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, real estate isn't always the most passive investment. It can take a lot of hard work and time to maintain and manage a real estate investment. Also, the upfront investment is often quite high. If you are buying a rental property, get ready to shell out 20 to 25% of the value of the property as a down payment!
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! Instead of investing tens of thousands of dollars into a rental property, you can passively invest with a much smaller amount of money.
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 versus Realty Mogul.
Fundrise Review 2020: Best Passive Real Estate Investment?
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RealtyMogul Review 2020: Best Crowdfunded Real Estate Platform?
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|Open To||All Investors||All Investors, Some Limited To Accredited Only|
|Minimum Investment||$500 Starter Portfolio, $1,000 Advanced Portfolio||$5,000 Mogul REIT I & II|
|Time Horizon||5+ Years||6 Months To 5+ Years|
|Fees||1% Annually + Origination Costs||1-1.5% Annually|
|Early Redemption Fees||Yes (1-3%)||Yes (1-2%)|
|Investment Options||16+ Portfolios||2 Portfolios, More For Accredited Investors|
|Dividends Earned||Yes - Quarterly||Yes - Quarterly/Monthly|
|Best For||Investors On A Budget||Income Investors Who Want Monthly Dividends|
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.
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.
Generally speaking, 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. Each portfolio holds a blend of both debt and equity investments.
Fundrise only offers portfolios to invest in. They do not offer any individual properties known as private placements, which are not available to non-accredited investors.
The average Fundrise investors are in their 30s, and while the median initial investment is $4,500.
However, the amount you invest is totally up to you! You can open a starter portfolio for just $500. This allows you to dip your toes in without going all in. At any time, you can upgrade from the starter portfolio to one of the advanced plans.
The amount that you invest is completely up to you, and how comfortable you feel about investing in crowdfunded real estate. Be cautious of over-allocating too much of your portfolio to any single position. Diversification is the key to managing your risk.
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.
Fundrise aims 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 on 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. Most people do not want to purchase a fixer-upper.
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.
The two primary ways to make money with Fundrise are:
In debt investments, you and other investors act as the bank. The interest payments earned on the loan are paid out to you as quarterly dividends
The same is true for rental income. If your Fundrise portfolio holds a cash flowing portfolio, the rental payments are shared among the investors.
Finally, Fundrise aims to buy properties at a lower price and sell them at a higher price. This is called asset appreciation. All of these different methods allow you to make money with Fundrise.
|Year||Average Annualized Return|
If you are curious about Fundrise returns, here's how much I earned on my $5,000 Fundrise investment.
There is a flat annual fee of 1% on the Fundrise platform.
This is broken down as a 0.15% investment management fee to manage your portfolio.
The other fee is a 0.85% asset management fee to manage the underlying properties held in your portfolio.
Fundrise also has an asset origination/acquisition fee. This is a one-time fee that can range from 0-2% of the initial investment. This is a fee for establishing real estate partnerships and the origination and negotiation of the underlying real estate assets.
Investors who would like to redeem their shares before holding them for 5 years will pay an early redemption fee.
The fee is calculated as a discount to the share price of your investment. The fee is reduced for each additional year you hold the investment.
|First 90 Days||None|
|Less Than 3 Years||3%|
|3 To 4 Years||2%|
|4 To 5 Years||1%|
Fundrise allows you to choose from over a dozen 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 a minimum of $500, you will have access to the starter portfolio. The next tier requires a minimum investment of $1,000 and will provide you with access to 3 more portfolios: supplemental income, balanced investing, and long-term growth.
In order to access the rest of the portfolios you'll need an Advanced Account which requires a $10,000 minimum investment. These portfolio invest in specific areas like Washington DC or Los Angeles and follow more advanced investing strategies.
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!
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.
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 mid-30s, and their average investment is $6,800.
Current projects on the docket feature apartment renovations in Jacksonville, FL; new apartment development in Georgetown, TX; and new commercial projects in Colorado Springs, CO.
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 renovations in Charlotte, NC; new home construction in Daly City, CA; and new commercial development in Chicago, IL.
Core - Fundrise Core gives you the opportunity to invest across portfolios such as balanced investing, supplemental income, or long term growth. The minimum investment for Fundrise Core accounts is $1,000.
Advanced - Fundrise Advanced account level gives you all the features offered in the Core plan, but also gives you access to Fundrise Plus plans. These are investments beyond what is offered in the standard Fundrise portfolios. These investments are more strategic in nature and change based on market opportunities. The minimum investment for Fundrise Advanced accounts is $10,000.
Premium - Fundrise Premium gives investors all the features offered in Core and Advanced and also allows users to invest in projects that occasionally become available. These projects are illiquid and typically have even longer term time horizons. The minimum investment for Fundrise Premium accounts is $100,000.
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 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.
Fundrise uses the funds you invest to purchase real estate. For this reason, liquidity or the ability to sell is not guaranteed.
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. If you aren't comfortable with this, you should consider a more liquid investment like a publicly-traded REIT.
After holding the investment for 5 years, there is no early redemption fee.
Fundrise offers quarterly redemption periods, but liquidity is never guaranteed. Fundrise also reserves the right to suspend liquidation/redemption as they see fit.
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.
When you sign up, 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 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 homeownership, 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 your goals and strategy.
Realty Mogul has a sleek online platform that allows you to keep track of your real estate investments. This is a 100% 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.
Through the Realty Mogul platform, you will have the opportunity to put your money into real estate ventures through a user-friendly online platform. You can browse investments, review research that’s been done, and sign legal documents securely online.
When you invest on the platform you're typically buying a share of a Realty Mogul LLC that invests in an LLC or LP that holds title to the property you see on the platform.
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, over 200,000 investors have joined. Over $550,000,000 has been invested through the platform with over $172,000,000 returned to investors in the form of distributions.
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. This is one of the advantages of investing in a passive real estate investment, they do all the leg work for you!
Every Realty Mogul 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.
First, you create a Realty Mogul account.
Realty Mogul carries a minimum investment of $5,000.
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. The minimum is also much higher, at $15,000 to $50,000. With private placements, you are investing in individual properties, not portfolios.
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 $5,000 minimum investment.
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 the income and net worth of the investor.
When you create an account with Realty Mogul, you will need to answer some questions to expand on 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.
Both accredited and non-accredited investors can invest in the non-publicly-traded REITs. The private placements are for accredited investors only.
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.
Over time, REITs have provided investors of all types with regular income streams, diversification of their portfolio, and long-term capital appreciation opportunities.
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 with a minimum investment of $5,000.
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.
Projects have included complexes in Texas, Brooklyn and Chicago. They are adding more all the time, so you may want to subscribe to their email list where they share new investment opportunities.
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.
For accredited investors, Realty Mogul also offers private placements. This is an investment directly into a single property or small handful. Since it is not diversified, it is seen as higher risk by the SEC and investors are required to be of accredited status. They also offer a 1031 Exchange service for high net worth investors.
Realty Mogul charges fees based on the type of investment you select.
Typically you can expect to pay approximately a 1% annual asset management fee on Realty Mogul.
There are also REIT management fees that range from 0.50% to 0.60% annually.
Certain investments may also have legal fees for specific investment types. These fees are usually a one time fee for the initial origination of the investment.
Fundrise and Realty Mogul are two of the most popular real estate crowdfunding 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 $5,000 minimum investment for both MogulREIT I and MogulREIT II. This makes the barrier to entry for Fundrise much lower.
Additionally, as a non-accredited investor you'll be limited to only 2 options on the Realty Mogul platform. With Fundrise, all investors regardless of accreditation will have access to their dozens of portfolios.
Another major difference between Realty Mogul and Fundrise is the dividends payout structure. Realty Mogul has monthly or quarterly dividend payouts, while Fundrise has only quarterly dividend payouts. This may or may not play a big factor for you as an investor. But monthly payouts let you reinvest your dividends on a more frequent basis. Or, these monthly dividends can provide more consistent monthly income.
There is also a difference in fees between Fundrise and Realty Mogul.
Fundrise has a fee structure displayed directly on their website. The most common fees on Fundrise are the 1% asset management and portfolio management fee. However, Fundrise also has early redemption fees for liquidating your investment early as well as other commission-based fees.
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 make sure you fully understand the investment you are making.
Compared to buying and managing a rental property, real estate crowdfunding offers clear advantages, including:
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.
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. Experts will manage the property for you, including collecting rent and doling out your share. This phenomenon is called crowdfunding, where investors pool their money together to purchase real estate investments.
Crowdfunding offers a way for investors to earn passive income. This type of investment does not require experience, large amounts of capital, or connections like traditional real estate investing.
This means that after your initial investment, you just sit back and let the work get done and hopefully your investment grows in value. Investors may want to consider reinvesting their dividends to take advantage of compounding your investment.
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 millions of dollars each year, with the platform continuing to pick up speed as more people opt-in.
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: