Fundrise vs. Realty MogulDisclaimer
- Fundrise has a lower minimum balance of $500 compared to $1,000 to invest with Realty Mogul.
- Realty Mogul only has two portfolios for non-accredited investors which are the Mogul REIT I and Mogul REIT II.
- Fundrise has four different portfolios available to all investors. The starter portfolio has a minimum balance of $500 while the advanced plans have a minimum of $1,000.
- Fees vary with Realty Mogul while Fundrise has a transparent 1% fee.
- Realty Mogul offers 1031 Exchanges and Private Placements for accredited investors.
- Distributions are paid monthly with Realty Mogul and quarterly with Fundrise.
- Investors should have a minimum 5 year commitment for either platform.
- 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.
- They cannot guarantee liquidity. During a downturn, liquidity may not be available as many investors will rush to sell, and buyers may be few and far between.
- They cannot guarantee dividends, just like the stock market!
- Dividends are taxed as ordinary income rather than capital gain rates.
- The platform has a limited track record as this is a brand new investment.
- 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.
- 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 based on the investment,
As investors, we are always looking for ways to grow and diversify our portfolios. Whether we buy many different stocks or spread our money across different asset classes, diversification is key to a balanced portfolio. One key component to a well rounded portfolio is real estate.
The problem is, it isn’t the most passive investment. Recently, a number of different crowdfunded real estate investing platforms have emerged. This provides investors with a great way to passively invest in real estate all over the US! 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 Fundrise vs. Realty Mogul.
Realty Mogul vs Fundrise: Summary
Starting with Fundrise, this is a new investing platform that allows average, everyday investors to invest in private real estate projects. In the past, these investments were reserved for high net worth individuals. Now under new investing regulations, you can invest in these deals without being an accredited investor. You can now invest in both private commercial and residential real estate. Here is our full review Fundrise.
How Does Fundrise Work?
Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate. This is a combination of debt and equity deals, giving investors both growth and income potential. Fundrise has changed the game by offering their starter portfolio with a $500 minimum balance. You can upgrade to one of their advanced plans at any time too!
In a nutshell, Fundrise curates private real estate deals. With some of these deals, you are an owner who has equity in the property. In others, you serve as the bank having a debt interest. Equity investments are growth investments, as you can capitalize on asset appreciation. Debt investments are income investments, as you aim to receive interest payments from the loan.
Fundrise uses the funds you invest in purchasing 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.
Real estate is not a highly liquid investment. Liquidity is a measurement of how easily an asset can be converted to cash. Most real estate investments are a minimum 5 year commitment, with some debt investments being shorter. That being said, it is important to understand that a Fundrise investment is a long term investment and you should expect to keep your money invested with them for at least 5 years.
They do offer quarterly redemption periods, but liquidity is never guaranteed. Real estate does not sell overnight, and if there are many people looking to pull out at the same time they may not have the cash on hand. You may also end up paying early withdrawal fees if you pull your money out early.
How To Make Money
You can make money in a number of different ways with Fundrise. They offer the starter portfolio as well as three advanced portfolios. This allows you to decide whether you want to follow an income oriented or growth oriented approach.
These portfolios will consist of debt investments and equity investments. Debt investments essentially make you and the other investors the bank, extending a loan to a real estate developer. Income is earned from interest payments.
Equity investments are higher risk, but higher potential return. Fundrise aims to find real estate in thriving markets for sale. They purchase the property, make upgrades to force appreciation and plan to sell it for a profit in the next few years. In the meantime, if the property is producing income from rents, that is shared among the owners or investors.
Fundrise Investment Portfolios
Fundrise allows you to choose from four real estate portfolios based on your risk tolerance 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.
The Fundrise Starter 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 entirely free!
Next, we have the Fundrise Supplemental Income Portfolio. This portfolio holds income-producing real estate. Investors will earn returns primarily through dividends from cash flow producing real estate and interest payments. Dividends are generated through rental and interest payments in proportion to your share of the fund.
The Fundrise Balanced Investing Portfolio offers a blend of 50% growth and 50% income-oriented investments. The goal for this portfolio is for a balance of the income-generating real estate, as well as real estate that is appreciating in value.
Long Term Growth
Finally, we have the Fundrise Long Term Growth Portfolio. 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 a property and performing renovations in order to sell the asset for a gain later.
eREIT And eFund
When you invest with Fundrise, you will get shares of eREITs and eFunds.
Keep in mind 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.
An eREIT will produce income for your portfolio in the form of dividends. Dividends are earned from the rent payments and interest payments from the underlying apartment and commercial leases owned within the eREIT as well as interest payments from underlying real estate debt investments.
An eFund is a partnership created by Fundrise to be treated differently for tax reasons and to provide greater investment flexibility. Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds are designed in a similar way to eREITs where there is a pool of real estate investments split into shares and sold to investors. Where eREITs are designed to generate income, eFunds are geared towards growth.
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
Cons Of Investing With Fundrise
Fundrise: The Bottom Line
Crowdfunded real estate can be a great way to gain exposure to real estate in a passive way. Unlike the traditional publicly traded REIT, this private real estate investment carries a number of benefits. Investors must be familiar with and comfortable with the liquidity of private real estate investments.
Fundrise seems to be a great pick for the passive, hands off real estate investor. Unlike other crowdfunded real estate platforms out there, you do not have to be an accredited investor. With a $500 minimum for the starter portfolio, this is a beginner friendly investment. You can automatically reinvest your dividends, allowing you to put your money back into Fundrise earning compound interest.
Investors should be ready to commit to a 5 year investment. Very few real estate investments are going to be a short term investment.
Realty Mogul Review
Realty Mogul and Fundrise are offering a nearly identical investing platform. Investors pool money together via crowdfunding and invest in portfolios of commercial and residential real estate. Realty Mogul has a sleek platform that allows you to keep track of your investment. This is a 100% passive, hands off real estate investment where you invest in portfolios of real estate projects.
How Does Realty Mogul Work?
First, you create a Realty Mogul account here. 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 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.
Realty Mogul Investment Portfolios
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 that holds commercial debt and equity investments. The goal of Mogul REIT I is generating income and providing diversification through a mix of real estate investments. 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 every month.
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 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. It is open to any investors and not limited to accredited investors.
Realty Mogul also offers a variety of private placement investments. These private placements are limited to accredited investors only. 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.
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 specific investment types. These fees can be up to 3%.
Pros Of Investing With Realty Mogul
Cons Of Investing With Realty Mogul
Fundrise vs. Realty Mogul Final Verdict
Fundrise and Realty Mogul are two of the most popular crowdfunded real estate investing platforms available today. These platforms have a lot in common, but there are small differences between the two. One difference being the minimum investment. Investors can invest in the Fundrise Starter Portfolio with just $500. Realty Mogul has a $1,000 minimum investment.
There is also 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 higher in other cases.
Another difference between Realty Mogul and Fundrise is the distribution period for individual REITs. Mogul REIT I has monthly distributions, where all Fundrise REITs have quarterly distribution periods. Realty Mogul also offers 1031 Exchanges and options for accredited investors. Fundrise has no offerings for accredited investors.