What is Fundrise and how does it work?
Fundrise is an online investment platform providing individuals access to alternative investments, such as real estate, private credit, and venture capital. The platform is designed with a long-term investment approach in mind, characterizing its strategy as slow and steady, akin to the tortoise in the proverbial race against the hare.
The core mission of Fundrise is to overhaul the traditional financial system to benefit individual investors by offering a simpler, more reliable, and cost-effective way to invest. This is achieved through technology that enables investors to access diversified portfolios of private real estate projects and high-growth private technology companies with relatively low minimum investments and fees.
Investors on Fundrise acquire shares in one or more of the platform’s funds. These funds may target a variety of assets, including a diversified portfolio of private real estate assets managed by Fundrise or investments in late-stage technology companies through the Innovation Fund.
Investors select a portfolio strategy and make their first investment, after which Fundrise continues to manage and diversify the portfolio on the investor's behalf. This includes adding new assets over time without requiring additional investments, although investors have the option to make manual contributions or set up recurring investments.
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How risky is Fundrise?
3/5— Moderate Risk
Investing with Fundrise, like all investment platforms, carries certain risks that potential investors should consider. Firstly, the focus on private market investments, such as real estate and venture capital, means that these assets are inherently less liquid than publicly traded stocks and bonds. This could affect the ability to quickly sell assets in some market conditions.
Secondly, while Fundrise's share repurchase program offers a measure of liquidity, it is subject to limitations and may be suspended, modified, or discontinued at the platform's discretion, potentially impacting investors' ability to redeem shares when desired.
The value of investments on Fundrise can fluctuate, meaning that the value of an investor's shares can go up or down. Economic downturns, changes in market conditions, or underperformance of assets can negatively impact investment returns.
Moreover, as with any investment vehicle, there's the risk of total loss. While Fundrise aims to minimize risks through diversification and careful asset selection, the possibility of losing all or part of the investment exists.
Lastly, regulatory risks could affect Fundrise and its investment offerings. Changes in laws, regulations, or government policies related to real estate, venture capital, or investment platforms could introduce new challenges or constraints.
How liquid is Fundrise?
1/5— Minimum Liquidity
Liquidity on the Fundrise platform is primarily facilitated through its share repurchase program, also known as the redemption program, which is designed to provide investors with a degree of optionality for their long-term investments.
The core investments on Fundrise offer quarterly liquidity, allowing investors to request the redemption of some or all of their shares at any time, with these requests being processed at the beginning of each quarter. For instance, if an investor submits a redemption request in August, it would typically be processed at the start of October.
Notably, there are no penalties or costs associated with redeeming shares through this program. This approach ensures that investors do not have to depend on the uncertainties of a secondary market to gain liquidity and can enjoy the long-term advantages of private market investing without sacrificing flexibility.
How volatile is Fundrise?
3/5— Moderate Volatility
The assets available for investment on the Fundrise platform, primarily consisting of private real estate and venture capital, typically exhibit different volatility characteristics compared to traditional public market investments like stocks and bonds. Private market assets often have lower volatility, partly because their valuations are not subject to daily market fluctuations and public investor sentiment in the same way that publicly traded assets are.
However, this does not mean these investments are without risk or fluctuations in value. Economic factors, real estate market dynamics, and company performance can impact the value of investments on Fundrise. Additionally, because these assets are less liquid, their valuation adjustments may occur less frequently, potentially masking short-term volatility but not eliminating the inherent risks and possible variations in investment value over time.
What is the average rate of return for Fundrise?
4.81 %— Low Return
Investors on Fundrise can expect to earn returns through two primary channels: dividends and appreciation. Over the past 7 years, the platform has reported an average income return of 4.81%.
Dividends are a share of the income generated from the projects within an investor's portfolio. These dividends are paid out as quarterly cash payments, which can either be distributed directly to an investor's bank account or reinvested back into the platform, based on the investor's preference.
Appreciation refers to the increase in value of an investor's shares, driven by changes in the net asset value (NAV) of those shares. This means that as the underlying assets in the portfolio grow in value, so does the investor's stake.
What is the minimum investment amount for Fundrise?
The minimum investment required to start investing with Fundrise through a taxable account is $10.
For those interested in investing through retirement accounts, such as IRAs, the minimum to get started is set at $1,000.
Before making an investment, individuals are prompted to select an investment plan that best suits their specific investment goals. Each plan offered on the platform is designed with a distinct risk and return profile, providing investors the flexibility to choose an option that aligns with their personal investment objectives. After the initial investment, individuals have the option to add funds to their account at any time, although additional investments are not mandatory.
What is the investment time horizon for Fundrise?
Investments in Fundrise are intended for the long term, with a recommended time horizon of 5 or more years.
This approach is due to the platform's focus on selecting strategies that offer the potential for long-term returns rather than prioritizing short-term gains. Given the nature of these investments, including their focus on private market assets like real estate, they are not suited for investors who may need to access their funds in the near term.
Who can invest in Fundrise?
To invest with Fundrise, individuals must be over the age of 18, have permanent U.S. residency, possess a valid U.S. tax ID, and file taxes in the U.S.
It is not necessary to be an accredited investor to participate in Fundrise's investment opportunities. However, due to regulatory and tax implications, the platform is currently unavailable to international investors, individuals residing in U.S. territories, and US-based entities that do not file and pay taxes in the U.S.
Additionally, investments from pass-through or disregarded entities are not accepted at this time, primarily due to foreign withholding regulations.
Is Fundrise regulated or audited?
Fundrise operates under the regulatory oversight of the United States Securities and Exchange Commission (SEC) and is subject to financial regulations applicable to investment platforms. Being SEC-registered, Fundrise must adhere to specific reporting, disclosure, and operational standards designed to protect investors and ensure transparency.
As part of its compliance with regulatory requirements, Fundrise undergoes regular audits conducted by independent third parties. These audits are intended to verify the accuracy of financial statements, compliance with laws and regulations, and the effectiveness of internal controls over financial reporting. The results of these audits help provide assurance to investors regarding the reliability of financial information presented by Fundrise and the integrity of its operations.
This regulatory framework and audit process are critical for maintaining investor trust and confidence in the platform, ensuring that Fundrise operates in a manner that aligns with legal requirements and industry best practices.
Is Fundrise insured?
Fundrise, like other investment platforms, operates within a regulatory framework designed to protect investors and the integrity of the financial system.
However, it's important to clarify that investments made through Fundrise, which primarily consist of real estate and other alternative assets, are not insured by the Federal Deposit Insurance Corporation (FDIC) or by any other government agency. The FDIC insures deposits in banks and savings associations against bank failure, a protection not extended to investments in stocks, bonds, real estate, or other non-deposit products offered by investment platforms like Fundrise.
Does Fundrise distribute payouts?
Investors can begin to participate in potential returns once their investment settles, which can take up to 5 business days from the placement of the investment.
Dividends can start to accrue daily after the investment settles, while appreciation is realized through periodic NAV updates. The platform's eREITs and eFund typically update their NAVs quarterly, whereas other funds like the Flagship Real Estate Fund, Income Real Estate Fund, and Innovation Fund update their NAVs daily.
Dividends are usually paid in the middle of the month following the end of each quarter, with the option for these to be either sent to the investor's primary checking account or reinvested based on the investor's settings. All returns, both from dividends and appreciation, can be tracked at any time from the Portfolio Page on the Investor Dashboard.
What are the annual fees for Fundrise?
Fundrise incorporates various fees at different stages of the investment process, designed to cover the costs of managing and advising on the investments made through the platform. Here's a breakdown of these fees:
- Early Liquidation Fee: Investors who choose to liquidate their eREIT or eFund shares before holding them for 5 years are subject to an approximate 1% penalty based on the total share value. There is no penalty for liquidating shares held for over 5 years.
- Advisory Fee: Fundrise charges a 0.15% annual advisory fee. This equates to $1.50 for every $1,000 invested over a 12-month period. This fee covers the cost of the advice and technology services provided by Fundrise.
- Management Fee for Real Estate Funds: There is an annual 0.85% flat management fee for investing in Fundrise's real estate funds. This translates to $8.50 per year for every $1,000 invested. These funds are typically part of the Supplemental Income, Balanced Investing, or Long-Term Growth Plans.
- Management Fee for the Innovation Fund: The Fundrise Innovation Fund, which is part of the Venture Capital Plan, carries a 1.85% annual flat management fee, or $18.50 per year for every $1,000 invested.
- Fundrise Pro: For investors seeking more active portfolio management, Fundrise offers the Pro option for $10 per month or a discounted rate of $99 per year if paid upfront.
How do I handle my investments in Fundrise?
On Fundrise, investors have a degree of control and flexibility over their investment strategy, allowing them to align their portfolio with their financial goals and risk tolerance. While the platform primarily manages the assets and investment strategies, investors can:
1. Choose an Investment Plan: Upon signing up, investors select an investment plan that matches their goals, whether they're seeking income, growth, or a balanced approach. Each plan has a different risk and return profile, enabling investors to tailor their investments to their preferences.
2. Adjust Investment Preferences: Investors have the ability to adjust their investment preferences over time. If an investor's financial goals or risk tolerance changes, they can modify their investment strategy accordingly on the platform.
3. Reinvest Dividends: Investors have the option to automatically reinvest dividends received from their investments back into their Fundrise portfolio. This can compound returns over time by increasing the amount of capital working for the investor.
4. Manage Contributions: Investors can add funds to their account at any time to increase their investment. They also have the flexibility to set up recurring contributions, making it easier to consistently invest towards their goals.
5. Redemption Program: Fundrise offers a share repurchase program, providing investors with an option for liquidity subject to certain limitations. This allows investors some level of asset management in terms of deciding when to potentially exit their investment, within the bounds of the quarterly redemption program.
It's important to note that while investors have these options for managing their investment, the actual acquisition, identification, and management of real estate assets or other investments on the platform are handled by Fundrise.
How does Fundrise get taxed?
Fundrise provides investors with necessary tax documents based on the types of funds and transactions in their portfolios. Here's a summary of the tax reporting support offered:
- Form 1099-DIV: Investors will receive this form for each eREIT or interval fund in their portfolio that generated aggregate distributions of $10 or more during the tax year.
- Schedule K-1: Investors owning shares of the Fundrise eFund will receive a Schedule K-1, which reports their share of the fund's income, deductions, and credits.
- Form 1099-B: This form is issued to investors who have liquidated any eREIT/interval fund shares in the previous year, detailing the sale of these shares.
Timing for Tax Documents:
- 1099-DIVs for eREITs and Interval Funds are intended to be issued at the end of January.
- K-1s for the Fundrise eFund are expected to be delivered in mid-March.
Investors can find out which types of funds they own by checking the Portfolio tab on their investor dashboard. Once issued, tax documents are posted to the Documents tab of the investor dashboard.
Multiple Tax Forms: If an investor's portfolio is diversified across different funds, they may receive multiple tax forms—one for each eREIT or interval fund generating sufficient distributions and a Schedule K-1 for eFund shares, if applicable.
How many investors are on Fundrise?
Fundrise has attracted over 385,000 investors.
Among its investment options, the Innovation Fund, focusing on private high-growth technology companies across sectors with strong macro tailwinds, has raised over $110 million from more than 35,000 active investors and has invested in 16 companies.
In its private credit investment strategy, Fundrise has acquired or financed over 37,000 residential units and made more than 71 unique mezzanine and preferred equity investments, collectively valued at more than $7 billion. Specifically, $516 million has been deployed into debt projects across 90 deals, encompassing 20,194 units.
The real estate portfolio includes 290 active projects and 151 completed projects.
Who is the CEO of Fundrise?
The CEO and co-founder of Fundrise is Benjamin Miller.
Before establishing Fundrise, Benjamin, alongside his brother Dan, gained extensive experience in the real estate sector through their work at WestMill Capital Partners. At WestMill, the Miller brothers were involved in developing, buying, and managing real estate properties within the nation's capital, laying the groundwork for the expertise and insights that would contribute to the founding and growth of Fundrise.