Beginner’s Guide To Fundrise
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Fundrise is a new investing platform that allows everyday investors to invest in private real estate projects traditionally reserved for the high net worth investors. For the first time, you can invest in private real estate investments with as little as $500 through Fundrise.
Getting started with Fundrise can be a bit complicated! We created this beginner’s guide to help you get started today.
Step 1: Open a Fundrise Account!
You can fund the account and decide on what plan best fits your needs later on!
Fundrise has the entire application process online where they will guide you through a series of questions to create your account. Currently, Fundrise is only offered to US residents age 18 or above. The minimum to get started with Fundrise is $500, or $1,000 for the advanced investment plans. Fundrise charges an annual fee of just 1%.
Step 2: Decide on an Investment Plan!
Fundrise gives you the option to choose from multiple investment plans based on your investment objective. Each portfolio offered by Fundrise will comprise of a blend of eREITs and eFunds created by Fundrise.
If you invest $500, you will automatically be placed in the Starter Plan. If you invest $1,000 or more, you can choose between three Advanced Plans.
Starter Portfolio: This portfolio is designed for new investors who would like to give Fundrise a shot. The minimum account requirement is only $500 to begin investing. This portfolio consists of 50% growth and 50% income oriented holdings.
Supplemental Income: This portfolio is geared towards income producing real estate. Investors will earn returns primarily through dividends and appreciation of the underlying holdings. Dividends are generated through rental and interest payments in proportion to your share of of the fund.
Balanced Investing: This portfolio offers a balance of 50% growth and 50% income oriented investments. The balanced investing portfolio invests in a blend of eREITs and eFunds offered by Fundrise. The goal for this portfolio is for a balance of income and growth producing real estate.
Long Term Growth: The goal of this portfolio is to generate returns primarily from asset appreciation. This portfolio aims to purchase high growth potential real estate and generate returns mostly from the sale of the underlying properties. This includes buying property and performing renovations in order to sell the asset for a gain later.
Step 3: Fund the account!
You will link your bank account using your online credentials or by manually entering your routing and account numbers. ACH transfers are mandatory for transactions under $25,000. Above $25,000 Fundrise will accept wire transactions.
Step 4: Decide what to do with Dividends!
All distributions or dividends from Fundrise will automatically be deposited into your bank account on file unless you opt in to the dividend reinvestment program. If you want to maximize your returns with Fundrise and allow your dividends to compound, you need to opt in to the dividend reinvestment program or DRIP. Fundrise provides this dividend reinvestment program free of charge as a courtesy for investors.
Compound interest is the effect of earning interest on top of your interest. By reinvesting dividends you are able to earn more dividends because you have a larger investment. Over time, the compounding of these dividends will result in exponential growth of your portfolio.
That’s it! Fundrise is a 100% passive investment. You simply fund the account and put your money to work. Down the road, you can add more funds to this account if you want to increase your investment.
Since Fundrise uses your invested dollars to purchase real estate assets and debt instruments, you are not guaranteed immediate liquidity. All Fundrise investors can obtain liquidity monthly. You must submit a redemption request followed by a 60 day waiting period, which is also subject to limitations. Fundrise is considered a long term investment, their investment team looks for opportunities over a 5 year time span. Anyone looking to invest in Fundrise must understand they may not be able to liquidate their position right away and they should be investing for a minimum time horizon of 5 years.
You will be updated on your investment’s performance through ongoing reports and status updates of your holdings. Fundrise will also send you tax forms at the end of the year for any earnings or dividends received for the prior year. You will also receive emails when new real estate projects are added to your plan!
There are countless ways to invest in real estate. Fundrise is just one of the many options. These may not be the best fit for you based on what you are looking for out of the investment. Check out our comprehensive guide on real estate investing to learn more and explore other avenues!