Investing in real estate can be a great way to build wealth. In fact, it has been turning average people into millionaires for years! However, the typical real estate investments where you have to own a physical property tends to be out of reach for most. This is because you often need tens of thousands of dollars to get started.
However, with REITs and real estate crowdfunding, investors can pool their money together and invest in real estate projects. Here, we look at two platforms that offer similar investment opportunities to investors; Fundrise vs Streitwise.
Fundrise offers users the opportunity to own real estate without having to find, manage and direct the investment.
The starter portfolio has a minimum investment of just $500 making the barriers to entry very low. This is accomplished through proprietary technology called eREITs and eFunds.
Streitwise offers an opportunity for investors to invest in real estate without necessarily owning a property. The platform offers real estate investment trusts (REITs) that feature relatively low fees and low investment minimums.
Summary: Fundrise vs Streitwise
- Fundrise offers real estate investments across the US through portfolios that are prebuilt
- Fundrise has different portfolios based on your investment objective - long term growth and income portfolios as well as a mix
- Streitwise offers investments in REITs which invest in rental real estate such as office buildings
- Streitwise will choose your specific investment for you, based on their current portfolio offerings
- Fundrise is open to accredited and non-accredited investors
- Streitwise is open to an accredited and non-accredited investors, but if you are non-accredited you will be subject to limitations
- Fundrise utilizes eREITs and eFunds with a $500 minimum investment
- Streitwise has a $1,000 minimum investment
- You can earn quarterly dividend distributions with Fundrise which can be automatically reinvested
- Low fees of 1% annually with Fundrise
- Lower than average fees for private REITs with Streitwise
- Both Fundrise and Steitwise are long term investments, with a 5 year minimum time horizon
- Dividends redeemable quarterly for Streitwise investors
- One year locking of principal investment with Streitwise
- Streitwise available to US citizens as well as legal US residents in addition to non-US customers
- Liquidity and redemption is not guaranteed with either platform
- Early redemption is often subject to fees
What Is Fundrise?
Fundrise is a crowdfunded real estate investing platform that establishes and manages investments in real estate throughout the United States.
These investments are collectively put together into portfolios which are fully managed by the team. This makes Fundrise a 100% passive, hands off investment.
Fundrise offers investments in what the platform calls eREITs and eFunds which are real estate investment trusts or partnerships. These investments are offered across Fundrise investment portfolios that are pre-built for investors.
How Fundrise Works
When you want to invest with Fundrise, you sign up and open the account.
You provide your personal information, including date of birth, name, address, phone number, social security number and other details.
Once you have signed up, you can proceed to invest. There are 4 different portfolios you can choose from.
Starter Portfolio - The Fundrise Starter portfolio is composed of 50% growth assets and 50% income assets. This portfolio is only a $500 minimum investment compared to the other core portfolios.
Supplemental Income Portfolio - A portfolio that consists mostly of income driven real estate assets such as rental income and loan payoffs. This has a $1,000 minimum.
Balanced Investing Portfolio - This is a portfolio consisting of both income and growth real estate assets. This also has a $1,000 minimum.
Long Term Growth Portfolio - Lastly, this portfolio that mostly generates returns from capital appreciation in the investment properties. This may be realized when Fundrise purchases a property and later sells it for a profit. The minimum investment is $1,000.
There are two main fees charged on the Fundrise platform which add up to 1% annually.
An annual asset management fee of 0.85% is collected by Fundrise for managing the real estate assets themselves.
Fundrise also charges an annual 0.15% advisory fee for managing your investment portfolio.
That being said, there may be other miscellaneous fees the company may charge. There are asset origination fees which could add up to 2%. However, these are one time fees at the inception of a new investment.
There are also early redemption fees for redeeming your shares before the 5 year time horizon. The early redemption fee can be from 1-3% of your Fundrise investment. This is why you should only invest if you have a minimum time horizon of 5 years. This is not a short term investment.
Different Investment Strategies
Fundrise offers varying investments that come in the form of supplemental income, balanced investing and long term growth. The allocation of your investment depends on whether you want income or growth or a combination of the two.
If you are investing for income, you can automatically reinvest those dividends back into your Fundrise portfolio to earn compound interest.
This is a new feature that the company has introduced. With Fundrise iPO, the company will sell shares of the Fundrise parent company itself through internet Public Offering (iPO).
An investor will need to have in their account an investment amount of $1,000 or more. They also need to have selected at least one of the advanced plans. With this offering, an investor is able to invest up to 25% of their entire account balance in the Fundrise platform itself.
- Low minimum investment, the Starter Portfolio has a minimum of $500
- Only 1% annual fee, but there may be origination fees for new projects
- There is no requirement to be an accredited investor - any investor can invest in the platform regardless of their net worth or income
- You earn quarterly dividends that you can automatically reinvest
- Redemption period each quarter, however they cannot guarantee liquidity
- They cannot guarantee liquidity and can suspend redemptions
- eREITs and eFundss are not publicly traded
- The distributions taxed just like ordinary income- this is opposed to qualified dividends, which can be taxed at long term capital gains rates
What Is Streitwise?
Streitwise is a REIT that manages real estate, mainly office properties, and is open to most investors. The minimum investment is $1,000 to get started with Streitwise.
The company has historically returned dividends of 10% each year. The dividends are distributed to investors quarterly. However, they have stated this will likely not be the case going forward.
When you invest with Streitwise, your principal investment gets locked up for a period of up to one year. It is after the lockout period when you can redeem shares every three months. But be cautious as the minimum investment is 5 years, and you can be subject to early redemption fees if you withdraw funds before that.
The current Streitwise REIT holds two commercial properties. The dividends are usually paid quarterly and are net of fees.
How Streitwise Works
If you want to invest in commercial real estate through Streitwise, you will need to open an account.
They will ask you to provide personal information, including email address, full name, street address, the dollar amount you’d like to invest etc. The platform will also need you to indicate whether you are considered an accredited investor or not. As a result, you will have to confirm your income as well as your net worth. After you provide this information, you fill out an ACH Authorization Form so that you link your bank account. This is how you will fund your investment.
Once you create your account and link your bank, you are ready to invest!
Minimum Initial Investment
Streitwise has a $1,000 minimum for your first investment. After that, any additional deposits must be made in $500 increments.
If you are investing in a Streitwise REIT, you can use different types of accounts. Individuals can hold this REIT, or within a corporate account. Steitwise offers individual accounts, self directed IRAs and 401(k)s. You can also hold a Streitwise REIT in trusts and LLCs.
Streitwise Investor Requirements
Streitwise is available to both accredited and non-accredited investors. However, if you are non-accredited then you may be subject to investment limitations.
Non-accredited investors can only contribute up to 10% of their annual income or 10% of their total net worth.
To be considered an accredited investor, you must have earned income exceeding $200,000 or $300,000 jointly within the last two years. They should also expect to earn the same or more the current year.
Alternatively, they must have a net worth of more than $1 million – excluding the value allocated to their primary residence.
Investors can take advantage of the dividend reinvestment plan (DRIP) that Streitwise offers.
Instead of taking your dividend in cash, you can automatically use it to purchase additional shares of the REIT. This is how investors can compound their returns over time.
Streitwise uses a variety of security measures to keep client information secure. The platform is compliant with the SEC and Regulation A of the Securities Protection Act.
Investors must understand returns are never guaranteed on Streitwise, and the potential to lose money in your investment is always possible. There is no insurance against possible investment losses.
They do all signing of documents through electronic methods via secure online services.
There are two main fees you will pay on the Streitwise platform. These consist of annual management fees and upfront acquisition fees.
Annual Management Fee: 2%
Upfront Acquisition Fee: 3% (one time fee)
The dividends you receive are net of, or after these fees.
- Streitwise REITs are available to accredited and non-accredited investors, but non-accredited will be subject to investment limitations
- REITs can be held in self-directed IRAs, but can also be held in self-directed 401(k)s
- The company uses strict investment principles when selecting potential investment properties
- Being an equity REIT, Streitwise offers a great opportunity for investors to potentially earn dividends and/or capital appreciation
- Streitwise Stockholder Redemption Plan provides you with a chance to redeem stock for 90 percent of its value when you have ended the lockout period of one year, however early redemption fees apply
- Investors have limited liquidity and there is no guarantee that you can sell when you want to
- Streitwise imposes an upfront fee of about 3%– the fee is for ongoing operations
- The ongoing fee is 2% annually
- Presently, investors can only invest in a single REIT – where they hold two investment real estate properties
- They started in 2017, so it’s a new platform that may not have a long-standing track record
Fundrise vs Streitwise: Conclusion
While both Streitwise and Fundrise offer online real estate investment platforms, they each have their own unique features.
Fundrise offers both debt and equity investments through portfolios of properties across the US. These portfolios are split into growth, income or a blend of both. The minimum investment in the starter portfolio is just $500.
Streitwise, on the other hand, only offers one REIT right now which owns two commercial office properties. With Fundrise, you are investing in a diversified portfolio of mostly residential real estate. The minimum investment is $1,000.
Fundrise has been here since 2010 and has shown remarkable performance over time. Fundrise also has much lower fees when compared to Streitwise, which has a more limited operating history as well.
Streitwise, being a relatively new kid on the block, does not have a long track record. However the 10% annual dividend yield has been very impressive.
Fundrise owns and operates its properties, unlike Streitwise.
Both Fundrise and Streitwise offer unique ways to invest in real estate using an online platform. Fundrise seems to offer more flexibility and Streitwise is less diversified overall by owning just office buildings. Investors should be aware of the potential risks and costs involved with both platforms.