Fundrise and Alternative Real Estate Investing


If you’re looking for options on real estate investment, there’s never been so many choices. Clearly, there’s no end in sight to the new products, services, and companies rolling out alternatives to allow individual investors to invest in different types of properties. It’s important as ever to do your research to find the very best vehicles out there. Fundrise gives you a solid platform and a new twist for alternative real estate investing.

Formed in 2010 by Dan and Ben Miller in Washington D.C., Fundrise is known as the first successful crowdfunding real estate company. Over the last ten years, they’ve allocated well over $600 million in capital across roughly $3 billion worth of real estate.

With Fundrise, you gain access to a real alternative to investing in the stock market. Institutional investors and money management companies have consistently outperformed the public equity markets by allocating part of their portfolios into private real estate. The incredibly high barriers of entry into this asset class have kept most individual investors out of these market gains. By democratizing the process and lowering the minimum investment amounts, you can now buy small slices of commercial property alongside hundreds of others looking for the same access. Regardless of your overall net worth or income, the asset class is now available, just like public equity shares in the stock market.

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A sample portfolio of a Fundrise account. Image credit – Fundrise

Fundrise focuses on the long term performance of commercial real estate with an investment horizon of 3 – 7 years. From the Fundrise website, they make the argument that properties are purchased through negotiations focusing on keeping prices low. They argue that in public stock markets, you are participating in an auction environment where paying too high of a price is a common practice. The trailing 20-year annual returns in the public equity markets are roughly 8%. Comparatively, trailing 20-year returns in the private real estate market is over 12%. Fundrise makes the argument that people are losing out on profits because of short term daily liquidity versus a longer multi-year investment horizon.

So you now are the owner of fractional shares of private commercial real estate through Fundrise, who is going to care for your new properties? Fundrise focuses on hands-on, active management and partnering with local operators with a history in improving properties to either maintain or increase their value over time. There’s no late-night worries or phone calls to answer when investing with Fundrise. Industry experts handle all your management and operational concerns.

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Fundrise focuses on diversification through it’s proprietary eDirect investments. Image credit – Fundrise

One of the highlights in investing through Fundrise is the potential for diversification. Your Fundrise portfolio is made up of proprietary “eDirect” investments. A sort of ETF for real estate containing a basket of properties. This provides a highly diversified portfolio of properties with the benefit of low initial investment amounts.

Minimum initial investments start at just $500. This ‘starter’ investment lets you gain access to 5 – 10 properties. With an investment of $1,000 – $10,000, you can expect to gain access to over 40 properties, and investing over $10,000 can give you exposure to over 80 properties. With so many new services claiming to offer fractional ownership, Fundrise has been a tried and true alternative to public stock market investing by providing access to a vast market once mostly sealed off from the general public.