REVIEW — Fundrise, “Invest in a Better Alternative”

Intro — Fundrise's History

Founded in 2010 by the Miller brothers, scions of an influential real estate family, and headquartered in D.C., Fundrise emerged as one of the very first real estate crowdfunding platforms. In fact, it is one of the few crowdfunding platforms whose existence predates the JOBS Act of 2012, which legally permitted investment companies to raise funds from the general public in exchange for modified securities. Fundrise actually helped lobby Congress for the passage of this law. Competitors like Yieldstreet, EquityMultiple, and RealtyMogul came shortly thereafter.

Fundrise started out by offering single-property investments, That said, they’ve recently begun to shy away from equity crowdfunding in favor of private REITs. They call these “eREITs” and “eFunds.” As of 2024, they no longer produce investments exclusive to accredited investors — bar none. Whether they were spooked by the SEC’s past crackdowns on CrowdStreet, Yieldstreet, and other platforms is anyone’s guess.
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What’s the deal with Fundrise, anyway?

Key Features

Fundrise operates under Regulation A+ offerings, enabling them to accept investments from non-accredited investors. This significantly broadens the potential investor base, making real estate investment accessible to nearly anyone with a minimum investment of just $10. The catch is that non-accredited investors are less likely to see large returns on their investments.

Fee Structure

Fundrise charges an annual advisory fee of 0.15% and an asset management fee of 0.85% for real estate funds. The Innovation Fund has a higher fee of 1.85%. While these fees are relatively low compared to traditional real estate investment managers, they are higher than those for low-cost index funds. The platform is upfront about its fees, but the complexity of some charges may require careful review.

Minimum Investment

The low minimum investment requirement of $10 is one of Fundrise’s standout features, making it one of the most accessible platforms in the real estate crowdfunding industry along with Groundfloor. Having said that, a Fundrise investor who invests a near-minimum amount of capital is not going to see enormous return potential, and that’s by design.

User Experience

Fundrise offers a user-friendly platform that is simple enough to navigate. The sign-up process is straightforward, taking about 10 minutes to complete. The dashboard is reasonably well-organized and offers clear insights into the performance of investments. However, some users have noted that finding specific project details can be cumbersome.

Customer Support

Fundrise offers email and ticket-based support, but lacks direct phone customer service. While the response time is generally within a single business day, some users have expressed frustration with the lack of immediate support. The Help Center and chatbot provide additional resources, but the absence of direct phone support is a fairly significant drawback.

Investor Testimonials

Common Praise

• Ease of access ("A user-friendly and easy platform for investing in real estate")
• Fee transparency (“Fundrise is very transparent about the process and fees”)

Common Complaints

• Liquidity concerns (“Funds are not liquid and there are potential penalties for early withdrawal from some of their funds”)
• Customer service issues (“Their customer service is beyond disappointing. I tried reaching out multiple times but I got nothing but silence”)
• Performance variability — some users report lower-than-expected returns, particularly during economic downturns
• Non-accredited real estate investing may provide less insulation against risk (“The reality is that if you have a net worth of under $300,000 you shouldn't be taking on all this unnecessary risk”)

Is There Reason To Be Suspicious of Fundrise?

Is Fundrise legit? That's a complicated question. Last year, the company dealt with one big regulatory snafu.

On August 22, 2023, SEC announced settled charges against Fundrise for improper solicitation practices.  From February 2016 to December 2021, Fundrise had compensated more than 200 social media influencers and online newsletter publishers to solicit clients, but didn’t require these solicitors to provide clients with mandatory disclosures about their relationship with Fundrise and the terms of their compensation agreements, which was illegal at the time. Fundrise agreed to a cease-and-desist order, censure, and a hefty $250,000 penalty, settling charges of willful violation of investment adviser regulations without admitting or denying the findings. Whoops! 

Barring this major incident, Fundrise has largely avoided the legal troubles that have plagued some of its competitors. However, it has faced a great deal of scrutiny over the performance of certain funds, particularly during recent economic downturns when real estate values have dipped.

The legal issues from last year, though, should give investors pause if they’re looking for a trustworthy and principled business to partner with.

Track Record

Fundrise’s “track record” (if you can even call it that), viewable under the tab “Client returns” while logged into the platform, seems pretty sanitized and vague. It reads like an advertisement and focuses on a few cherry-picked metrics: “Average returns for each investor based on how many years they've been invested in Fundrise between 2015-2024,” “How Fundrise compares to public REITs,” etc. 

More comprehensive information on the historical performance of the company’s eREITs and eFunds is accessible via a link that’s carefully hidden in fine print and gated behind a CAPTCHA.
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Scoring Fundrise

Platform Details

• Years in Operation: 14
• Minimum Investment: $10
• Types of Investments Offered: eREITs, eFunds, Private Credit, Venture Capital
• Accreditation Requirement: No, open to all investors

User Experience

• Ease of Use: 4 Stars ... Fundrise offers a user-friendly web interface and a robust mobile app.
• Account Setup: 4 Stars ... The registration process is straightforward, and non-accredited investors are permitted to invest.
• Customer Support: 2.5 Stars ... Moderately responsive support team and extensive educational resources, but phone support is not an option.

Investment Experience

• Investment Options: 3 Stars ... While primarily focused on real estate, the variety of eREITs, eFunds, and other alternative assets offer sufficient diversification. However, the lack of accredited-only investments is a drawback for experienced investors.
• Returns: 3 Stars ... Returns can vary, and some funds have underperformed during market downturns.
• Risk Management: 2.5 Stars ... The platform is more of a laissez-faire marketplace than a curated selection of investments — certain competitors offer relatively more in-house due diligence.

Platform Transparency

• Disclosure of Information: 2.5 Stars ... Fundrise provides detailed reports and regular updates on investments, but information on historical performance is intentionally difficult to find.
• Fee Structure: 4 Stars ... Low fees compared to industry standards.

Overall Rating — 3 Stars

• Summary: Fundrise is a solid choice for long-term investors seeking to diversify their portfolios with real estate and tech startups. The platform's low minimum investment, broad range of options, and user-friendly interface make it accessible to novice investors. However, the lack of liquidity, potential for early redemption penalties, and limited customer support are areas for improvement.
• Pros: Low minimum investment of $10, broad range of investment options, user-friendly platform, transparent fee structure, quarterly payout schedule
• Cons: Lack of liquidity and potential for early redemption penalties, limited customer support options, complexity of some investment details
• Would Recommend? Yes, but only for small investors

Conclusion

Fundrise may be suitable for investors with a) a small amount of capital, b) a long-term outlook, and c) comfort with the risks associated with real estate and tech startup investments. While it may not be the best choice for those seeking immediate liquidity or guaranteed high returns, it provides a solid introduction to long-term investment, and is appropriate for new investors (or those with limited capital) who want to diversify their stock and bond portfolio with real estate. In short, our recommendation is very narrow: we think it’s only usable as a “beginner” or “trial” platform.

Fundrise likely won’t be going away anytime soon, especially if they commit to not flying in the face of the SEC again, but what happened last year was a serious red flag. Keep an eye on this page for further updates on that front.

The bottom line — investors should be aware of the inherent limitations of Fundrise’s offerings, keep themselves posted about any problems at Fundrise, and conduct thorough due diligence before committing any funds.

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