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.
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.
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.
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.
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.
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!
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 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.
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.