Fundrise vs Realty Mogul: Best Crowdfunded Real Estate Investment?

August 6, 2019

Contents

Fundrise vs. Realty Mogul

Investing Simple is affiliated with Fundrise and Realty Mogul. This relationship does not influence our opinion of these platforms.

As investors, we are always looking for ways to grow and diversify our portfolios. Whether we buy many different stocks or spread our money across different asset classes, diversification is key to a balanced portfolio. One key component of a well-rounded portfolio is real estate.

The problem is, it isn’t the most passive investment. Recently, a number of different crowdfunded real estate investing platforms have emerged. This provides investors with a great way to passively invest in real estate all over the US! Many of these platforms offer unique features to investors, making it difficult to choose between them. In this post, we will compare two of the most popular crowdfunded real estate platforms Fundrise vs. Realty Mogul.

Realty Mogul vs Fundrise: Summary

Fundrise has a lower minimum balance of $500 compared to $1,000 to invest with Realty Mogul.
Realty Mogul only has two portfolios for non-accredited investors which are the Mogul REIT I and Mogul REIT II.
Fundrise has four different portfolios available to all investors. The starter portfolio has a minimum balance of $500 while the advanced plans have a minimum of $1,000.
Fees vary with Realty Mogul while Fundrise has a transparent 1% fee.
Realty Mogul offers 1031 Exchanges and Private Placements for accredited investors.
Distributions are paid monthly with Realty Mogul and quarterly with Fundrise.
Investors should have a minimum 5 year commitment for either platform.

Click here to invest with Fundrise!

Click here to invest with Realty Mogul!

Fundrise vs Realty Mogul comparison review article. — Fundrise vs. Realty Mogul

We’ve all heard the word “diversification,” and these days, a well-rounded portfolio includes real estate, now available to novice investors or those without deep pockets.

In times gone by, only the wealthy could afford to buy into real estate ventures. Fast forward to today, when the field is wide open to anyone with the foresight to see its ongoing value.

Maybe you can’t open your checkbook and pull out thousands of dollars to put into a deal. But with its potential for hefty, sizeable returns, long-term appreciation, a consistent flow of passive income, and the long list of tax advantages, more and more young people have been looking to become property owners.

Real estate investing gives you a tangible asset, and projects are less volatile than stocks and bonds. You can’t expect to become wealthy overnight, but you will see your investment flourish and grow in the long run.

The Problem With Traditional Real Estate Investing

Another major roadblock to buying into real estate deals is the many demands on your time, energy and even your wallet. Once you buy that coveted property, you become the landlord, shouldering all the responsibilities for upkeep, maintenance and longer-term repairs. You’ll need to respond to broken pipes, power outages, storms, loose roofing shingles, drafty windows, and many other complications as the property ages.

Maybe you can’t afford to buy that fixer upper in upstate New York, or that condo in Chicago. But we’re here to tell you there’s a way to buy into property as a bonafide part owner that doesn’t require you to find tenants, collect rent, take care of lawn maintenance, or deal with leaky sinks.

Now there’s a viable way to buy into real estate projects that leaves you in a hands-off position. That’s right, experts will manage the property for you, including collecting rent and doling out your share. This phenomenon is called crowdfunding, and you need to know more about it NOW.

Real Estate Crowdfunding

Crowdfunding is passive income at its best. To get in on the game, you won’t need the experience, funds and connections needed to jump in.

This means that after your initial investment, you just sit back and let the work get done and the dividends grow. We recommend reinvesting that earned money into more shares, rather than going out and spending it!

Crowdsourcing is an alternative way to pool money to fund a project or venture by raising small amounts of money from a large number of people, typically via social media platforms. Crowdsourcing worldwide raises billions of dollars each year, with the platform continuing to pick up speed as more people opt in.

Not only do you NOT need to be rolling in money to buy into real estate through crowdfunding; you also don’t need to be an expert in real estate management. A team of experts oversee the daily aspects of the projects. Your only task is checking your earnings statements, and deciding which project you wish to buy into next.

Advantages Of Crowdfunded Real Estate

Compared to buying and managing a rental property, real estate crowdfunding offers clear advantages, including:

You will not need to handle any day-to-day responsibilities! Teams of experts manage the properties for you.
You will know ahead of time what you’re getting into. Each potential project is thoroughly researched beforehand so that investors have as much info as possible to make wise decisions.
You’ll receive tax benefits. Real estate crowdfunding allows investors to receive certain tax breaks, such as depreciation, that normally apply to owning an investment property.

Crowdfunded Real Estate Basics

Here are a few tips for making sure that your real estate crowdfunding venture turns out to be a wise choice, not a poor strategy on your part:

Choose your platform carefully. Every real estate crowdfunding platform is different and some may be a better fit for your needs than others. Researching the various platforms to identify their strengths and weaknesses is an important first step for investors.
Keep an eye on liquidity. Real estate has very different liquidity schedules as well as unique return profiles for each individual investment. It’s important to understand the length of time you need to set aside for a deal before you take the plunge into investment decisions. Real estate is not a highly liquid investment. Most real estate investments are a minimum 5-year commitment, with some debt investments being shorter.
Don’t overlook risk. Real estate is a good way to diversify your investment profile, but it also expands your risk as well. As with most avenues in the financial world, there are no absolute guarantees, so weigh the potential returns against the projected risk to decide what’s the best choice for your financial goals.

Two reputable crowdsourcing platforms currently gaining momentum are Fundrise and RealtyMogul. Let’s take a closer look at what each platform has to offer, and which might be the best option for you.

Fundrise Review

Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate. This is a combination of debt and equity deals, giving investors both growth and income potential. Fundrise has changed the game by offering their starter portfolio with a $500 minimum balance. You can upgrade to one of their advanced plans at any time too!

In a nutshell, Fundrise curates private real estate deals. With some of these deals, you are an owner who has equity in the property. In others, you serve as the bank having a debt interest. Equity investments are growth investments, as you can capitalize on asset appreciation. Debt investments are income investments, as you aim to receive interest payments from the loan.

How Much Should You Invest?

The average Fundrise investors are in their 30s, and while the median initial investment is $4,500, you can open a starter portfolio for just $500.

How much should you invest? The experts at Fundrise recommend you allocate about 30 percent of your investable assets to alternatives like private real estate ventures.

Real estate gurus also emphasize this isn’t a get-rich-quick avenue. It’s meant to be a long-term investment. If you have a minimum time horizon of approximately five years to put into the deal, Fundrise may be for you.

How Does Fundrise Work?

The function of Fundrise is to acquire assets with a high potential to grow in value. The key here is to buy ahead of major demographic or cultural shifts, understand emerging neighborhood growth, or recognize untapped property potential. That’s where the experts come in.

Another focus is making major improvements to the property to increase the sale price. Fundrise puts your investment to work on across-the-board improvements, like building new urban housing, renovating run-down apartments, and renting out viable vacant buildings.

When the refurbished properties are sold, ideally, returns are recognized. There is far greater demand for complete real estate developments. What they have found is that there are many more potential homebuyers for a fully renovated home than a rundown fixer upper, and more renters for new luxury apartments near a metro area than for the previously vacant land.

There isn’t a one-size-fits-all option for Fundrise investing.

How To Make Money With Fundrise

You can make money in a number of different ways with Fundrise. They offer the starter portfolio as well as three advanced portfolios. This allows you to decide whether you want to follow an income oriented or growth-oriented approach.

These portfolios will consist of debt investments and equity investments. Debt investments essentially make you and the other investors the bank, extending a loan to a real estate developer. You will earn income from interest payments.

Equity investments are higher risk, but higher potential return. Fundrise aims to find real estate in thriving markets for sale. They purchase the property, make upgrades to force appreciation and plan to sell it for a profit in the next few years. In the meantime, if the property is producing income from rents, that is shared among the owners or investors.

Fundrise Fees & Returns

Fundrise charges a fee of 1 percent 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 percent fee.

Portfolio Options

Fundrise allows you to choose from four real estate portfolios based on your risk tolerance and investment goals. Some portfolios aim for cash flow, and others focus on the growth of the underlying assets. If you invest the minimum of $500, you will have access to the starter portfolio. The other three advanced plans require a minimum investment of $1,000.

Starter Portfolio

The Fundrise Starter Portfolio is for new investors who would like to give Fundrise a shot. The minimum account requirement is only $500 needed by you to start investing. This portfolio consists of 50 percent growth and 50 percent income-oriented holdings. If you want to upgrade to an advanced plan down the road, it is entirely free!

Supplemental Income

This Supplemental Income Portfolio holds income-producing real estate. You can choose an option that will best meet your needs for supplemental income. This will create a consistent income stream by investing in cash-flowing real estate.

The goal here is to funnel quarterly dividends to you via a portfolio allocated mostly to debt real estate assets. Investors will earn returns primarily through dividends from cash flow producing real estate and interest payments. Dividends are generated through rental and interest payments in proportion to your share of the fund. Around 25 percent of Fundrise investors choose this strategy, with the average age of investors in their 30s and the average investment is $6,670.

Balanced Investing

The Fundrise Balanced Investing Portfolio offers a blend of 50 percent growth and 50 percent income-oriented investments. The goal for this portfolio is for a balance of the income-generating real estate, as well as real estate that is appreciating in value. Fundrise balanced investing helps you build wealth steadily through diversification.

If you buy into this class, the goal is to earn returns through a blend of dividends and appreciation. This is a balanced mix of income and growth strategies. The median age of investors in this class is 30s, and average investment is $6,800. Current projects on the docket feature apartment reno’s in Jacksonville, FL; new apartment development in Georgetown, TX; and new commercial projects in Colorado Springs, CO.

Long Term Growth

The fourth portfolio option is the Fundrise Long Term Growth Portfolio. The goal of this portfolio is to generate returns primarily from property appreciation. This portfolio aims to buy high growth potential real estate and generate returns mostly from the sale of the underlying properties. This includes buying a property and performing renovations in order to sell the asset for a gain later.

This category will earn you returns on your investment via appreciation in share value, rather than consistent dividends. This is a growth-oriented strategy favored by people with an average investment of $7,600. The wide array of projects currently includes apartment reno’s in Charlotte, NC; new home construction in Daly City, CA; and new commercial development in Chicago, IL.

Investment Liquidity

Fundrise uses the funds you invest to purchase real estate. For this reason, there is a 60-day waiting period for withdrawing funds. There are also quarterly redemption periods when you can withdraw your funds.

It’s vital to remember that a Fundrise investment is a long-term one, and you should expect to keep your money invested with them for at least 5 years.

They do offer quarterly redemption periods, but liquidity is never guaranteed. Real estate does not sell overnight, and if there are many people looking to pull out at the same time, they may not have the cash on hand. You may also end up paying early withdrawal fees if you pull your money out early.

Fundrise eREIT & eFund

When you invest with Fundrise, you will get shares of eREITs and eFunds. Keep in mind that Fundrise is a private real estate investment. You can only buy and sell Fundrise eREITs and eFunds on the Fundrise platform. They are not publicly traded on a stock exchange like a publicly-traded REIT.

Real Estate Investment Trusts (REITs) are corporations, trusts, or associations that invests directly in income-producing real estate and is traded like a stock.

An eREIT will produce income for your portfolio in the form of dividends. Dividends are earned from the rent payments and interest payments from the underlying apartment and commercial leases owned within the eREIT as well as interest payments from underlying real estate debt investments.

An eFund is a partnership created by Fundrise to be treated differently for tax reasons and to provide greater investment flexibility. Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds are designed by experts in a similar way to eREITs where there is a pool of real estate investments split into shares and sold to investors. Where eREITs are designed to generate income, eFunds were designed by experts for growth potential.

Getting Started With Fundrise

Fundrise will guide you through a series of simple but important questions to get a sense of who you are and where you stand financially.

The first step, obviously, is to open an account here.

Next, you need to provide your age and whether you’re actively working or retired. Next, you need to elaborate on your real estate experience. Maybe it’s home ownership, or apartment renting. Maybe it’s none.

Then, you will need to give some thought to your specific goals for signing up. Are you in it just to test the waters? Or have you pinned down an exact dollar goal in a spelled-out time frame?

Whatever your goal, chances are good you’ll find something to suit you.

Pros Of Investing With Fundrise

The minimum for investors to get started with the Starter Portfolio is $500.
Small retail investors are able to access private real estate investments.
Since this is a non-traded REIT, it may be less correlated with the overall market.
Fundrise has a transparent fee of 1 percent per year.
This investment allows you to earn compound interest, with the option of automatically reinvesting quarterly dividends using a drip (Dividend Reinvestment Plan).
Fundrise does not have a minimum net worth or income requirement like most private investment funds do.
This is a 100 percent passive real estate investment.
Fundrise gives you diversified exposure to real estate.
Fundrise supports retirement accounts.
Monthly redemption periods eliminate the temptation for panic selling.

Cons Of Investing With Fundrise

They cannot guarantee liquidity. During a downturn, liquidity may not be available as many investors will rush to sell, and buyers may be few and far between. Don’t rely on your real estate investment for handy cash.
They cannot guarantee dividends, just like the stock market!
Dividends will be taxed as ordinary income rather than capital gain rates.
The platform has a limited track record as this is a brand-new investment.

Fundrise seems to be a great pick for the passive, hands-off real estate investor. Unlike other crowdfunded real estate platforms out there, you do not have to be an accredited investor. With a $500 minimum for the starter portfolio, this is a beginner-friendly investment. You can automatically reinvest your dividends, allowing you to put your money back into Fundrise earning you compound interest.

Realty Mogul Review

Realty Mogul has a sleek platform that allows you to keep track of your investment. This is a 100 percent passive, hands-off real estate investment where you invest in portfolios of real estate projects. Realty Mogul lets you buy into both commercial and residential properties.

Commercial sites include plazas, shopping centers, marketplaces and offices. Residential projects include things like multi-family housing units such as condo or apartment complexes. When you invest in real estate, you’re tapping into the potential for long-term appreciation, along with a regular, consistent cash flow.

How Does Realty Mogul Work?

Through the Realty Mogul platform, you will have the opportunity to put your money into real estate ventures online through a private, secure website. You can browse investments, review research that’s been done, and sign legal documents securely online. Once invested, you will have access to an investor dashboard, giving you 24/7 access to watch your money grow and proliferate.

The platform has seen enormous success: to date, members of the public have invested over $400 million through Realty Mogul, financing more than 300 properties valued at over $2 billion.

Realty Mogul experts are constantly on the lookout for diversified, multi-tenant, centrally located, cash flow producing properties. Its investment team examines every project on the drawing board, checking it against hundreds of data priorities. Every deal is put to the test against the most conservative financial models, and requires unanimous approval from an investment committee, whose members have collectively transacted more than $5 billion in real estate.

Getting Started With Realty Mogul

First, you create a Realty Mogul account.

Realty Mogul carries a minimum investment of $1,000. Investment lengths start at just 6 months and range out to a high of 120 months. This lets you make your investment decisions specifically based on your own long and short-term goals.

To invest in Realty Mogul private placements, you must be an accredited investor. An accredited investor is someone who has a recognized level of income, net worth, or professional experience allowing them to invest in higher-risk securities that may not be registered by companies with traditional securities laws.

To be eligible to invest in Mogul REIT I and Mogul REIT II, you are not required to be an investor who is accredited. You can invest in these REITs as long as you meet the $1,000 minimum investment.

SEC Compliance

In order to stay compliant with the SEC, the companies who issue unregistered securities must verify they are selling to accredited investors only. They may do this by verifying income and net worth of the investor.

When you create an account with Realty Mogul, you will need to answer some questions to ink out your goals for real estate investments. Are you looking for returns in the shorter term to meet a specific need, such as a down payment, or do you plan to reinvest some of the dividends you’ve earned into new projects?

Investors can purchase equity investments in both commercial and residential real estate, as well as real estate debt investments. Realty Mogul offers multiple investment vehicles, however, some are only accessible to accredited investors.

Realty Mogul Investment Options

Mogul REIT I

One option is Mogul REIT I, a public, non-traded Real Estate Investment Trust (REIT) that gives you debt and equity investments in commercial real estate properties of different types and in various locations.

The REIT’s primary focus is providing monthly income and diversification to investors by taking a close look at numerous investment opportunities. The driving force of REITs is to allow investors to spread funds across multiple properties, creating higher levels of diversification.

The minimum investment for Mogul REIT I is $1,000. This investment is open to any type of investor, not just accredited investors. Mogul REIT I has carried an average annualized return of 7.76 percent over its life. Investors receive dividend payments every month.

Over time, REITs have provided investors of all types with regular income streams, diversification of their portfolio, and long-term capital appreciation opportunities.

There are currently more than 4,600 investors in this REIT, with 17 investments for a total of $289 million. The REIT has distributed between 7.76 percent and 8 percent annualized returns based on purchase price. That’s a hit, by any standards.

Mogul REIT II

MogulREIT II is a public, non-traded REIT for residential real estate, primarily apartment building. It is set up for appreciation and income through investments in equity in multifamily apartment buildings.

Although RealtyMogul has paid a 4.5 percent annualized distribution to investors in MogulREIT II, the focus is also on long-term capital appreciation. This comes about from renovating, upgrading and repositioning the multi-family properties, which ups their net worth.

Mogul REIT II looks for properties in established areas and neighborhoods. As a result, over the past year Mogul REIT II has paid out a 4.5 percent yield on distributions to investors.This REIT has the goal of paying out quarterly cash distributions to investors. The minimum investment for this REIT is $1,000. It is open to any investors and not limited to accredited investors.

Projects have included complexes in Texas, Brooklyn and Chicago. They are adding more all the time, so keep checking back in!

Realty Mogul also offers a variety of private placement investments. These private placements are for accredited investors only. For the most part, all private placement offerings are slightly different within Realty Mogul. Some may have investment minimums as well as lock-up periods for your initial investment.

Realty Mogul Fees

Realty Mogul charges fees based on the type of investment you select, whether it’s a debt or equity investment. These fees include an asset management fee ranging from 0.30 percent to 0.50 percent annually. There are also legal fees for specific investment types. These fees can be up to 3 percent.

Pros Of Investing With Realty Mogul

Gives regular investors access to large scale real estate investments.
The minimum investment is only $1,000.
Monthly or quarterly dividend distributions based on the investment.
Investment options are clear and easier to understand than some similar platforms.
Experts monitor projects on a consistent basis.
You can manage and complete all documents for transactions online.
User-friendly dashboard and experience with frequent project updates.
Invest in both loans and equity investments.

Cons Of Investing With Realty Mogul

Non traded REITs are not liquid in nature, so you need to have long term goals.
Some investments are only for accredited investors.
Fees vary based on the investment.

Fundrise vs. Realty Mogul Final Verdict

Fundrise and Realty Mogul are two of the most popular crowdfunded real estate investing platforms out there today. These platforms have a lot in common, but there are small differences between the two that you need to consider before making a choice. One important difference is the minimum investment. Investors can invest in the Fundrise Starter Portfolio with just $500. Realty Mogul has a $1,000 minimum investment.

There is also a difference in fees between Fundrise and Realty Mogul. Fundrise has a very transparent fee structure, displayed directly on their website. Realty Mogul fees are more complex and dependent on the specific investment. In some cases, fees might be lower on Realty Mogul but higher in other cases.

Realty Mogul and Fundrise are offering a nearly identical investing platform. Investors pool money together via crowdfunding and invest in portfolios of commercial and residential real estate. However you decide to invest, we recommend doing your homework and fully understanding what you’re getting into. The important thing is to GET INTO crowdfunding, as a premium way to diversify and expand your personal wealth.