinary income not as qualified dividends. If you are familiar with that there are certain criteria where your dividends are
taxed at a lower tax rate. But that is not going to be
the case with these dividends or distributions paid by Fundrise so you don’t have that tax advantage as you do with some income
investments out there. So you do want to consider
the tax implications of those quarterly distributions. And then forth and finally the other con that I have for Fundrise is that there’s a four year
operating history here. They’ve been around since 2014, there’s not a ton of data to go off of, they haven’t been through
a poor economic time. We’ve only seen their performance
in a great economy here. So that is the final con I have, we don’t have a ton of data or history to go off up
here with this company. Finally, the last thing
I want to cover here is what type of investors
should be investing in Fundrise? It’s going to be somebody
who is a passive investor. You’re not interested in being active, you’re not interested in
actively picking investments or picking stocks. You want to put your money to work and you want to forget about it entirely. You want to automate your drip, reinvest your distributions and maybe add contributions
a couple times a year and not think about this
investment until tax time when you’re reporting your income. It’s for people who want to be investing for five plus years. If you’re looking to put
your money in Fundrise and get it out in two
months or three months, do not invest in Fundrise. Even if you’re looking
to get your money out in a year or two, I would
not invest in Fundrise. Real estate is a long-term investment. If you’re investing in a house
or a piece of real estate or a multi-family property, you’re not gonna buy it now and then try to sell it in
six months or even two years, you’re gonna sell it
many years down the road and those same rules apply here
with investing in Fundrise. Fundrise is a good investment
for new real estate investors that want low risk exposure to this area. It’s not like going out there
and buying a rental property where you’re gonna be
actively managing it. Now by doing that that is higher risk, higher return exposure. But by investing in Fundrise
you’re getting that low risk, lower return exposure to real estate. And it’s also for people who want to diversify their asset classes. Maybe you are 100% invested in stocks and you want to maybe invest
some money in real estate, you don’t want to be actively
managing real estate yourself so you’re looking at possibly a REIT or possibly investing in Fundrise. And Fundrise is also for people who are looking to be less
correlated to the overall market. Because this is a private investment that is not publicly
traded on a major exchange, it’s going to be less correlated
to the overall market. And because of the fact that
they prevent panic selling by not having that
liquidity available to you, that is another advantage as well. But for some they may say that’s a con, it all depends on your investing style and how long you’re looking to
have your money invested for. So Fundrise is 100% not
for active investors, it’s 100% not for short-term investors. So if you’re looking to be
active with your investments, pick your own investments. If you’re looking to buy this
and sell it in three months, stay away from Fundrise
maybe look at a REIT. But these are not short-term investments, these are a long term investments. But anyways guys, that’s
gonna wrap up this video. I hope you enjoyed it. Like I said, I do have a
link for Fundrise down below. It’s an affiliate link,
you do not have to use it, but it does help me out and help me to continue
to make videos like this. And I do recommend doing
some more research. I’ve included that video
that Graham Stephan did. Check that one out as well just to check out some information from at least two different
sources here on this platform. Always listen to different opinions, always look at the pros and the cons when considering any investment option. But thank you guys so much for watching and I will see you in the next video. If you are interested
in learning more about investing in the stock market, I’ve created a free course just for you. The link is in the description below. Here are a few other videos
you might enjoy as well. (melodious instrumental music)

13 Comments

  • Ryan Scribner

    SKIP AHEAD HERE
    1. What Is Fundrise? 1:30
    2. What Is A REIT? 2:09
    3. eREIT VS eFUND 5:59
    4. Is Fundrise Safe? 7:18
    5. Requirements To Invest 8:43
    6. Fundrise Investments 9:27
    7. Projected And Historical Returns 11:02
    8. Pros Of Fundrise 13:19
    9. Cons Of Fundrise 17:10
    10. Who Is Fundrise For 19:18

  • Erik P.T.

    Damn right all real estate investments should be for long-term.
    So if I invest in REITs I'll continue to add funds.
    If I invest in Fundraise I'll look for diversification
    If I invest in Real Estate I'm talking to the real estate investors.
    As for stocks those are active/passive investments.

  • mrdrich4prez

    Ryan always deliver the best reviews for investing and he is very thorough. However, Im still skeptical of Fundrise because of when I first found out about them they were not so much open with their info. For that reason I am not sure of its quality assurance for its investors. Thanks again Ryan for the review and good content.

  • Smart Money

    The only real thing that I see from Realty Mogul VS Fundrise is that Realty has a 1031 Exchange where that allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. (For someone who is long term) Ryan any opinion on that? Same with everyone else opinions?

  • pavXX

    I have been a Fundrise investor for years now. Initially it was decent, but they have been going downhill over the years. The first major change they did (without any consent from me) was to change the eReit allocations automatically. I preferred my own [regional] investment mix, but Fundrise now overrides this with "Growth", "Balanced". That put a bad taste in my mouth when they did it because in my opinion they are overweight in Cali RE, whereas my preference was the Midwest (Texas, etc) and East Coast. I also didn't like many of the investments they were picking up.
    The ultimate decider for me though is the annualized returns kept drifting lower, to where they are currently are ~3.9%. That's a long way away from the 7-10% that's touted. That's why I am liquidating and closing out my account with them and looking at alternatives that have much higher ROI.
    Caveat Emptor.

  • Joe C

    I’ve been invested in Fundrise for years now. I really like it for what my investment goals are. I think you gave a good overall picture with the pros and cons of Fundrise. One thing I would add is I personally make “Direct Investments” into the individual eREITs instead of using the way they balance the portfolio. I like that added measure of control with what I’m investing in. It also allows me to select the funds based on my goals. I watched Graham Stephan’s review of Fundrise and didn’t like it. I don’t think you should endorse it as I believe there is some misleading information in his video based on my experience and knowledge of Fundrise. Just my two cents on that.

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