Investing in real estate has changed over the years. Now, new investment platforms allow you to gain access to private real estate deals throughout the country.
In this post, we will review and compare two popular real estate investing platforms: Fundrise and CrowdStreet.
Both of these platforms have similar offerings, giving you the opportunity to passively invest in real estate.
Fundrise is the original real estate crowdfunding platform and is open to all investors. With a low minimum investment, you are able to achieve diversification across dozens of different properties. However, diversification comes at the cost of customization. You have little say about what properties you invest in.
CrowdStreet is a more hands-on platform designed for high-net-worth investors. Through the platform, investors are able to pick and choose individual deals to invest in. However, the minimums and requirements are significantly more and therefore are out of reach for many new investors.
Both platforms were created with the goal of making it easier for investors to get exposure to real estate without the typical headaches that come from owning and managing properties. However, both platforms have chosen different approaches to achieve this goal. Continue reading for the details!
|$10 Minimum, Private Commercial Real Estate Portfolios||View Investments|
|$10 Minimum, Short Term Real Estate Debt Investments||View Investments|
|$100 Minimum, Buy Rental Property Shares||View Investments|
|$1,000 Minimum, Private Commercial Real Estate Portfolios||View Investments|
|Marketplace, Buy/Sell Single Family Rental Properties||View Investments|
|Accredited Investors Only||No||Yes|
|Fees||1% + Origination Fees||0.5% To 2.5%|
|Investments||Portfolios||Portfolios, Private Placements|
|Best For||Beginner And Intermediate Investors||High-Net-Worth Investors|
Fundrise is a crowdfunded real estate investing platform. Similar to real estate investment trusts or partnerships, investors pool their money together to purchase real estate assets.
These assets then produce income and/or growth based on the structure of the investment.
Historically, Fundrise has provided investors with solid 8% to 11% returns on their portfolios over time. That being said, it is a longer-term investment with a minimum time horizon of 5 years. If you sell before then, you'll likely see significant fees for doing so.
Real estate is traditionally a high barrier to entry investment, but crowdfunded platforms allow average retail investors to gain exposure to this asset class. In fact, the Fundrise Starter Portfolio has a minimum account balance of $10. Additionally, you are able to upgrade to one of the advanced plans at any time, so this is a great way to test the platform out.
This platform offers a variety of benefits such as low account minimums and quarterly redemption periods. However, investors should understand the liquidity and time horizon requirements of an investment in the Fundrise platform. We will discuss this in further detail throughout the article.
Fundrise offers plans to invest in different types of real estate such as income-producing rental properties or growth-oriented real estate developments.
The main investment objectives of Fundrise are to generate revenue from income-producing properties as well as buying and selling real estate in thriving markets.
As a Fundrise investor, you can choose whether you want to be in a growth-oriented portfolio or income-oriented portfolio. They also offer a blended portfolio, if you want the best of both worlds!
Fundrise investors receive income from rental payments and proceeds from flips in the form of dividend payments or distributions. They also receive interest payments from debt investments, as this platform offers a blend of debt and equity investments.
In exchange, Fundrise collects a 1% fee as the investment manager. This is the only annual fee they charge. However, you may be subject to an early redemption fee if you do not commit to the full term of the investment. In addition, when a new property is acquired, there is sometimes an origination or acquisition fee that might affect some investors.
It is important to understand that Fundrise is a private real estate investment firm. The Fundrise eREITs and eFunds can only be bought and sold through this platform. They are not publicly traded on a stock exchange like a publicly-traded REIT.
Fundrise allows you to choose from dozens of professionally built real estate portfolios based on your risk tolerance and investment preferences.
Some portfolios are geared toward cash flow while others focus on the growth of the underlying assets.
If you invest a minimum of $10, you will be placed in the starter portfolio.
There is a minimum investment of $5,000 if you want to branch out beyond the starter and basic portfolios and begin to customize your investments.
Before investing, you will need to determine what your minimum investment will be. Choosing your minimum investment will impact what features and investments you have access to. Below are the investment account levels available on Fundrise.
The Fundrise Starter Portfolio is for new investors who would like to give Fundrise a shot.
The minimum account requirement is only $10 to begin investing. This portfolio consists of 50% growth and 50% income-oriented holdings.
If you want to upgrade to an advanced plan down the road, it is completely free to do so!
The Fundrise Basic Plan offers the same investment as the Starter Portfolio but also adds the capability to invest through an IRA. You can also create and manage your own personal investment goals within the platform. The minimum investment is $1,000 to get started.
The Fundrise Core Plan allows you to invest in one of the three portfolios detailed below: Supplemental Income, Long-Term Growth, or Balanced Investing. The minimum investment is $5,000 to get started. Your investment in this plan will be allocated across projects based on the portfolio you choose.
The Fundrise Advanced Plan gives you more flexibility over the allocation you have to specific projects. You still gain access to the core portfolios but you can choose the allocation to specific Fundrise eFunds.
Currently, there are a number of eFunds available for investors. These include the Washington DC eFund, the Los Angeles eFund, and the National eFund. These eFunds are structured as partnerships as opposed to traditional REITs. This allows them to be more flexible in the projects they invest in and how they distribute to investors.
Additionally, you'll gain access to the Plus versions of the three core portfolios. These are also structured as eFunds and allow investors the potential for greater upside as well as greater downside than the original core portfolios.
The minimum investment is $10,000 for the Fundrise Advanced Plan.
Currently, the primary perk to Fundrise Premium is the ability to invest in Plus Plans. These allocate a percentage of your portfolio into more advanced strategies that may provide additional tax benefits.
The minimum to get started is $100,000 and you can get investment fees waived if you invite a friend.
Within Fundrise Core Plans, investors can choose to invest in the Fundrise Starter portfolio, Supplemental Income, Long-Term Growth, or Balanced Investing. The minimum is $5,000 to invest in Fundrise Core plans.
The Fundrise Supplemental Income Portfolio holds income-producing real estate.
Investors will earn returns primarily through dividends from cashflow-producing real estate. Dividends are generated through rental and interest payments in proportion to your share of the fund.
The Fundrise Balanced Investing Portfolio offers a blend of 50% growth and 50% income-oriented investments.
The balanced investing portfolio invests in a blend of eREITs and eFunds offered by Fundrise. The goal for this portfolio is for a balance of income-generating real estate, as well as real estate that is appreciating in value.
Finally, we have the Fundrise Long-Term Growth Portfolio.
The goal of this portfolio is to generate returns primarily from asset appreciation.
This portfolio aims to purchase high-growth potential real estate and generate returns mostly from the sale of the underlying properties. This includes buying property and performing renovations in order to sell the asset for a later gain.
Fundrise uses the funds you invest to purchase real estate. For this reason, there is a 60-day waiting period to withdraw funds.
There are also quarterly redemption periods. However, liquidity is never guaranteed. You may also be subject to early withdrawal penalties if you do not commit to the full investment term.
This is why it is important to understand what you are investing in when you invest with Fundrise. Investors should aim for a long-term investment of at least a five-year time horizon when investing with Fundrise. This real estate investment is not highly liquid and may not be for everyone!
It is important to remember that past performance does not guarantee future returns. All investing involves risk, including the potential loss of principal. That being said, since inception, the Fundrise returns have been solid, typically ranging from 8% to 11%.
These returns are "net of" or after fees. Here's the return I experienced from my $5,000 Fundrise investment.
Click here to see updated Fundrise returns.
Fundrise charges a fee of 1% per year.
They do not charge any other hidden fees and there is no front load fee with Fundrise.
The returns shown above are the returns after Fundrise collects the 1% fee.
If you cash out early, you may be subject to an early redemption fee.
In addition, when a new property is purchased, you may be subject to a small origination or acquisition fee. More on that here.
Fundrise may be a great platform for passive investors who are looking to gain access to private real estate markets.
You can get updated information on the real estate projects you invest in on your dashboard. Fundrise also sends newsletters and project updates on a consistent basis.
These non-public REITs cannot be sold as easily as a publicly-traded REIT.
In addition, you can automate your dividend reinvestment plan, allowing compound interest to build up in your account.
In most cases, Fundrise is best for investors with a minimum five-year time horizon. Real estate is not a liquid investment and inexperienced investors need to take this into consideration.
While Fundrise does offer a 90-day satisfaction guarantee, you should not invest if you have a short-term investing mentality.
CrowdStreet is an online commercial real estate investment platform that launched in 2014.
This platform differs from Fundrise because there are a number of different ways you can invest with the platform. These include:
CrowdStreet is one of the many crowdfunded real estate investing platforms we have come across that allows investors to pick and choose individual projects to invest in.
This platform also focuses solely on commercial real estate, meaning there is no residential real estate in the mix. On its site, the company claims to review around 400 potential investment opportunities each month. Of those reviewed, less than 5% are accepted.
CrowdStreet is geared toward accredited investors as almost none of the current offerings on the marketplace are open to non-accredited investors.
In order to become an accredited investor, you have three options: meet the net worth rule, meet the income rule, or meet the financial knowledge rule.
The net worth rule states that if your net worth is greater than $1 million without including your personal residence, then you will qualify as an accredited investor.
In order to meet the income rule, you must have an income of over $200,000 if single or a combined income of $300,000 if married.
To qualify under the financial knowledge rule, you must pass the regulated financial exams Series 7, Series 65, and Series 82. These exams are typically taken by stockbrokers and financial advisors, however, anyone can study for these exams and take them to become an accredited investor.
Without meeting one of these 3 rules, you'll be unable to invest in the majority of offerings that CrowdStreet has to offer.
The minimum investment varies depending on the investment path you choose.
For the direct investing approach, a $25,000 minimum is common.
The fully managed portfolio option, on the other hand, has a minimum investment of $250,000.
This makes CrowdStreet out of reach for many new investors. It is clear that they are aiming for higher net worth, accredited status clients.
If you want automatic diversification without the need to choose your own investments, this option may be for you. With CrowdStreet, you are able to invest in professionally managed and institutional-quality real estate funds. These commercial real estate funds are invested in multiple properties in multiple different areas.
There are two different funds to choose from: single-sponsor funds or CrowdStreet funds.
Single-sponsor funds are put together by a leading real estate investment firm and benefit from that firm's specialty. The CrowdStreet funds are investments which are curated by CrowdStreet professionals.
This is an attractive feature for those who want to rely on the experts to bolster their returns.
Through direct investing, you pick and choose properties to invest in.
This is ideal for the active investor with a sizable amount of capital to deploy. CrowdStreet offers research tools for investors and is very transparent about the investments.
This differs from Fundrise where investors are only able to invest in eREITS or eFunds. For investors looking to be more involved with their investments, this is an attractive feature.
Currently, most deals available on CrowdStreet have a minimum investment of $25,000.
Then there is managed investing. CrowdStreet experts will build you a personalized real estate investment portfolio and invest in deals on your behalf.
Managed investing is best for wealthy individuals looking to park a significant amount of money in real estate and have confidence that their investment is in good hands. An offering like this can be a particularly effective way to diversify a significant portfolio without needing to invest a significant amount of time into researching individual investments.
This service is reserved for high-net-worth investors, as the minimum to invest is $250,000.
With the direct investing approach, each project has a targeted investor IRR or internal rate of return.
Since launching in 2014, CrowdStreet has returned an IRR of +17%. This is based on the +520 deals that have closed and the 54 that have been fully realized.
With over $245 million paid back in returns to investors so far ad $2.25 billion raised, CrowdStreet has an incredible trajectory.
Click here to see updated CrowdStreet returns.
The fees for individual projects range based on the project. CrowdStreet does not charge these investors any fees, however, most of the deal sponsors will include some costs.
For the CrowdStreet funds, the fee ranges from 0.5 to 2.5%.
These fees go toward administrative costs, platform costs, and acquisition costs.
Currently, CrowdStreet does not offer investors access to a secondary market, meaning investors should be prepared to hold an investment for the life of the deal. Each deal varies, though most have a targeted holding period of 3-5 years.
Fundrise and CrowdStreet offer similar investments but are very different crowdfunded real estate platforms.
Both platforms allow you to invest in commercial real estate using the convenience of online platforms. They both offer portfolio or fund-based investing but the minimum investment required is significantly higher for CrowdStreet.
CrowdStreet provides an attractive offering for the high-net-worth investor who wishes to be more hands-on in their investing and diversify into commercial real estate. Fundrise on the other hand is ideal for smaller investors or those wishing to diversify into a fund and don't have interest in individually selecting projects.
The Fundrise starter portfolio has a $10 minimum while most of the CrowdStreet funds have a $25,000 minimum investment.
Another important difference is the accredited investor requirement. All but one of the CrowdStreet investments require you to be an accredited investor. All of the investment offerings from Fundrise are open to non-accredited investors.
It is clear that CrowdStreet is going after an entirely different group of investors. The Crowdstreet platform aims at higher net worth investors. Fundrise aims to work with the everyday investor who has a few thousand dollars to invest.
CrowdStreet is unique because you can decide which properties you'd like to invest in and put your entire investment into that one property.
Fundrise, on the other hand, will only let you invest in their assortment of portfolios (Balanced, Long-Term Growth, Income, etc). For that reason, in most cases CrowdStreet is better for active, high-net-worth investors.
Both Fundrise and CrowdStreet allow you to invest retirement dollars on their platforms. However, both platforms structure this arrangement in a different way.
On CrowdStreet, you're able to use funds from an existing self-directed IRA to invest on the platform. This is a special type of IRA that you will need to have set up and will typically cost at least a couple hundred dollars to do so.
With Fundrise, you're able to set up an IRA on the platform and don't need to have an existing self-directed IRA. There is a $125 fee to set this account up. However, in order to access the IRA, you will need to have a Basic plan with the $1,000 minimum.
The advantage of investing IRA dollars is that you're able to take advantage of tax deferral and potentially avoid taxation entirely if you leave your investments to grow until retirement.
While not something investors are always concerned with, knowing that your information and data is secure is something that shouldn't be overlooked on crowdfunding platforms.
Fundrise's security protocols involve offering 2-factor authentication for investors, and ensuring that all connections to the platform are encrypted using "https" with TLS (transport layer security). These help to minimize the likelihood of your login info being stolen or your account being compromised.
CrowdStreet's approach to security is also extensive. They go as far as limiting access to client personal information to specific employees in order to avoid your information getting into the wrong hands. Their website also uses industry-standard encryption and protection techniques to keep your data safe.
In some instances, the fees may be lower for CrowdStreet but not in all cases. That is because the fees for the funds range from 0.5% to 2.5%. Fundrise charges a flat 1% fee for annual investment management.
Overall, we believe Fundrise offers a more appealing platform and one that is more accessible to the average investor. CrowdStreet may be a good option for those higher net worth investors who have the capital to meet the minimum investment and would like to concentrate their real estate portfolio.