1. No, you do not need to be an accredited investor to invest with Fundrise. Their crowdsourcing model sets them apart from a traditional REIT allowing the average investor to participate in deals for as little as $500. Is this Vanguard REIT a better investment? Let’s take a look at the performance of these investments over the last few years. People have been investing in traditional publicly traded and private REITs since their invention in the 1960’s. The Washington DC eFund is one of two market-specific eFunds currently offered by Fundrise. When it comes to how to invest in real estate, investors who are interested in earning income from rental properties should consider Fundrise or REITs as a good alternative. While this platform is new, the concept of passively investing in real estate is not. Evaluate your options before you agree to invest. Fundrise is a unique real estate investment, where most traditional REITs contain real estate that has already been purchased. For more information, please read our. REITs can invest in a variety of real estate types. These income and asset levels indicate the investor has achieved a level of financial savviness at which they should be able to determine the risks involved in investing without the typical disclosures of a publicly-traded company. The only requirement is that you are a U.S. resident who has at least $500 to invest in one of its funds. With an eREIT you're able to access a growing portfolio of real estate projects by pooling your money with other investors. As mentioned above, REITs can take many different forms, so we will continue the comparison of Fundrise vs. REITs by using the Vanguard Real Estate ETF as our example. 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. Mutual funds generally can be purchased directly from the mutual fund company that runs the fund. A Real Estate Investment Trust (REIT) is a company that purchases real estate assets and then issues thousands or millions of shares of the company to investors. Although both investment choices — Fundrise and REITs — invest in real estate, there are differences between them. Additionally, there are plans in place for major growth as new projects pop up this year. REITs can be a valuable addition to your investment portfolio. In this comparison guide, we'll look at the differences between Fundrise and REITs in general. These investments change hands just like stocks, and as a result the performance of the asset is heavily correlated with the overall stock market. This eREIT also aims to buy properties below their replacement cost. Fundrise builds the eFunds using a slightly different structure compared to traditional REITs. You may think of Fundrise as a private real estate investment trust (REIT) without the inclusion of fees associated with hiring a “middleman”. Whereas with a REIT, you are investing in a corporation that in turn invests your money into real estate. Ultimately, you are responsible for your financial decisions. For tax purposes, a REIT must pass at least 90% of its taxable income to shareholders annually and meet other criteria. The information on Investing Simple could be different from what you find when visiting a third-party website. Learn more about how we make money and our editorial policies. In fact, VNQ is one of the most popular REITs available on the market today! Investing Simple has advertising relationships with some of the offers listed on this website. © Copyright 2018 - 2020 Investing Simple LLC. Non traded REITs have an advantage of giving you exposure to private real estate and offering higher distributions, on average, than publicly traded REITs. Since those are the hours most people are at work, access to a bank branch was extremely limited – you usually […]. This is simple to do and can all be done online. With so many different investment options offered by Fundrise, investors can buy into different types of real estate in all kinds of locations. 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. It is certainly possible that Fundrise will continue to outperform the Vanguard REIT, but they cannot guarantee returns. This eREIT invests primarily in real estate debt and equity investments, that will provide fixed rates of return as well as aiming for long term value creation. It’s important you understand that investing in real estate can be risky. 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… This eREIT focuses on real estate in urban areas where there is limit of the supply and high demand. 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. The fund currently holds 25 projects in the DC Metro in close proximity to Amazon's HQ2. Fundrise offers far more REIT options than Rich Uncles, which only currently offers two. Professional management, lower minimum investment, and diversification are just a few of the benefits of these real estate investments. Fractional shares if your brokerage account allows it. Fundrise Vs REITs, A Real Estate Portfolio Made Easy For You. Why Invest In Fundrise vs. REITs. Your personal investment returns will depend on which investment plan you choose and your risk tolerance. After I made an investment through E*Trade, I would deposit an equivalent amount of money into my Fundrise account. This gives retail investors the ability to invest in real estate investments they may not have been able to before often due to high costs or exclusivity of the investment. This is primarily in Massachusetts, New York, New Jersey, North Carolina, South Carolina, Georgia, Florida, as well as Washington D.C. and Philadelphia, PA. Investments in this eREIT focus on fixed rates of return and assets that have a high potential for value creation. Most significantly, as the name implies, shares of non-traded REITs do not trade on a national securities exchange. There are two core types of real estate investment trusts; publicly traded REITs and non traded REITs. however, there are some important differences between the two investment vehicles. However, in all other years, Fundrise has had significantly better performance than the Vanguard REIT. In 2014 and 2019, the Vanguard REIT significantly outperformed Fundrise. Typically, a REIT will specialize in a certain niche depending upon its employees' expertise or opportunities in the real estate market. Growth eREITs look for long term asset growth over time. This strategy focuses on renovation and value adding opportunities for redevelopment, as well as investing in completely new development projects. Unlike publicly traded REITs, Fundrise and DiversyFund are private funds. By qualifying as a REIT, it can deduct all shareholder dividends from its income to reduce its taxable income to zero. This is both a pro and a con. REITs are attractive investments because of the relatively high dividend yields along with the ability to provide passive exposure to real estate. 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. Long-term investors who want a diversified real estate portfolio customized to their needs. With all the different features and fees, how can you know which robo-advisor is right for you? When comparing Fundrise vs. REITs, you need to understand that Fundrise is just one variation of a REIT, which are special purpose entities that concentrate on how to invest money in real estate, similar to how a mutual fund invests in stocks and bonds. What Is The AcreTrader Minimum Investment? REITs work like this: the REIT as a whole owns the real estate, but individual investors own REIT shares. This eREIT is for asset appreciation and long term growth. 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. Fundrise does have support for private REITs, while RealtyShares does not. Your money is pooled with other investors to fund these real estate deals, similar to how Kickstarter might fund the launch of a product. All products are presented without warranty. A comparison of Fundrise vs. REITs that will show you how to build passive real estate income with as little as $500. The annual fees charged to investors are between 0.30% → 0.50% and you can expect investments to span anywhere from 6 months to approximately 7 years. These investments are very liquid and you can buy or sell at any time. You simply invest your money and let the experts lend their expertise. If you’re not an accredited investor (and I’m definitely not), you can only invest in Realty Mogul’s REIT options. This REIT has an expense ratio of 0.26% compared to the 1% fee associated with Fundrise. Want to learn the ins and outs of crowdfunded real estate?Here's our free guide that covers the basics of getting started with this investment.We will show you how to get started with as little as $500 and explain the basics, like debt versus equity investments.Get The Guide. Fundrise vs REIT Comparison Fundrise is an online platform that matches investors with real estate investment opportunities. These real estate investments generate income that is distributed to investors as dividends. Fundrise has taken a new approach to the traditional REIT structure with the introduction of the eREIT. Fundrise offers investors a simple option that takes advantage of more than 100 years of professional experience. So you might be wondering is Fundrise a REIT? One of the most popular providers of these traditional REIT investments is Vanguard. Sourcing, underwriting, and closing new debt and equity real estate investments are not common practices of public REITs. Fundrise’s mobile app is among the best investment apps that allows you to start investing and monitor the growth of your portfolio. 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. Similar to the DC eFund, this fund aims to generate returns through appreciation rather than income. When choosing between Fundrise vs. REITs, think about your experience with real estate and your desired time horizon in regard to the money you’re investing. Most of us are familiar with publicly traded REITs, these are investments that trade on public security exchanges and offered to everyday investors. 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. If you aren't an accredited investor, then you can only use Fundrise. Alternatively, you can invest in publicly traded REITs , … I also would add that any investor who would be comfortable picking an individual company like Fundrise ought to be, in principle, comfortable choosing an individual public REIT over a *basket* of public REITs. On the positive side, the price of your shares is not subject to the volatility of the stock market. The focus for VNQ is investing in real estate assets that provide both income and growth, Fundrise offers a variety of real estate portfolios which are concentrated on. The investors then earn dividends from those shares. Fundrise Returns Vs. Public Index Funds And Public REITs. In this article, we will be comparing the "new school" investment which is Fundrise to the "old school" investment which is Vanguard REITs. You are not typically required to be accredited and the minimum investment amounts vary. In fact, one of Fundrise's eREITs initiated an 8.25% dividend yield in 2017, and Fundrise's total returns have beaten the REIT benchmark index in four of the past five full years. Passively invest in private real estate deals with as little as $500. Before the invention of the REIT, investors would have to purchase real estate themselves or in syndicates, which were limited to wealthy and accredited investors. 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. REITs that are stocks, ETFs, and mutual funds can be purchased by anyone with a brokerage account. 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. The growth eREIT is also taking advantage of historic low interest rates by financing it’s acquisitions using long term fixed rate loans. Overall, Fundrise rates 9 out of 10, while RealtyShares ranks 8 out of 10. I think Fundrise requires your investment to be locked up with them for 5 years before you can withdraw your principal without penalty. This includes assets that have high potential for redevelopment, brand new ground up projects, and income producing debt. Then Fundrise is able to scout out new deals and add them to the portfolio. Fundrise's average annualized platform returns were between 8.76% and 12.42% between 2014 and 2019, according to Fundrise. Here's our free guide that covers the basics of getting started with this investment. Fundrise has created a new investment called the eREIT, which is a non traded REIT offered on the platform. Another advantage is that non traded REITs are less correlated to the overall stock market, as they are not traded on an exchange. All Rights Reserved. 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