Fundrise is a real estate investing platform that allows individual investors and real estate experts to invest together, eliminating the need for them to identify their own investment opportunities. Fundrise funds high-potential projects, offering real estate investing opportunities to the average investor, eliminating the need for them to go through additional red tape.
What is Fundrise
Fundrise is an innovative platform that allows you to invest in two ways: buying shares and lending money. The former will enable you to earn passive income. At the same time, the latter gives you a higher interest rate but involves more work and lower returns on investment.
Fundrise makes investing in commercial real estate projects easy and profitable, whichever path you choose. The company was created with real estate developers and investors in mind. Still, it is open to anyone looking to create wealth through a combination of direct investments and passive income.
How Does Fundrise Work?
There are two deals on the company's platform: Direct Deals and Marketplace Deals. The most significant difference between them is that you invest in completed real estate projects with Direct Deals. Conversely, with Marketplace Deals, you can access developments before they have been built or renovated.
This means you will lend money for their construction and pay your share later. It seems that getting involved in such an investment requires users to do work first to earn returns later.
However, this is only sometimes the case. Since you will earn money through interest payments, a delay may occur before your investment pays off. Ultimately, it's up to you how much time and effort you want to put into your investments since Fundrise offers two options with different kinds of return on investment.
It starts with an evaluation of possible projects by experienced development specialists. Next comes project selection, when developers present their ideas and investors can choose which ones they like most and pledge money for them.
Regarding Marketplace Deals, pre-registration occurs when user deposits are collected from select buyers interested in specific projects. These are refunded when a project is fully funded, and credited to the account when it enters construction, thus allowing you to own shares.
If your investment happens to be a Direct Deal, once the developer has completed the building or renovation, he will inform you about your return on investment.
Once your money is in an equity real estate portfolio managed by Fundrise, you can get access to detailed information about how much money you have made or lost over time and request withdrawal at any point in time.
The company was founded to provide a single solution for investors and developers. However, there are a few restrictions you need to be aware of in order not to get banned or lose your accounts.
How Much is the Limit on Transactions
Your transactions must never exceed $2 million within any period of 12 months. Transactions within the amount of $100,000 through a single account should take place once every 90 days. Choosing to invest more than $5,000 at once or come close to this limit with multiple investments will appear suspicious and may result in your account being frozen or terminated without prior notification.
Furthermore, residents of China attempting to invest in US properties through the Fundrise platform will be denied. Fundrise is not for laundering money or attempting any illegal activity.
What are PFM and Tax Benefits?
PFM is a personal financial management tool that allows you to access all your financial data in one place. This feature is designed to help users make better investment decisions based on detailed information about current balances, real estate property performance, market conditions, and available cash flow.
The platform's partnership with Kabbage allows investors to receive instant funding opportunities to invest in Fundrise projects in a timely manner due to a lack of liquidity or experience with real estate.
Lastly, the Fundrise investment platform is federally tax-exempt if it's an equity share that doesn't exceed $10 million. It means that even if you have failed to recapture your initial investment plus 7%, you may be able to claim tax benefits as a non-corporate business owner.
Pros and Cons of Investing
There are several advantages to working with this company:
- You don't have to be wealthy and invest hundreds of thousands or even millions to start your investing journey.
- You can make money on capital appreciation, dividends, fees, and tax benefits because there is no maximum income requirement you need to exceed before getting access to the platform.
- The platform offers free tools that allow easy access to all available data and market information to help you make better investment decisions. However, it is worth mentioning issues with incorrect property data at some point.
- If developers cannot repay their debt after the project is completed successfully, Fundrise will cover the costs yet still be entitled to recover principal and interest from developers.
- You can access information about your investment, such as expected returns or any property value changes (which may occur depending on market conditions) through the PFM tool.
Cons of Using This Platform:
- The most important caveat – there is a lack of transparency regarding fees. Investors don't know how much they have to pay for advisory services and how much of their investment will be invested into the selected real estate deals they've chosen.
- Although Fundrise does have low fees – lower fees than many other platforms – they can still burden new investors and others who lack experience investing in real estate investments. Also, you can get a higher return on investment if you invest more money through any Fundrise-affiliated broker. However, consider this option carefully because it's better to diversify your portfolio before investing more. Especially since some traders don't offer transparency when collecting transaction fees.
Investing in the real estate market with Fundrise is relatively easy. All you need is a United States social security number, a bank account, or an existing brokerage investment account with at least $500 deposited, and you are ready to build your Fundrise portfolio.
Investors should always consider all options on the market before making any decision.
This article was produced and syndicated by Wealth of Geeks.