Are you interested in growing or diversifying your investment portfolio? Real estate investments may be a good option.
This is because real estate (especially multifamily properties) tends to perform well in inflationary climates and has long been recognized as one of the best ways to hedge an investment portfolio against inflation.
In the past, real estate investments were considered to be more work than stocks due to the ongoing maintenance of the property.
However today, real estate investors have more options to explore, and you don’t have to be an accredited investor to enjoy the profits that come with commercial properties.
A new and easier way to invest in commercial real estate is through a real estate crowdfunding platform, such as Fundrise or Realty Mogul.
These platforms have become increasingly popular because they’re easy to use, offer a variety of options to invest in commercial real estate, and require very little money to get started.
While both platforms can be a good option, let’s dive into more detail and see how Fundrise and Realty Mogul compare so you can determine which platform is right for your goals.
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What is Fundrise?
Founded in 2012, Fundrise is the most popular real estate crowdfunding platform. It’s also the first investment platform to provide a simple, low-cost way for anyone to take advantage of real estate’s historically consistent and exceptional returns.
Since launching their first offer, Fundrise has invested more than $4 billion worth of real estate across the USA.
Their mission is simple: to empower the individual investor. That’s why Fundrise focuses on important aspects of investing like cost efficiency, minimizing fees, frequent communication, and developing smarter tools to give you the best insight possible.
Fundrise follows a “value investing” strategy where they acquire assets for less than what they believe their intrinsic value is. Over time, their team works to increase the value of each asset through hands-on management and in partnership with local operators.
Bottom Line: Fundrise can be an excellent option for people who want to invest in real estate, but don’t want to deal with the hassle that comes when owning property. Here, Fundrise takes care of research and underwriting before deciding to invest in specific properties.
Best for beginner investors.
- $10 initial investment.
- REITs and eFunds.
- Low fees.
- No accreditation.
Best for accredited investors.
- $5,000 initial investment.
- REIT and private placements.
- Pre-vetted investments.
- Simple and easy to use.
How does Fundrise work?
Fundrise offers two primary investment avenues: eREITs or eFunds.
A REIT is a company that owns and usually operates income-producing real estate or related assets. This can include office buildings, retail shopping centers, apartments, hotels, warehouses, and related properties.
Fundrise eFunds invest in individual properties or small groups of properties in growth neighborhoods that are adjacent to major metropolitan cities, such as Los Angeles.
As you can see, eREITs are focused on income while eFunds are focused on growth.
Fundrise is a private real estate investment, which means you can only buy eREITs and eFunds on the Fundrise platform since they are not available on public exchanges or markets.
What are the main benefits of eREITs?
- Consistent income generation – Fundrise eREITs are a diverse family of funds designed to capture real estate’s potential for income generation.
- Technology-enabled efficiency – Their funds are designed for direct, online investment, avoiding the costs and inefficiencies that have limited public REITs’ return potential.
- Private market’s powerful return profile – Due to being a private real estate investment, the properties that comprise of their eREITs offer a true portfolio diversification.
Why would someone invest in eREITs?
Fundrise eREITs offer a way for individual investors to earn a share of the money generated through commercial real estate ownership, without having to deal with the headache of going out and buying commercial real estate.
What features are unique to Fundrise?
Five Portfolio Options
Whether you’re starting with just $10 or $5,000, Fundrise has an account level for you.
Starter – Initial investment of $10+, you’ll get access to dividend reinvestment, auto-invest, and registered products.
Basic – Initial investment of $1,000+, you’ll get access to everything included in the Starter portfolio, as well as the option to invest via IRA, the ability to create and manage Investor Goals, and access to Fundrise iPO.
Core (MOST POPULAR) – Initial investment of $5,000+, you’ll get access to everything included in the Basic portfolio, as well as the ability to customize portfolio strategy, directly allocate to funds, and non-registered products.
Advanced – Initial investment of $10,000+, you’ll get access to everything included in the Core portfolio, as well as access to specialized funds.
Premium – Initial investment of $100,000+, you’ll get access to everything included in the Advanced portfolio, as well as priority access to Investor Relations team, and periodic accredited offerings.
Diversity Through Specialized eREITs
Fundrise offers different eREITs where the main objective is capital appreciation (long-term growth) or balanced (security and income). It could be office buildings, apartments, retail properties, or a mix of all three.
Fundrise Pros and Cons:
- Low minimum investment requirements – You can get started today with as little as $10.
- Low fees – Fundrise’s management fee is only 1% per year.
- Low barrier to entry – Anyone can invest in real estate without actually having to go out and buy property. You don’t need to be accredited.
- Long-term investments – Fundrise is great for investors with a long-term outlook. In the case of an economic downturn, liquidity may not be available, which means it’s important to only invest money you won’t need for at least five years.
- Tax consequences – Your distributions will be taxed as ordinary income rather than as capital gains.
What is Realty Mogul?
Similar to Fundrise, Realty Mogul is a real estate crowdfunding platform that allows you to invest in REITS and private real estate investment properties.
Since it was founded in 2012, nearly 250,000 investors have joined Realty Mogul and over $950 million has been invested on the platform.
Realty Mogul offers a straightforward approach which focuses on smart diversification strategies, generating cash flows, and creating value in office, industrial, retail, self-storage, and apartment buildings.
Bottom Line: Realty Mogul offers investment options that are clear and easier to understand than similar platforms. It offers investment options for both accredited and non-accredited investors, making it a great option for those who have an appetite for high risk, high reward real estate investing.
How does Realty Mogul work?
Through the Realty Mogul platform, members can create their own real estate portfolio, diversifying their holdings with investments in individual properties and Real Estate Investment Trusts (REITs).
A REIT is a single investment into a diversified basket of real estate properties. Historically, REITs have been positively correlated with inflation, which can make them a possible hedge for inflation.
Over the long term, REITs have also compared favorably to traditional investment indexes, such as the S&P 500.
Realty Mogul offers two REITs:
Income REIT – This is to provide a monthly income to investors through contractually obligated interest payments. It comprises of different commercial properties and aims to provide monthly dividends.
Apartment Growth REIT – This is to provide long-term capital appreciation, in addition to providing quarterly income. It comprises of various multi-family apartment buildings and aims to provide quarterly dividends.
Realty Mogul also provides access to individual properties, but you’ll need to be an accredited investor. Fortunately, you DO NOT need to be an accredited investor to invest in their REITs.
What is an accredited investor?
This refers to any investor who has maintained a certain level of income or net worth and who is able to participate in private placement of securities.
Accredited investors can be individuals, banks, insurance companies, employee benefit plans, or trusts. For an individual to qualify as an accredited investor with Realty Mogul, he or she must meet one of the following criteria:
- Earn an annual income exceeding $200,000 or joint income exceeding $300,000 together with a spouse.
- Have a net worth exceeding $1 million (not including one’s primary residence)
- Be a general partner, executive officer, or director for the issuer of a security being offered.
Once you invest with Realty Mogul, you’ll get access to a member dashboard, which gives you 24/7 access to your investments along with regular reporting from the real estate companies on the performance of your investments.
What features are unique to Realty Mogul?
Non-traded REITs for non-accredited investors
Realty Mogul offers two public non-traded REITs for non-accredited investors, one REIT that focuses on income and another REIT that focuses on growth.
Publicly traded REITs usually have dozens (or even hundreds) of properties in their portfolio, which can make it difficult to invest in specific areas of the country.
However, the advantage of investing in a non-traded REIT through the Realty Mogul platform is that you can take a more precise approach.
Monthly and quarterly distributions
While most of Realty Mogul investments are intended to be long-term, most of them are paid monthly or quarterly distributions. When you invest through the Realty Mogul platform, you can withdraw your distributions or reinvest them.
Opportunities to invest in individual properties
While Fundrise offers investment plan options based on your goals and risk tolerance, Realty Mogul gives you more control on where you want to invest your money – especially when it comes to investing in individual properties.
To access standalone real estate investments through the Realty Mogul platform, you’ll need to be an accredited investor.
While it’s important to do your own research before selecting an investment opportunity, the Realty Mogul platform allows you to thoroughly analyze each deal.
Investments are also pre-vetted, which means they go through the sponsor history and individual background checks to ensure that deals will provide positive returns.
Realty Mogul Pros and Cons:
- Options for any type of investor – Realty Mogul has options for both accredited and non-accredited investors.
- Frequent distribution – When you invest through Realty Mogul, you’ll typically receive monthly or quarterly dividend distributions, depending on the investment.
- High net worth options – There are options for high net worth investors including 1031 Exchanges and Private Placements.
- Independent investing choices – Realty Mogul doesn’t provide investment advice and its members will need to do their own due diligence or prospective real estate investments. Fundrise will put together an investment portfolio for you based on your goals and risk tolerance. Both options are good, but it’s up to you on how you prefer to organize your portfolio.
- High minimum investment – Realty Mogul has a $5,000 initial investment minimum for REITs and a $25,000+ minimum investment for individual properties. Fundrise has a $10 initial investment minimum, which makes it more affordable for anyone to get started.
- Variable fee structure – Realty Mogul has fees ranging from 1% and 1.5% for REITs.
Fundrise vs. Realty Mogul: Fees
Fundrise charges a flat 1% annual fee to invest through their platform. This breaks down to 0.85% management fee and a 0.15% annual advisory fee.
Realty Mogul fees will depend on the type of investment you’re making through their platform. For REITs, the fee ranges from 1% and 1.5% and is based on the amount of your investment.
Who is Fundrise best for?
Fundrise is best for those who are new to investing. If you’ve never invested in real estate before, Fundrise makes it easy and affordable. You can get started with just $10 instead of investing a minimum of $5,000 with Realty Mogul.
This can give new investors an opportunity to dip their toes in the water to see how they like using the Fundrise platform before choosing to make bigger investment commitments later.
Who is Realty Mogul best for?
Realty Mogul is best for accredited investors who want the most control over their investments. When investing through Realty Mogul, you’ll get to build the real estate portfolio that’s right for you.
It’s geared towards high-net-worth investors who already have some experience with real estate investing. Their platform provides an easy way to browse and understand real estate options or offers REITs for those looking for a lower minimum investment.
Fundrise vs. Realty Mogul FAQs
Can Fundrise be trusted?
Yes, Fundrise is a legitimate real estate investment platform with a strong track record. However, just like with any investment platform, Fundrise notes that past performance doesn’t guarantee future results or expected returns.
Is Fundrise a wise investment?
Fundrise is one of the best and most popular real estate investing platforms because it’s easy to use and you can get started today with just a $10 minimum investment.
This can be a great options for beginners who want to dip their toes into commercial real estate compared to similar investing platforms.
Has anyone made a lot of money on Fundrise?
Investing in non-traded REITs can be risky, but there can be some great rewards too. According to Fundrise, the average annualized returns on the platform were between 7.31% and 16.11% between 2017 and 2021.
Past results don’t guarantee future success though, and it’s important to never invest anything that you can’t afford to lose. Another option is to invest in publicly traded REITs which are traded on an exchange like a stock.