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Written by Ed Canty, CFP® on August 6, 2021
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Fundrise vs Roofstock 2021: Best Crowdfunded Real Estate Platform?

Real Estate investing has never been more accessible by the average joe investor.

With the release of new investment regulations over the last 5 years, new real estate investing platforms have emerged with lower barriers to entry.

In this post, we will review and compare two trendy real estate investing platforms: Fundrise vs Roofstock.

Both of these real estate investing platforms allow you to potentially invest with a few clicks on your keyboard or smartphone. Here are the differences likely to matter to you the most!

Roofstock vs Fundrise: The Basics

Fundrise is the largest crowdfunded real estate platform available and allows investors to invest into portfolios of properties across the country. Depending on the level of assets you have in the platform, you will be able to access additional levels of control over your investment.

Roofstock is a platform for investing in single-family properties. Through the platform, you can purchase homes across the country that already have a renter and a property management company in place. This allows you to play a hands-off role in the investment.

Both platforms allow investors the opportunity to diversify into real estate without the typical headaches of owning and managing a property. However, the ways in which they do so vary quite significantly.

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what are the risks of investing in fundrise real estate platform

Fundrise Review 2021: Best Passive Real Estate Investment?

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  • Transparency
  • Operating History
  • Liquidity
  • Investment Minimum
  • Historical Performance
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Roofstock Review

Roofstock Review 2021: Best Real Estate Platform?

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Fundrise vs Roofstock: Summary

  • Fundrise is a crowdfunded real estate investing platform offered to both non-accredited or accredited investors
  • Roofstock is an online service that allows you to invest in individual real estate properties
  • Roofstock allows you to purchase an entire property, all properties on the platform are single-family homes
  • Fundrise offers real estate investment portfolios based on your objectives
  • Fundrise has a $10 minimum investment
  • Roofstock has a minimum of the full property value, typically $50,000 but can be more
  • Roofstock One has a minimum investment of $5,000 but is only open to accredited investors
  • Fundrise has a 1% annual fee
  • Roofstock has a 0.50% initial set up fee, and a 2.50% commission paid by the seller for each sale
FeatureFundriseRoofstock
Minimum Investment$10Varies Based On Property
Accredited OnlyNoSome Investments Are
InvestmentsPortfoliosIndividual Properties, Portfolios, Property Shares
Best ForPassive Portfolio InvestingSingle Family Real Estate Investing

What Is Fundrise?

In the past, only high net worth investors had access to private real estate projects.

Now under new investing regulations, Fundrise allows anyone to invest in these deals. Through the platform, you can invest in both commercial and residential real estate with as little as $10. Fundrise constructs portfolios of real estate projects available to everyday investors.

 

How Does Fundrise Work?

Fundrise is a crowdfunded real estate investing platform.

Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate assets. These assets then produce income and/or growth based on the principal investment.

Fundrise was one of the companies that started the wave of crowdfunding real estate platforms way back in 2010. Since then, dozens of similar platforms have arisen in the space appealing to various niche investors, but Fundrise was really the pioneer in this space.

By far, one of the best parts about this platform is the low minimums to get started.

The Fundrise Starter Portfolio has a minimum account balance of $10.

This allows you to get exposure to a broad portfolio of properties.

A collection of Fundrise real estate projects.

Fundrise Real Estate Projects

With Fundrise, investors have access to dozens of different portfolios that allow for investing in different types of real estate.

You can invest in income-producing rental properties or growth-oriented real estate developments. Fundrise offers different investment plans based on your investment goals. You can keep track of Fundrise real estate projects within your investment account.

Fundrise will also notify you about significant developments with their projects.

The primary 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.

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Investors receive income from rental payments and proceeds from flips in the form of dividend payments or distributions. In exchange, Fundrise collects a 1% fee as the investment manager.

It is essential to understand 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.

This means that it is important that you go into this investment with a longer time horizon. If you're looking for a place to park your money for a few months, this is not the investment for you.

On the bright side though, this prevents investors from panic selling. If there is a crisis and investors want to sell, they'll likely have to wait for one of the quarterly distribution periods. This prevents your investment value from tanking and puts some guard rails in place to keep yourself in line.

Investment Options And Portfolios

Fundrise investment options include the starter portfolio, the balanced investing portfolio, the growth portfolio, and the income portfolio. Each of these fundrise portfolios have different investment goals.

Starter Portfolio

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 entirely free!

Supplemental Income

Next, we have the Fundrise Supplemental Income Portfolio.

This portfolio holds income-producing real estate. Investors will earn returns primarily through dividends from cash flow producing real estate. Dividends are generated through rental and interest payments in proportion to your share of the fund.

Balanced Investing

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 the income-generating real estate, as well as real estate that is appreciating in value.

Long Term Growth

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 a property and performing renovations to sell the asset for a gain later.

Fundrise Account Levels

Fundrise offers multiple different account levels based on your goals and investment objective.

Starter

Fundrise Starter allows you to invest in the Starter Portfolio. This portfolio gives you exposure to dozens of different properties across the country. The minimum for Fundrise Starter is $10.

Basic

Fundrise Basic allows you to invest in the same Starter Portfolio with the added ability to invest with an IRA and create and manage personal investment goals. The minimum for Fundrise Basic is $1,000.

Core

Fundrise Core gives you the opportunity to invest in all the standard Fundrise portfolios. These portfolios include long term growth, supplemental income, and balanced investing. The minimum for Fundrise Core is $5,000.

With a Fundrise Core account you'll have exposure to 40-80 different real estate projects in your portfolio.

Advanced

Fundrise Advanced accounts give you everything offered in core as well as opportunities to invest in projects outside the standard portfolios. These investments are more strategic and are more subject to change. The minimum for Fundrise Advanced accounts is $10,000.

By moving to a Fundrise Advanced account, your investment options widen to include Plus portfolios and Fundrise eFunds. Plus portfolios are variations on the Core portfolios and allow investors the potential for greater upside as well as greater downside potential.

With this account level, your portfolio will have exposure to 80+ real estate projects within the Fundrise platform.

Premium

Fundrise Premium offers investors all the features in Core and Advanced, as well as the opportunity to invest in projects outside the typical Fundrise fund. These projects are less liquid and have even longer time horizons. The minimum for Fundrise Premium is $100,000.

Additionally, at this level you'll have access to book calls with the Fundrise investments team to discuss your investing strategy and seek advice on your investments. This offering is geared towards high net worth individuals.

Fundrise Technology: eREIT & eFund

Each portfolio consists of eREITs and eFunds designed by Fundrise.

An eREIT will produce income for your portfolio in the form of dividends.

You may earn dividends from the rent payments of the underlying apartment and commercial leases owned within the eREIT as well as interest payments from underlying real estate debt investments held by Fundrise.

Fundrise currently has 16 eREITs available to investors on the platform.

An eFund is a partnership created by Fundrise to provide greater investment flexibility.

Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds are built 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 built to generate income, eFunds are geared towards growth.

Fundrise currently has 3 eFunds available to investors on the platform.

Fundrise Investment Liquidity

The funds you deposit on the platform are used 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.

This is why it is crucial to understand what you are investing in when you invest with Fundrise. Investors should aim for a long-term investment of at least a 5-year time horizon when investing with Fundrise.

If you decide to sell before 5 years, you'll be subject to up to a 3% early redemption fee, so keep that in mind before you invest.

This real estate investment is not highly liquid and may not be for everyone! It is essential that investors understand that liquidity and distributions are never guaranteed.

Fees

Fundrise charges a fee of 1% per year. There are also some loan origination fees charged.

They do not charge any other hidden fees, and there is no front load fee with Fundrise. This is another reason why Fundrise is so popular among investors. The company is extremely transparent with their fee structure. In fact, when you first login, you will not only see your returns in your overview, but also the fees you have paid. 

You're also able to set up an IRA directly on the Fundrise platform. This can go a long way in helping to reduce your tax bill and creating a strong foundation for retirement. There is an annual fee of $125 to set up an IRA on Fundrise. This fee is waived if you maintain a balance of over $25,000.

Pros Of Investing With Fundrise

  • The minimum to get started with the Starter Portfolio is $10.
  • 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% 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% passive real estate investment.
  • Fundrise supports retirement accounts.
  • Quarterly redemption periods eliminate the temptation for panic selling.

Cons Of Investing With Fundrise

  • Liquidity is never guaranteed. During a downturn, liquidity may not be available as many investors will rush to sell, and buyers may be few and far between.
  • Distributions (dividends) are never guaranteed.
  • Distributions (dividends) are taxed as ordinary income rather than capital gain rates.
  • The platform has a limited track record of four years and not a long investment history.

Best Real Estate Platforms

Roofstock review compared against Fundrise real estate investing

What Is Roofstock?

Roofstock is an online real estate investing platform where investors can purchase a rental property outright and leave the management duties to the Roofstock team.

This is an ideal platform for those wanting to invest in income-generating single-family housing, but are hesitant to take on the highly involved property management that comes along with it.

It is also ideal for those looking to own real estate in markets that they do not live in.

The Roofstock platform, similar to other real estate investing platforms such as Fundrise and RealtyMogul allows you to passively invest in income and/or growth-oriented real estate.

Where Roofstock differs is you can buy the property outright and invest in the entire rental property. The Roofstock platform is not real estate crowdfunding, but a more natural way to purchase an investment property.

Other platforms invest your money in a portfolio of different real estate projects, not just one property.

Investors using the Roofstock platform can purchase the rental property and leave all the management duties and tenant communication to your Roofstock property manager. This allows investors to focus on growing their passive income stream rather than dealing with the broken toilet at one of their rental properties.

Roofstock also has another platform called Roofstock One that allows investors to buy shares of individual properties instead of buying the whole thing.

Investors in Roofstock One can start investing, at a minimum of 1/10th of the property value. Investors will have direct rights to equity ownership in the home and any income generated after all expenses.

How Does Roofstock Work?

1. Search for Properties that fit your investment goals.

Roofstock offers a variety of single-family rentals on its platform.

You can set filters to get an idea of the rentals that fit your parameters. You can see 3D pictures, property inspections, title reports, insurance quotes, tenant details, neighborhood ratings, schools, and more. Roofstock also provides tools to analyze the potential return on your investment as well as cost estimates.

Roofstock investment options in single-family real estate rentals.

2. You can make your offer to purchase the rental property.

Making an offer on Roofstock is free.

If your offer is accepted Roofstock charges a 0.5% transaction fee, or $500 (whichever is higher). You have the option to buy now where you accept the listing price offer, and the property will be taken off the market. You also have the option to negotiate to try to get a better price on the property.

Roofstock will notify you when the seller responds to your offer.

Roofstock real estate investing making offers for investments and negotiating prices for real estate property.

3. Finalize the purchase.

The Roofstock service and transaction team will guide you through closing and escrow until your property closes.

You can start collecting rental income as soon as you close. From there, Roofstock will continue to support you as you earn income from your rental property. They will act as property manager taking care of repairs and maintenance and tenant communication.

While most properties will already have a tenant, some will be vacant at the time of sale. If this is the case, Roofstock provides a guarantee that if they can't find you a buyer in 45 days, they will cover the rent for up to a year.

Portfolio Investments

Roofstock also gives you the option to invest in real estate portfolios.

These are portfolios of multiple rental properties managed by Roofstock. The Roofstock portfolio option allows investors to purchase multiple real estate properties at once. This gives you added diversification within your rental property investments.

In most cases, this is a multiple hundred-thousand-dollar or million-dollar investment.

Similar to other Roofstock investments, you have the option of accepting the listing price or negotiating with the seller for a better offer. You will also get aid from Roofstock management with ongoing property management services.

This allows you to get in on the single-family rental game without living in that market or maintaining the property.

Roofstock pre-created portfolios of real estate. Investors can use Roofstock One to gain diversified exposure to multiple real estate investments within one deal.

Roofstock One

Roofstock also offers a feature called Roofstock One, where investors can purchase shares of individual properties.

To use this feature, you must be an accredited investor.

Roofstock One has a minimum investment of $5,000. Investors can purchase a minimum of 1/10th of a property and share ownership with a collection of other investors. This allows you to better diversify across a number of different properties.

Investors will own an equity stake in the property and have rights to any income it generates as well as capital appreciation in the event of a sale. Similar to other Roofstock investments, Roofstock will provide ongoing property management for your rental property.

Self Directed IRAs

Roofstock also offers the option to invest in real estate investments within an IRA on the platform.

Investors can open up a self-directed IRA through New Direction IRA and begin investing in Roofstock investments.

You can also rollover your existing IRA or 401k plan into your self-directed IRA.

Fees

  • Roofstock chares an initial 0.50% setup fee for each transaction (minimum $500).
  • Sellers on Roofstock pay a 3% commission on the sale (minimum $2,500).
  • Roofstock One charges a 10% property management fee on gross rent.
  • Investors on Roofstock One also pay a 0.5% asset management fee on the cost of the property.

Roofstock Guarantees

One thing that sets Roofstock apart from their competition are the guarantees they provide. Traditionally, when buying a rental property there were very few things that were guaranteed.

Obviously, before an investor bought a property they would do their due diligence but if something slipped through the cracks you'd have a hard time calling up the seller and asking for a refund for a house you just bought.

On Roofstock you are able to ask for a refund. Kinda.

The two big promises Roofstock makes to investors are their 30-day money-back guarantee and their guaranteed lease up on vacant properties.

30-Day Money-Back Guarantee

If you don't like your property, Roofstock will take it off your hands. Just let them know within 30 days and they will list it for you on their platform for free and when it sells you get your money back. If it doesn't sell within 6 months, Roofstock will buy it from you themselves.

Guaranteed Lease-Up

If you buy a home without a tenant and don't get a tenant within 45 days, Roofstock will pay you 75% of the market rent for your property for up to 12 months. You're going to have a hard time finding any other sellers or platforms who will match something like this.

Guarantees like these are unprecedented in the real estate industry so time will tell if Roofstock is able to hold true to them over time. We sure hope they're able to as it forces other platforms to take a hard look at what they are doing to support their investors.

Pros Of Investing With Roofstock

  • Invest in real estate markets throughout the United States.
  • Not required to be an accredited investor (except for Roofstock One).
  • Fees for buyers and sellers are reasonable. 
  • No real estate agent or commissions paid to an agent.
  • Roofstock investments already have tenants and property managers.
  • Purchase a property with as little as a 20% down payment.
  • Guarantees by Roofstock prevent some downside risk.
  • Investors can take advantage of tax-advantaged strategies like the 1031 Exchange.

Cons Of Investing With Roofstock

  • Most investments on Roofstock require large down payments to begin investing on the platform. 
  • Investors are tying up their money in a long-term investment that may not be quickly sold. 
  • Roofstock One is limited to accredited investors only.
  • They only offer single-family rental properties.
  • Limited diversification by investing in individual properties.

Roofstock vs Fundrise Final Verdict

Both Fundrise and Roofstock offer a way for investors to gain exposure to real estate in their portfolios. Each platform allows investors to participate in real estate investments in a relatively passive manner.

However, each platform takes a different approach to its investment style.

 Fundrise allows investors to invest in a variety of real estate portfolios that are prebuilt and already generating income or growth. With a minimum investment of $10, you can try the Fundrise starter portfolio and begin investing in real estate projects throughout the county. 

Fundrise uses technology and crowdfunding to provide a more interactive investor experience. Fundrise takes care of property management, collecting rents, and distributing any earnings from rents or capital appreciation from the sale of the properties.

Roofstock, on the other hand, gives more serious investors a way to purchase a rental property outright. At the same time, leaving the property management duties to Roofstock. Investors will need a much larger sum of capital to begin investing with Roofstock.

Those who are accredited may use the Roofstock One platform where they can purchase shares of individual projects.  The minimum investment for Roofstock One is $5,000.  Roofstock leverages technology to make the buying process of investment real estate much easier than it has been traditionally, along with the added convenience of ongoing property management.

Keep Reading

Fundrise vs roofstock
Article written by Ed Canty, CFP®
Ed is a CERTIFIED FINANCIAL PLANNER™. At his day job, Ed helps clients plan for retirement, manage their investments, and navigate their tax situation. In his free time, Ed enjoys golfing, traveling, fishing, and wrenching on his old car.

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