Fundrise vs Realty Mogul
Investing Simple is affiliated with Fundrise and Realty Mogul. This relationship does not influence our opinion of these platforms.
As investors, we are always trying to diversify our portfolios. Whether we buy multiple different stocks or spread our money across different asset classes, diversification is key to a balanced portfolio. Recently, a number of different real estate investing platforms have emerged. Many of these platforms offer unique features to investors, making it difficult to choose between them.
In this post, we will compare two of the most popular crowdfunded real estate platforms, Realty Mogul and Fundrise.
Fundrise is a new investing platform that allows everyday investors to invest in private real estate projects. In the past, only high net worth investors had access to projects like this. Now under new investing regulations, Fundrise gives you the chance to invest in these deals. You have the ability to gain investment exposure to both commercial and residential real estate. Here is our full review of the Fundrise investment platform.
How Does Fundrise Work?
Fundrise is a crowdfunded real estate investing platform. Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate assets. These assets then produce income and/or growth based on the principal investment. Historically Fundrise has provided investors with a positive return on their portion of the investment over time.
Real estate is traditionally a high barrier to entry investment. Now platforms like Fundrise allow average retail investors to get exposure to this asset class. The Fundrise Starter Portfolio has a minimum account balance of $500.
Fundrise E-REIT & E-FUND
Fundrise takes a new approach to the traditional Real Estate Investment Trust (REIT) structure. Through the use of technology, Fundrise makes it easy to fund your account, check in on projects and choose your portfolio. By leveraging new regulations, Fundrise gives the average investor access to commercial and residential real estate with as little as $500.
The Fundrise platform offers a variety of benefits such as low account minimums and quarterly redemption periods. However, investors should understand the liquidity and time horizon of an investment in the Fundrise platform. We will discuss this in further detail throughout the article.
Real Estate Projects
Fundrise offers plans to invest in different types of real estate. You can invest in income-producing rental properties or growth-oriented real estate developments. Fundrise offers different investment plans based on your investment goals. You can keep track of Fundrise real estate projects within your investment account. Fundrise will also notify you about major developments with their projects.
The main investment objectives of Fundrise are to generate revenue from income producing properties as well as buying and selling real estate in thriving markets. As a Fundrise investor, you can choose whether you want to be in a growth-oriented portfolio or income-oriented portfolio. Investors receive income from rental payments and proceeds from flips in the form of dividend payments or distributions. In exchange, Fundrise collects a 1% fee as the investment manager.
It is important to understand that Fundrise is a private real estate investment. You can only buy and sell Fundrise eREITs and eFUNDs on the Fundrise platform. They are not publicly traded on a stock exchange like a publicly traded REIT.
Fundrise Investment Options And Portfolios
Fundrise allows you to choose from four real estate portfolios based on your risk and investment goals. Some portfolios aim for cash flow and others focus on the growth of the underlying assets. If you invest the minimum of $500, you will have access to the starter portfolio. The other three advanced plans require a minimum investment of $1,000.
This portfolio is 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. If you want to upgrade to an advanced plan down the road, it is 100% free!
This portfolio owns income-producing real estate. Investors will earn returns primarily through dividends from cash flow producing real estate. This plan pays out dividends in proportion to your share of the fund.
This portfolio offers a blend 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-generating real estate, as well as real estate that is appreciating in value.
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 these properties. This includes buying property and performing renovations in order to sell the asset for a gain later.
Fundrise Technology: eREIT & eFUND
Each portfolio consists of eREITs and eFunds constructed by Fundrise. These investments are set up as real estate investment trusts or partnerships and they are managed by Fundrise.
An eREIT will produce income for your portfolio in the form of dividends. You can earn dividends in multiple ways. First, from the rent payments of the underlying apartment and commercial leases owned within the eREIT. Second, from interest payments of the underlying real estate debt investments owned by Fundrise.
An eFund is a partnership created by Fundrise for tax advantages and to provide greater investment flexibility. Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds function in a similar way to eREITs where there is a pool of real estate investments split into shares and sold to investors. Where eREITs aim to generate income, eFunds focus on growth.
Fundrise Investment Liquidity
Fundrise uses the funds you invest to purchase real estate. For this reason, there is a 60 day waiting period for withdrawing funds. There are also quarterly redemption periods when you can withdraw your funds.
This is why it is important to understand what you are investing in when you invest with Fundrise. Investors should aim for a long-term investment of at least a 5-year time horizon when investing with Fundrise. This Real estate investment is not highly liquid and may not be for everyone!
It is important that investors understand that liquidity and distributions are never guaranteed.
Fundrise Historical Returns
Past performance does not guarantee future returns. All investing involves risk, including the potential loss of principle.
Fundrise charges a fee of 1% per year. They do not charge any other hidden fees and there is no front load fee with Fundrise. The returns shown above are the returns after Fundrise collects the 1% fee.
Pros Of Investing With Fundrise
- The minimum to get started with the Starter Portfolio is $500.
- Small retail investors are able to access private real estate investments.
- Since this is a non traded REIT, it may be less correlated with the overall market.
- Fundrise has a transparent fee of 1% per year.
- This investment allows you to earn compound interest, with the option of automatically reinvesting quarterly dividends using a drip (Dividend Reinvestment Plan).
- Fundrise does not have a minimum net worth or income requirement like most private investment funds do.
- This is a 100% passive real estate investment.
- Fundrise gives you diversified exposure to real estate.
- Fundrise supports retirement accounts.
- Monthly redemption periods eliminate the temptation for panic selling.
Cons Of Investing With Fundrise
- Liquidity is never guaranteed. During a downturn, liquidity may not be available as many investors will rush to sell and buyers may be few and far between.
- Distributions (dividends) are never guaranteed.
- Distributions (dividends) are taxed as ordinary income rather than capital gain rates.
- The platform has a limited track record of four years and not a long investment history.
Fundrise: The Bottom Line
Fundrise may be a great platform for passive investors who are looking to gain access to private real estate markets. The Fundrise platform may also a good option for investors who are looking to diversify asset classes.
Since you can only liquidate your positions quarterly, investors may be less tempted to actively trade in and out of positions. This may protect you from self-harm or emotional investing.
In addition, you can automate your dividend reinvestment plan, allowing compound interest to build up in your account.
In most cases, Fundrise is best for investors with a minimum 5 year time horizon. Real estate is not a highly liquid investment and inexperienced investors need to take this into consideration. While Fundrise does offer a 90-day satisfaction guarantee, you should not invest if you have a short-term investing mentality.
Realty Mogul Review
Realty Mogul is an online crowdfunded real estate investing platform. Investors can pool their money together and invest in a variety of different real estate projects. The design of the platform allows for an interactive experience by the investor. You can check the status of your investment, view ongoing updates and monitor the progress of each project. This modern approach to real estate investing aims to give a better investor experience when compared to a traditional REIT. Realty Mogul offers a variety of portfolios consisting of both commercial and residential real estate.
How Does Realty Mogul Work?
Realty Mogul is a crowdfunded real estate investing platform where investors can pool their money together and purchase real estate projects throughout the country. The Realty Mogul platform offers a variety of real estate investments. Investors can purchase equity investments in both commercial and residential real estate as well as real estate debt investments. Realty Mogul offers multiple investment vehicles, however, some are only accessible to accredited investors.
When you create an account with Realty Mogul, first you will create your username and password. The minimum investment is $1,000 and you can make any deposits under $100,000 directly using ACH transfers (anything over $100,000 will need to be a wire transfer). To invest in Realty Mogul private placements, you must be an accredited investor.
To be eligible to invest in Mogul Reit I and Mogul Reit II, you do not need to be an accredited investor, you can invest in these REITs as long as you meet the $1,000 minimum investment.
What Is An Accredited Investor?
An accredited investor is someone who has a recognized level of income, net worth, or professional experience allowing them to invest in higher-risk securities that may not be registered with traditional securities laws. The SEC uses the term accredited investor to describe individuals who show financial knowledge of the risks associated with an unregistered security.
In order to stay compliant with the SEC, the companies who issue unregistered securities must verify they are selling to accredited investors only. They may do this by verifying income and net worth of the investor using tax returns, W-2’s, mortgage statements etc.
An investor must meet the following requirements to meet the accredited status:
- An annual income of $200,000 ($300,000 if married) over the last 2 years, and reasonably expects to make this much in the future.
- OR A net worth of at least $1,000,000, not including the value of your primary residence.
Realty Mogul Investment Options
Realty Mogul offers 3 different investment options. Each has a unique investment objective.
Mogul REIT I
Mogul REIT I is a public non traded REIT investing in commercial debt and equity investments. The goal of Mogul REIT I is to generate income and diversification through a variety of real estate investments. With the aim to preserve, protect and grow your investment over the long term, Mogul REIT I has the objective to pay attractive and consistent cash distributions. The minimum investment for Mogul REIT I is $1,000. This investment is open to any type of investor, and not limited to accredited investors. Mogul REIT I has had an average annualized return of 7.76% over its life. Investors receive dividend payments on a monthly basis.
Mogul REIT II
Mogul REIT II is a public non traded REIT focused on the growth of capital over the long term. This REIT has the goal of paying out quarterly cash distributions to investors. Mogul REIT II mainly invests in residential real estate, primarily apartment developments. One of the main strategies of the REIT is to renovate and reposition multifamily homes with the goal of capital appreciation over time. Mogul REIT II looks for properties in established and revenue-consistent areas and neighborhoods. As a result, over the past year Mogul REIT II has paid out a 4.5% yield on distributions to investors. The minimum investment for this REIT is $1,000.
Realty Mogul also offers a variety of private placement investments. These private placements are limited to accredited investors only. You must have a net worth of $1,000,000, or annual income of $200,000/ $300,000 if married. For the most part, all private placement offerings are slightly different within Realty Mogul. Some may have investment minimums as well as lock-up periods for your initial investment. The investment objective for Realty Mogul private placements is for long term capital appreciation and income over time.
Realty Mogul Fees
Realty Mogul charges fees based on the type of investment you select. For example, debt or equity investments. These fees include an asset management fee ranging from 0.30% to 0.50% annually. There are also legal fees for certain investment types. These fees can be up to 3%.
Pros Of Investing With Realty Mogul
- User-Friendly dashboard and experience.
- Gives regular investors access to large scale real estate investments.
- The minimum investment is only $1,000.
- Quarterly or monthly distributions based on the investment.
- Invest in both equity and debt real estate investments.
- Good option for accredited investors.
Cons Of Investing With Realty Mogul
- Non traded REITs are illiquid in nature, you must have a long term time horizon.
- Some investments require investors to be accredited investors.
- Fees vary by investment vehicle.
Fundrise vs Realty Mogul
Fundrise and Realty Mogul are two of the top crowdfunded real estate investing platforms available today. Both platforms share a variety of features, but there are small differences between the two. One difference being the minimum investment. Investors can invest in the Fundrise Starter Portfolio REIT with only $500. Realty Mogul has a $1,000 minimum investment for its REITs.
In addition, we also noticed a difference in fees between Fundrise and Realty Mogul. Fundrise has a very transparent fee structure, displayed directly on their website. Realty Mogul fees are more complex and dependent on the specific investment. In some cases, fees might be lower on Realty Mogul, but not in all cases.
Another difference between Realty Mogul and Fundrise is the distribution period for certain REITs. Mogul REIT I has monthly distributions, where all Fundrise REITs have quarterly distribution periods. Realty Mogul also offers 1031 exchanges and more options for accredited investors when compared to Fundrise.
We believe both Fundrise and Realty Mogul offer extremely valuable platforms to its users. Both platforms give average everyday investors the opportunity to invest in large scale real estate projects. These platforms both offer a quality experience, but we believe Fundrise has a slight edge over Realty Mogul.
All together, there are countless ways to invest in real estate. Fundrise and Realty Mogul are just two 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 guide on real estate investing to learn more and explore other avenues!