Fundrise recently published its third quarter results, purporting to show gains in spite of rising interest rates and the looming threat of a recession. That’s good news for the hundreds of ‘ordinary’ investors who use the platform to put money into harder to crack investment areas like commercial real estate.
Fundrise is a platform that allows investors and real estate experts to invest together, eliminating the need for them to search individually for deals. Fundrise funds high-potential projects, offering opportunities in real estate investment properties to average investors, saving them from going through additional red tape.
What Is Fundrise
Fundrise is an innovative platform that allows you to invest in two ways: Buying shares and lending money. The former allows you to earn passive income while the latter gives you a higher interest rate but involves more work on your part and lower returns on investment.
Whatever path you choose, Fundrise makes it easy and profitable to invest in commercial real estate. The company was created with developers and investors in mind, but it is open to everyone who wants to create wealth through a combination of passive income and direct investments.
How Does It Work
There are two kinds of deals on the platform: Direct Deals and Marketplace Deals. The most significant difference between them is that with Direct Deals, you invest in completed real estate projects, while with Marketplace Deals, you get access to developments before they have been built or renovated.
This means that you will be required to lend money for their construction and pay for your share later on. It seems that getting involved in such an investment requires users to do work first to earn returns later.
However, this is not necessarily the case. Since you will earn money through interest payments, a delay may occur before your investment pays off. In the end, it’s all up to you how much effort and time you want to put into your investments since Fundrise gives two options with different kinds of return on investment.
It starts with an evaluation of possible projects by experienced development specialists. Next comes project selection, when developers present their ideas and investors are given an opportunity to choose which ones they like most and pledge money for them.
When it comes to Marketplace Deals, pre-registration takes place when user deposits are collected from select buyers interested in specific projects. These are refunded when a project is fully funded, and credited to the account when it enters construction, thus allowing you to own shares.
If your investment happens to be a Direct Deal, once the developer has completed the building or renovation, he will inform you about your return on investment.
Once your money is in an equity real estate portfolio managed by Fundrise, you can get access to detailed information about how much money you have made or lost over time and request withdrawal at any point in time.
The company was founded to provide a single solution for investors and developers alike. However, there are a few restrictions that you need to be aware of in order not to get banned or lose your accounts.
How Much Is the Limit on Transactions
Your transactions must never exceed $2 million within any period of 12 months. Transactions within the amount of $100,000 through a single account should take place once every 90 days. If you choose to invest more than $5,000 at once or come close to this limit with multiple investments, this will look suspicious, and they may freeze or terminate your account without prior notification.
Fundrise is not for laundering money or attempting any illegal activity.
Furthermore, residents of China attempting to invest in US properties through the Fundrise platform will be denied.
What Are Pfm and Tax Benefits?
PFM is a personal financial management tool that allows you to access all your financial data in one place. This feature is designed to help users make better decisions about their investments based on detailed information about current balances, property performance, market conditions, and available cash flows.
The platform’s partnership with Kabbage allows investors to receive instant funding opportunities so they can invest in Fundrise projects without any delay due to a lack of liquidity or experience with real estate.
Last but not least, the Fundrise investment platform is federally tax exempt if it’s an equity share that doesn’t exceed $10 million. It means that even if you have failed to recapture your initial investment plus 7%, you may be able to claim tax benefits as a non-corporate business owner.
Pros and Cons of Investing
There are several advantages to working with this company:
- You don’t have to be a super-rich person and invest hundreds of thousands or even millions to start your investment journey.
- You can make money on capital appreciation, dividends, fees, and tax benefits because there is no maximum income requirement you need to exceed before getting access to the platform.
- The platform offers free tools that allow you to get easy access to all available data and market information that will help you make better decisions about your investments, although it is worth mentioning issues with incorrect property data at some point.
- In case of developers were not able to repay their debt after the project was completed successfully, Fundrise will cover the costs but still be entitled to recover principal and interest from developers.
- You can get access to information about your investment, such as expected returns or any changes in properties’ value (which may occur depending on market conditions) through the PFM tool.
Cons of Using This Platform:
- The most important caveat – there is a lack of transparency regarding fees. Investors don’t know how much they have to pay for advisory services and how much of their investment will be invested into the selected property they’ve chosen.
- Although investor fees are affordable and not as high as on other platforms, they can still be a burden for those who lack experience in real estate investments. Also, you can get a higher return on investment if you invest more money through any Fundrise-affiliated broker. However, you should consider this option with care because it’s better to diversify your portfolio first before investing more. Especially since some traders don’t offer transparency when collecting transaction fees.
Getting started with Fundrise is rather easy. All you need is a US social security number, a bank account, or an existing brokerage investment account with at least $500 deposited in it and you are good to go.
Investors should always consider all options on the market before making any decision.
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This article was produced and syndicated by Wealth of Geeks.
