Which is the best for real estate investment?

Add real estate to yours investment portfolio can be a great way to generate high returns and protect against market downturns or inflation. However, if you are not interested in buying and managing the property yourself, there are alternatives. Both REITs and platforms like Fundrise make real estate investing easier and more accessible to investors. However, while Fundrise may seem very similar to the underlying REITs, these two investment options have important differences to note. Here’s what you need to know. With all the options you have for investing in real estate, it makes a lot of sense to work with a Financial Advisor when you choose such securities.

What is fundraising?

Fundrise, a type of REIT, is an online platform that allows investors to purchase shares of real estate interests. Through Fundrise, investors can diversify their portfolioextra low cost Real estate investment without the hassle of purchasing, renovating or managing such properties.

This also makes real estate investing possible for more people. Instead of requiring the full amount of capital needed to purchase a property, Fundrise has a lower minimum that makes it possible for newer or lower-budget investors to access real estate investing.

Fundrise operates as a crowdfunding business model. Investors buy shares of preset portfolio strategy; Their money is then diversified across various funds within that strategy. Fundrise uses this capital to purchase, renovate, market and own a wide range of properties while charging investors an annual consulting fee and a Management fee.

Over time, investment assets held in Fundrise’s portfolio can gain value and yield income. In return, investors can see the value of their own portfolio increase and may even receive quarterly dividend the result is.

How REITs work at Fundrise

One of the simplest ways for investors to add real estate to their portfolio is through a real estate investment trust, or REIT. Buying shares of a REIT is similar to buying shares of other investments such as mutual fund, exchange-traded funds (ETF) or even individual stocks.

The story continues

When investing through Fundrise, investors are buying shares of private equity REITs, or “eREITs,” which is a trademarked term. These investments provide capital for various residential and commercial real estate projects, providing investors with a return on the property as it increases in value.

Equity REITs can be privately or publicly traded; in the case of Fundrise, their eREITs are open to all investors but not traded on the exchange. No broker and no sales commission for investors who buy eREITS; they are sold directly by Fundrise.

Fundraising vs REIT . Investment

Investing in REITs – especially publicly traded REITs – is a lucrative option for many investors. Traditionally, these investments have not only performed well, but most of the time they even boast of higher returns over S&P 500. REITs offered through fundraising However, these are individually traded investments. This means that they may not boast the same returns or have the same benefits as public REITs purchased through a brokerage account.

With that said, a fundraising REIT typically includes a variety of investments. As such, they can provide a better hedge against market downturns than some specialized REITs or individual real estate purchases. Here are some important differences between the two REIT investment methods:

• Fundrise offers low investment minimum: To start investing through Fundrise, investors are only required to invest a minimum of $10. Other REITs can have significantly higher requirements – sometimes in the four or five-figure range – especially when it comes to private or non-exchange-traded REITs.

• Fees may be higher with Fundrise eREITs: Fundrise charges investors a total of 1% in Annual fees. This includes a 0.15% consulting fee and a 0.85% wealth management fee. The typical publicly traded REIT charges about 50 basis points, or 0.5%, annually. On average, this makes Fundrise twice as expensive as a public REIT.

• Private REITs don’t provide the same liquidity as public ones REITs: In general, REITs work best in the long run. invest. However, if you need to liquidate your publicly traded REITs on an exchange, you can usually do so fairly quickly through your account. brokerage platform. However, fundraising REITs are private and not traded, which means your shares may take longer to sell.

• Fundrise platform could be simpler to use: There are many different REITs to choose from, but finding the one that best suits your investment goals and timing can be difficult, depending on where and how you invest. Fundrise offers predefined portfolios, allowing investors to choose the right portfolio for their goals. Any money invested will be disbursed according to that portfolio’s allocation without having to shop around or do a lot of digging.

All REITs are IRS required pay at least 90% of taxable income to investors. They are disbursed as dividends. While dividends (and overall returns) are never guaranteed, this requirement can make REITs a great choice for investors looking passive income stream.

Fundraising vs REIT: Which is Better?

So, between investing through Fundrise or investing in public REITs, which is better? Well, the difference will really depend on your goals and priorities as an investor. Both can be good options depending on what you’re trying to accomplish. While traditional REIT options may be richer and more affordable to invest in, Fundrise offers a much more manageable, automated solution.

With that said, if you are just looking for the ease of managing your REIT investments then you might consider working with a financial advisor who can manage an entire portfolio. your investments, including REIT investments.

Key point

Standard REITs can be publicly traded, privately traded, or non-publicly traded. Fundraising REITs are private and therefore may be somewhat illiquid, may be simpler for some investors, and only require an initial investment of $10. Investors can only choose the preset portfolio that best suits their goals. The fundraising platform fee is 1% annually, which is higher than the average public REIT fee. While Fundrise’s investment model is quite simple, the return earned can be lower than a public REIT, depending on the portfolio you choose.

Investment tips

• Consider working with a financial advisor as you weigh the pros and cons of various real estate properties. Finding a financial advisor is not difficult. SmartAsset’s free tool connects you with up to three financial advisors serving in your area, and you can interview the right advisors for you for free to decide which one is right for you. If you are ready to find a mentor who can help you achieve your financial goals, start right now.

• REITs can be an important part of your retirement. Planning for retirement requires knowing how much you’ll need to maintain your lifestyle once you’re done with work. Free SmartAsset retirement calculator can give you an idea of ​​how much you need to save.

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