Is Fundrise Legit?

If you are a new investor or have recently found Fundrise, you may be asking if Fundrise is legit. The crowdsourced platform often sounds too good to be true.

How Can You Know Fundrise Is Legit?

Ben and Dan Miller initially started Fundrise in 2012, and the platform has processed over $5 billion in transactions since then in real estate. It is unlikely the company would still be in business if it were a scam, and it would likely have not processed that much money through its platform.

Annually. Fundraise has had an average annual return of 10.11%, slightly higher than most private commercial properties’ 10.3% average yearly returns. It is doubtful they would be paying out that much in returns if they were stealing from their investors.

Fundrise’s Reputation Online

Companies that rip off their customers and do not pay out the dividends they promise would undoubtedly have a bad reputation after being in business for ten years. You can check for complaints with the Better Business Bureau, which would be riddled with complaints by now if Fundrise were illegitimate.

One only has to look back to Bernie Madoff to see what happens when a stockbroker scams people out of their money. If you look at Fundrise closely, you will find a company that has helped the small investor achieve what he usually would never be able to accomplish.

Previously, if a small investor wanted to invest in real estate, they would have to produce enough money to purchase a house or other building, pay them down, and find financing for the rest owed on the building. They would often have to remodel it, then resell the property or rent it out to make a profit. Both required a lot of personal involvement in the investment, which could take many hours.

These commitments made it hard for many people to produce enough to invest in real estate or needed the necessary time. What most could invest in had a much smaller profit margin than the larger real estate projects like shopping malls, apartment complexes, or office buildings, making their return on their investment slow in most cases.

Fundrise changed all that since investors can combine smaller amounts of money to achieve the goal of financing more significant projects that bring more enormous profits without much effort.

When you research the reputation of Fundrise, instead of articles depicting huge losses and bad dealings, you find they have served over 300,000 people and made it possible for them to diversify their investments by adding real estate to the mix of their portfolio.

Instead of Being a Scam Investing in Fundrise Creates Wealth for Smaller Investors

Using Fundrise to invest in real estate works since investors can combine their money and use it to fund large projects vetted by the company. Some platforms make you invest so much that it cuts out the small investor from the real estate market.

At Fundrise, you will get both quarterly dividends and income from asset value appreciation because Fundrise invests in both eREITs and eFunds for your portfolio to give it better diversification.

With Fundrise, there are two eREIT types of investments you can make.

Income eREIT
Growth eREIT

The Income eREIT focuses on debt investments in commercial real estate. These have a steady cash flow.

The Growth eREIT has a lower dividend and focuses on appreciating assets to create its wealth.

These eREIT’s are both non-traded and are less liquid than other REIT’s. This is mainly because real estate takes longer to liquidate than most other investments, and this is especially true when multiple investors own equity in the same property.

You can invest in the Interval Fund also. Starting an interval fund gives investors the ability to liquidate some or all of their investments quarterly without a fee. The interval fund is money the company holds in its most extensive account. This fund offers greater diversity and still has the same benefits as the other investment types at Fundrise.

Is it Safe to Invest With Fundrise?

Investments can always be risky if there is a downturn in the market. The Fundrise business model has some risk because its most significant revenue stream is not in asset management but an originating developer fund.

There are also a few drawbacks to Fundrise. The three biggest ones are:

Fundrise Fees Can Be Complicated
Fundrise Investments are Not Easy to Sell
Fundrise Investments Can Be Complex

Real estate investment fees at Fundrise can be complicated because many people are involved. For the same reason, the investments can be complex. Real estate is often not easy to liquidate because of the need to find someone to buy the investor out to free up the funds. Real estate is a better investment for the longer term of five years or more and is not feasible for investors who want a quick return on their investment.

Although Fundrise may have a few cons, the pros far outweigh them for most investors looking for a lower investment in real estate to diversify their assets further.