Fundrise Alternatives – Making Real Estate Investing Easy
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A good investment strategy usually includes diversification. But that can be especially difficult when adding real estate to your investment portfolio.
A down payment on a home can be hard to come up with, as can qualifying for traditional real estate investment trusts (REITs) or joining a private equity fund. The costs can add up, making it difficult to add real estate projects to your investment options.
The real estate investment platform Fundrise is one option. It allows individuals to invest as little as $10 — though $1,000 is the next level up for a minimum investment after opening an account — and immediately start as real estate investors with low costs. A bigger investment can mean more diversification and investment opportunities.
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Fundrise alternatives
Fundrise is easy to join and is best for beginner investors who don’t want to spend much time researching real estate deals as alternative investments. Fundrise handles the asset allocation of your real estate investment portfolio based on your investment strategy.
Fundrise allows passive income through regular dividends for a low minimum investment that can be added whenever you want. You can set up automatic transfers to Fundrise so that you’re investing regularly as your portfolio grows over time.
Investment beginners and even experienced investors who want to do their research may want to use other real estate investment platforms. Fundrise investments must be held for at least five years, though users can withdraw funds sooner by paying a penalty of 1% of their total share value.
For those and other reasons, alternatives to Fundrise are worth looking at. Different features may appeal to different kinds of investors. We’ll review eight other real estate crowdfunding platforms, highlighting the pros and cons of each, the costs, and who each might be best for. They include investment trusts (REITs) that allow regular, everyday investors to find diversification from stocks and bonds, with dividends and appreciation that have beaten the stock market.
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8 Fundrise alternatives
CrowdStreet
CrowdStreet is only available to accredited investors. Individuals or big companies with a high net worth are given this special status under financial regulation laws. As an accredited investor, an individual or an entity can invest in securities that aren’t registered with the Securities and Exchange Commission.
The SEC defines an accredited investor as someone with a gross income of $200,000 or more in the past two years, a joint income of more than $300,000, and an expectation of the same income in the current year. Or they can have a net worth of more than $1 million. This income helps them bear financial losses and need less protection from the SEC.
Investments can include private REITs, real estate funds or companies exempt from SEC registration and whose shares don’t trade on national stock exchanges.
Like other real estate crowdfunding platforms, CrowdStreet provides passive investing in real estate through properties that the site investigates and does due diligence for.
Users can invest in thematic managed funds, choose individual deals that meet their own investment criteria, or use its experts to help build a customized real estate portfolio. You can choose individual properties such as apartment buildings or other rental properties to invest in, with your money going directly to the sponsor behind the project.
CrowdStreet has an annual return of 18.1%, with holding periods generally 3 to 5 years, with some investments having a targeted hold for as long as 10 years. The minimum investment amount is generally $25,000.
DiversyFund
DiversyFund is a type of investment similar to Fundrise, with a low minimum investment aimed at small-scale investors who don’t want to pay management fees. DiversyFund requires at least $500 to start an account, and the holding period is five years.
A downside to this platform is that any profits are automatically reinvested. That might be fine if you plan to invest for the long haul and don’t want a passive income stream of quarterly dividends. Still, short-term investors who want regular dividends may not want their profits automatically reinvested.
Investors are only paid once the property is sold after five years. Returns are paid at a 7% preferred return rate before DiversyFund receives any profits as the real estate owner. If the profit is higher than 7%, then profits are shared with 65% to investors and 35% to the company. When investors average a 12% return annually, the remaining profit split is 50-50.
RealtyMogul
RealtyMogul has a higher investment minimum, $5,000, than other real estate crowdfunding platforms. But its three-year holding period is lower than the five years others require. Also, investors can sell their REIT shares back to RealtyMogul after one year.
RealtyMogul sells REITs and other investments, such as individual properties, and only nonaccredited investors can invest in its REITs.
The company does its due diligence by personally visiting and assessing all the real estate properties it lists. The in-depth vetting has helped it find property in areas with a history of above-average performance on the secondary market. It accepts only about 1.1% of the properties submitted for investment.
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Groundfloor
Like Fundrise, Groundfloor allows real estate investors to start with a $10 investment. It allows accredited and non-accredited investors to fund short-term loans to borrowers who want to buy real estate, fix it up, and flip it for a profit.
Single-family homes, apartment buildings, and commercial properties can be invested in. Groundfloor was started in 2013, and the company's returns to date are 10.5%. Users invest in real estate debt, meaning the property's collateral backs investments. That makes the risk much lower than common or preferred equity investments, according to Groundfloor.
Loans can carry very high risk and require some research to choose a deal that’s most likely to succeed. The site rates each investment, meaning an individual house, by risk. The least risk is a red A, and the highest is a red G.
Loans are repaid within three years and sometimes as quickly as six months.
Roofstock
Among the real estate crowdfunding platforms we’ve reviewed, Roofstock is a little unique. Its focus is helping investors buy turnkey, single-family rental homes leased to renters. You’re investing in property that you can visit, if you want, and touch and see what it looks like inside. You own it.
You don’t have to buy homes to invest through Roofstock, though that seems to be the company’s main goal. You can also invest in portfolios of properties through REITs, but only if you’re an accredited investor. Remember those? Those are people with a net worth of $1 million or more.
For non-accredited investors, which will likely be most of us, one advantage to buying a leased home through Roofstock is its low costs: a 0.5% fee to buy the home, which can be charged to your credit card. The house is yours when you complete your financing.
Home sellers pay just a 3% listing fee, so the total fee of 3.5% paid by the seller and buyer is half of what it normally is when a home is sold.
Buyers assume the contract from the previous owner and can start collecting rent immediately from the current renters. You can hire Roofstock’s property manager if you want to. Roofstock offers a 30-day money-back guarantee if you’re unsatisfied with your purchase.
Roofstock offers properties in 27 states. You can bring your property to Roofstock and sell it through the company, and Roofstock will connect you with a local real estate agent to make the process easy.
Streitwise
Streitwise allows accredited and non-accredited investors to start a real estate investment portfolio by buying shares of a REIT called 1st Streit Office Inc. The REIT is owned by Streitwise and its owners, Tryperion Partners.
If you’re confused by the spelling of Streitwise, the company is trying to be clever by putting “reit” in it. REIT is short for real estate investment trusts. Get it?
The company invests in vetted real estate projects. So, like DiversyFund, Streitwise has skin in the game by investing in the investment properties it offers. The company seems to invest most of its commercial property in secondary urban-suburban office locations. It says it focuses on Class A properties in good locations, which it expects companies will want more of as they seek less dense office space among property types after the pandemic.
Streitwise’s initial investment requirement was only $1,000, but it has since increased that to a minimum of $5,000 (500 shares). The company says it has paid quarterly dividends of 8 to 10% since 2017. Dividends can be reinvested in the REIT.
Shares can be sold after one year for a penalty of up to 10% of the share price and with no penalty after five years.
PeerStreet
PeerStreet is only open to accredited investors. It specializes in real estate loans, with your investment money used to fund borrowers’ loans. As the loans are paid back, you make money. It’s more of a peer lending website than a way to invest in real estate.
PeerStreet calls what it does real estate debt investing. The borrowers make monthly interest payments on their real estate loans that you’ve helped fund, and you receive your share of those monthly payments through PeerStreet.
Accredited investors can review each investment on its merits before deciding if they want to invest. Users can set up diversified portfolios manually or automatically with investments across geographies, lenders, borrowers, asset classes, terms, loan-to-value ratios, and rates.
Investments typically range from one to 36 months, and money can be withdrawn once each month. PeerStreet doesn’t have any updated information on its website on the fees it charges, but a PeerStreet blog post from 2015 says that it typically takes a 1% spread on each loan it puts up for investment, sometimes as low as 0.25%.
The company says its returns have ranged from 7% to 12% on loans with a loan-to-value ratio of 75% or less. With interest rates as low as they are now, and rising, 7% is still a high return. That’s because it uses private money lenders, which tend to offer higher interest rates.
Borrowers often seek private money loans because they either want the money fast or they don’t qualify for traditional loans that usually carry lower interest rates. This can lead to loan defaults, which PeerStreet says its customers are protected from because a property secures every investment. Offerings are given a first-lien position, meaning they’re first in line to be repaid in case of default or other problems.
Uninvested cash in PeerStreet earns interest like a savings account, without maintenance fees or minimum balances, in an account called PeerStreet Pocket. The FDIC does not insure it. It pays 4.00% annual interest.
The minimum initial investment is $1,000. Funds can be withdrawn once a month, and there’s no minimum holding time
EquityMultiple
With a $5,000 minimum investment and the ability to hold the investment for at least five to seven years, you can join other real estate investors at EquityMultiple and possibly earn the 17.4% historical net rate of return the company says it provides. Investors must be accredited investors.
The company has two options for real estate investors and the third option for a short-term savings account.
Investors who want to build their real estate portfolio one property at a time can start with a $5,000 minimum investment. Investors looking for more diversification have a minimum investment of $20,000 that’s required.
People looking for an alternative for their savings can invest a minimum of $5,000 into an account for three to nine months.
EquityMultiple specializes in commercial real estate, though its investment offerings include apartments, townhouses, and industrial property.
For its debt investments, it says anticipated returns range from 8 to 12% annually. Preferred equity investments have a current preferred return of 10 to 12% and a total preferred return of 10-18%. Common equity investments have an internal rate of return of 10 to 24%.
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Costs
Each real estate investment platform has its costs that are charged to investors. The fee structure can change anytime, so look for them on each company’s website. If you can’t find them online, contact the company for more information.
Here are the costs we found for the eight companies we reviewed.
CrowdStreet doesn’t charge a registration fee, and fees vary by project. For CrowdStreet funds, users must pay 0.50% to 2.5% of invested capital each year.
DiversyFund doesn’t charge fees, including no annual management fee that other REITs charge. Each real estate project, however, may have developer fees of 2-8%, with DiversyFund acting as the developer.
RealtyMogul charges annual fees of 1-1.25% of invested capital. Fees vary by investment, but the RealtyMogul Income REIT, for example, charges operating expenses of up to 3% of equity contribution.
Groundfloor doesn’t charge investors any fees. The borrowers pay all of the fees.
Roofstock charges buyers a fee of 0.50% to buy a home. If you want to hire Roofstock to manage your new property, its management fee starts at 0.50% but may adjust with its gross rents.
Streitwise charges a 2% ongoing fee.
PeerStreet charges a service fee from 0.25% to 1% for each loan an investor funds.
EquityMultiple charges a fee of 0.5% to 1.5% of invested capital. It also charges an administrative expense fee of $30 to $70 annually to cover tax document creation, annual filings, and entity formation.
Platform | Accredited Investor | Minimum Investment | Annual Return | Holding Period |
CrowdStreet | Yes; $200,000 | $25,000 | 18.1% | 3 to 5 years |
DiversyFund | No | $500 | 11.2% | 5 years |
RealtyMogul | No | $5,000 | 6-8% | 3 years |
Groundfloor | Both | $10 | 10% | 3 years |
Roofstock | Yes | $5,000 | 12% | 5 years |
Streetwise | Both | $5,000 | 9.3% | 5 years (1 year with 10% penalty) |
PeerStreet | No | $100 | 7-12% | None |
EquityMultiple | Yes | $5,000 | 8-12% | 3 - 9 months |
Pros and cons
Pros
- Real estate is a good way to diversify your investment options and can lead to much higher returns than stocks.
- Passive income through quarterly dividends is a common benefit of real estate investment platforms.
- Investment minimums are as low as $10, though a $1,000 minimum is more common.
- Beginner investors may prefer Fundrise or similar platforms that do the asset allocation for them.
Cons
- Some real estate crowdfunding platforms only allow accredited investors, meaning you must have a net worth of $1 million or more, or have an annual income of at least $200,000 for each of the past two years.
- These platforms often recommend holding these investments for the long-term, for five to seven years or longer, to realize the full benefits.
- Be aware of the difference between investing in real estate vs. buying a home through sites such as Roofstock, where you’ll become a landlord.
Working With Advisors Can Provide More Security than Going at It Alone.
- SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in 5 minutes.
- Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
The bottom line
For about $1,000, you can become a real estate investor and make money, or at least try to, as the wealthy do. Real estate investment platforms help make it easy.
Most don’t require you to be a landlord or buy a home, though you can go that route if you want to, and you can sit back and earn some passive cash flow through quarterly dividends while watching your investment portfolio grow.
Fundrise is a good place to start. It makes real estate investing easy for beginners and is simple to use. But there are other alternatives, some of which require having a high net worth and being an accredited investor. While you should do your homework and do some vetting on your own, all of the platforms we reviewed do their due diligence and review properties from many angles before recommending them as investments.
The best news is that there are alternatives, and hopefully, you can find one that fits your investment needs so you can start earning some passive income.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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