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Real estate is one of the most effective long-term investment options. However, while it may be possible to purchase your own home, for many people the prospect of real estate investments may be financially outside their reach. Fortunately, there are options to invest in real estate with a smaller sum, such as with REITs or, for better risk-adjusted returns, a real estate crowdfunding platform.
Although this is a relatively new asset class, the real estate crowdfunding industry continues to grow each year. Arrived Homes is a fairly new entry into the market, while Fundrise has a proven track record. So, in this Arrived Homes vs. Fundrise comparison, we’ll look at both of these platforms in more detail to help you decide which one is right for you.
Related reading: 11 Ways to Invest in Real Estate
Fundrise is an online real estate platform that lets the average investor buy into private residential and commercial properties with the strategy of pooling their assets. The main products of Fundrise are REITs or real estate investment trusts.
REITs generally invest in income-producing properties either by holding mortgages or through buying and managing buildings. Fundrise labels its products as “eREITs”, or you can also invest in eFunds, where your funds will be pooled with other investors to buy land, develop properties and then sell them. There is also an Interval Fund, which offers higher diversification and liquidity compared to its other funds.
As an investor, you can purchase shares in eREITs, eFunds, or the Interval Fund by buying a Fundrise portfolio. There are several portfolio options including:
- Balanced Investing
- Supplemental Income
- Long-Term Growth
Within each plan, Fundrise determines the mixture of eREITs and eFunds, in addition to the underlying properties. As a result, it’s a completely hands-free way to invest in real estate. There are also Advanced and Premium accounts, which provide investors with access to a larger selection of real estate projects, benefits, and features.
For more details, please read our Fundrise review.
The minimum investment for Fundrise depends on the package you choose, but it’s it’s possible to get started with as little as $10.
- Starter: $10
- Basic: $1,000
- Core: $5,000
- Advanced: $10,000
- Premium: $100,000
Regardless of the package level you choose, the fee structure remains the same. There is a 1% annual fee on REITs and funds with a 1% redemption fee within the first five years.
The primary difference between these different plans or packages involves the amount of options you’ll have. For example, with the starter plan, you’ll own a share of a diversified real estate portfolio. However, with $5,000 investment, you can choose a core strategy that better aligns with your goals. Fundrise offers three core strategies: long-term growth, income, and balanced.
- Open To All: There are no investor requirements and the platform investments are open to non accredited investors.
- Low Minimums: You can start investing with Fundrise from just $10. So, even if you have a very modest investment fund, you can use the platform.
- Easy to Use Interface: It takes approximately 10 minutes to sign up to Fundrise, providing that you’ve already read the investor disclosures. You’ll need to provide your address, phone number, Social Security Number, and an appropriate funding method. Once you’ve done this, you’re good to go.
- Excellent Communication: Fundrise does an outstanding job of communicating with investors. You’ll get emails about new projects and properties that have been added to your portfolio. They’ll also let you know when a property is sold, along with the return that it produced for investors.
- Five Investment Levels: You can choose the investment tier that best suits your preferences and expected returns.
- Excellent Track Record: Although the real estate crowdfunding indusrty is still relatively new, Fundrise is one of the most established companies in the industries. At this point, they have a track record with several years of success.
- Satisfaction Guarantee: There is a 90-day satisfaction guarantee to ensure that you’re happy with your investment.
- Limited Liquidity: This can be said for most real estate investment platforms, but you cannot simply cash out if you need the funds without incurring a fee. You’ll need a five year investment to maximize returns.
- No Specific Investment Control: You have no control over a specific investment within your REIT or fund. You’re investing in a portfolio of properties, not an individual property.
Related reading: Fundrise Returns – My Results After 3 Years
Arrived Homes is another real estate crowdfunding platform, but it does not have the proven track record of Fundrise, as it’s still relatively new. However, one key difference is that you can invest in fractional shares in single-family rental homes and earn dividends based on the net rental income accrued from each property. So instead of investing in a real estate portfolio, you’ll pick a specific property to invest in.
Arrived Homes expects holding periods of five to seven years. Since Arrived Homes only began to acquire properties in 2021, none have been sold as yet. However, it’s anticipated that appreciation will offer additional returns (on top of rental income) when properties are sold.
As an investor, you’ll be investing in shares of an entity that owns the underlying property. Each individual home series will elect and be qualified to be taxed as a separate REIT. This should take place in the taxable year ending after the initial offering of interests for the series completes.
Arrived Homes allows you to invest from just $100, so there will be multiple investors for each property. You will be entitled to fractional interest on the income and capital appreciation for every property in which you invest in.
Arrived Homes has a simpler fee structure, which is set at a 1% annual fee. This makes it far easier to calculate your potential fees.
- Invest in Single Family Rental Homes: Unlike with Fundrise, you can invest in specific single family rental properties, so you can choose properties that appeal to you rather than having your funds investing in properties determined by the platform. This also provides the potential for greater diversification, as you can spread your investment funds across multiple properties.
- Low Investment: You can invest from just $100 with no requirement to be an accredited investor.
- Quarterly Dividends: Providing the amount is at least $5 per investor, you will receive quarterly dividends.
- Realistic Way to Own Rental Properties: Many people would love to own rental properties, but purcahsing a rental house requires a lot of capital. Arrived Homes makes it possible to get the benefits of rental properties with just $100.
- Hands-Free Investment: One of the downsides of owning rental properties is dealing with tenants and issues that come up. When you invest through Arrived Homes, you have none of those responsibilities.
- Limited Investment Selection: The current investment selection (at the time of writing) is only 28 properties, but this should expand over time.
- No Proven Track Record: Arrived Homes has only been established since 2021, so it has no proven track record. While it is an innovative platform, you don’t have the reassurance of years of trading activity. As of yet, there have been no properties sold or fully complete.
- Very Limited Liquidity: It’s possible to request redemption after only six months, but there are no guarantees that the request will be fulfilled, as it depends on the market.
There are a number of factors that will help you to determine which is the right platform for you. These include:
This is not particularly a deciding factor in the Arrived Homes vs Fundrise comparison, since both platforms have an A rating with the Better Business Bureau. However, if you’re looking at other real estate crowdfunding platforms, its industry reputation should be the first thing that you look at.
Due diligence is perhaps the most important element of real estate investing. With a crowdfunding platform, it refers to the vetting process used to select investment properties. There are specific criteria applied to every investment to ensure it is worthy of the platform and its investors.
Arrived Homes has a 10 step due diligence process. This includes a focus on the most lucrative markets and neighborhoods, sourcing deals, defining the ideal purchase criteria, making the right offer, and strategic renovation investment. It also includes selecting experienced managers and great tenants for the rental properties, leveraging scale to reduce costs, and employing technology to improve efficiency.
Fundrise also has a multi-step process with a lead underwriter assigned to evaluate each investment project, with over 350 data points. This includes visits to the property, consideration of comparable properties, a comprehensive property appraisal, pro forma financial analysis, and a review of the local laws. After the underwriting process is complete, the project is presented to Fundrise’s Investment Committee for approval.
While you may be looking for a medium to long-term investment, the ability to earn a passive income may be a deciding factor for you. Both Arrived Homes and Fundrise could offer passive income sources. After your initial investment, the investment properties are managed by the platform with no input needed from you. You’ll earn dividends paid from the net rental income. After the investment term, the property will be sold and if the sale price is more than the acquisition and renovation costs, you’ll receive a distribution of the property capital appreciation less any transaction fees.
However, since Arrived Homes is still a relatively new platform, there have not yet been any properties sold and therefore no investors have received any capital appreciation yet.
Real estate investing requires a long-term commitment even if you’re using a crowdfunding platform. Many real estate crowdfunding platforms require investments for five years plus, which allows the platform to acquire, renovate and sell the property to maximize the potential capital appreciation. For this reason, crowdfunding platform investments are illiquid, and generally, you’ll be expected to retain your investment for the full term.
Arrived Homes warns its investors to prepare for five to seven-year investments. At the moment, there is no facility to liquidate early, but the company is working on a program, which will allow this. It is expected that when this is available, there will be a six-month holding period on withdrawals.
On the other hand, Fundrise has a unique and popular early withdrawal capability. While it recommends remaining invested for a minimum of five years, there is an option if you need to cash out early. Early withdrawals are typically offered on a quarterly basis, but you need to have been invested for at least 90 days. Withdrawals within the first five years of initial investment do incur a 1% early withdrawal fee, but this fee does not apply after five years.
However, the withdrawal policy is not guaranteed. Early withdrawals are only available if Fundrise has sufficient available cash to accommodate any redemptions. If the funds are not available, your withdrawal request will be denied. This means that if there is a heavy demand for redemptions or reduced new investor funds, withdrawals may be limited or even completely unavailable.
Arrived Homes and Fundrise are quite similar, with both offering low minimum initial investment options and investments being open to non-accredited investors. Either platform is well suited to new or small investors. However, there are some key differences that will influence which is the best choice for you in the Arrived Homes vs Fundrise comparison.
First, while Arrived Homes only offers investments in single-family rental properties, Fundrise has a slightly more diverse property portfolio. But, while you can specify properties with Arrived Homes, Fundrise makes the property investment decisions for you.
This means that Fundrise could be a better choice if you want to start out investing in single-family properties, but plan to move up to more sophisticated investment options eventually. Fundrise not only has other property investment types such as multifamily complexes or commercial properties, but there are multiple investment plans which can grow with your expanding interest and portfolio.
For example, you could start out with the Starter Program at $10+, and later move up to Basic or Core levels. You may even choose to move up to an Advanced or Premium plan, which will provide one-of-a-kind offerings that require accredited investor status.
This means Fundrise can accommodate investors with different preferences and investment fund sizes. There are even customized portfolio strategies to assist you to develop a diverse real estate portfolio.
The second key difference between the two platforms is the length they have been established. Fundrise has a proven track record, with published results of previous returns, so you can get an idea of what you can expect.
On the other hand, Arrived Homes has only been operating since 2021 with most of its properties acquired in the latter half of 2021. Since it takes several years for properties to be bought, renovated, and sold, there is no record of long-term success yet.
If you’re willing to take a chance on a newer platform, Arrived Homes could be a good option if you’re a small investor who is looking for a steady dividend income. Otherwise, most investors will be better suited to Fundrise.