Fundrise vs. RealtyMogul: Passive Real Estate Investing

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fundrise vs realtymogul

If you’re interested in growing or diversifying your investment portfolio, you may have considered investing in real estate. Unfortunately, many investors consider real estate to be hard work and time-consuming, with a high upfront investment cost.

However, there’s a solution to these potential barriers. Real estate crowdfunding allows anyone to passively invest with a far lower initial investment. Two of the most popular real estate crowdfunding platforms for non-accredited investors are Fundrise and RealtyMogul, so how do you choose between them? Here we’ll delve into these platforms in more detail with our Fundrise vs RealtyMogul head-to-head comparison.

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Fundrise vs. RealtyMogul Overview

The main difference between Fundrise and RealtyMogul is that Fundrise allows investors to start with just $10, while RealtyMogul requires a minimum of $5,000. Both platforms provide a few options that allow investors to choose a specific goal, such as long-term growth or passive income. Both companies also have very solid track records.

Before we get into all of the details, here is a quick summary of the Fundrise vs RealtyMogul comparison.

  • Both Fundrise and RealtyMogul have options for non-accredited investors and accredited investors.
  • Fundrise allows investors to begin with their Starter portfolio for as little as $10.
  • Fundrise offers three Core strategies: growth, income, and balanced for investments of at least $5,000.
  • RealtyMogul offers two REITs (income and growth) that require a minimum investment of $5,000.
  • Both Fundrise and RealtyMogul allow accredited investors to invest in specific properties or projects, which increase risk as well as potential returns.
  • Both platforms launched in 2012 and have developed a strong reputation through solid performance for investors.
  • Both Fundrise and RealtyMogul offer limited liquidity options for REIT (real estate investment trust) and eREIT investors.

The Fundrise Basics

Fundrise

Fundrise is possibly the most popular real estate crowdfunding platform and has been around since 2012. To date, Fundrise has raised more than $1 billion in capital with over 150,000 investors. Fundrise uses the generated funds to invest in real estate crowdfunded projects including multi-family condominiums and commercial office space locations across the country. Fundrise is also an eREITs pioneer with over $150 million raised so far.

The average Fundrise investment is approximately $5,000 and according to management, the annual returns are 10% to 14%. In fact, over the past six years, Fundrise has achieved an average net annualized return of 10% or more (see our article on Fundrise returns for more details).

There are two avenues of investment for Fundrise; eREITs or eFunds that allow you exposure to commercial real estate projects throughout the country.

Fundrise Features

  • Diversity: Fundrise has specialized eREITs that allow you to diversify your portfolio in region-specific areas, yet the initial investment is just $1,000. This allows you access to markets that may be more viable than where you currently live.
  • Liquidity Restrictions: Unlike publicly-traded REITs, the Fundrise eREITs have Net Asset Values adjusted once per quarter. Additionally, if you need funds from your eREIT you can sell once per quarter. This differs from many commercial real estate investments where your funds are typically locked in for at least five years. However, liquidity is not guaranteed and Fundrise has the right to decline withdrawal requests if market conditions require it.
  • Prefunded Deals: Fundrise prefunds all of its deals with its own capital. This shows confidence and commitment in its deals.
  • $10 Minimum Investment: Fundrise facilitates a very low minimum investment opportunity of just $10, compared to the typical $10,000+ required with many real estate crowdfunding platforms.
  • High-Quality Deal Flow: Fundrise only approves approximately 2% of deals, which supports its well-established and successful track record within the industry.

For more details, please read our Fundrise review.

The RealtyMogul Basics

RealtyMogul

RealtyMogul is another real estate crowdfunding platform that has a long track record, as it was founded in 2012, like Fundrise. While it hasn’t raised as much as Fundrise, RealtyMogul has raised an impressive $500 million+ from accredited investors.

Through RealtyMogul, investors can participate in real estate investment throughout the country, many commercial deals that would be traditionally out of reach for the average real estate investor, as they run into 10s of millions of dollars.

So far, RealtyMogul investors have invested in over 350 properties with a value at $2 billion+ and more than $100 million has been returned to those investors.

RealtyMogul has also branched out to offer options for accredited and nonaccredited investors, including MogulREITs. You’ll typically be purchasing shares in an LLC operated by RealtyMogul that holds the title to the property.

RealtyMogul Features

  • Pre-vetted Investments: Fewer than 10% of deals first shown to RealtyMogul make it through to platform investors. The vetting process involves sponsor history, individual background checks, and track record to ensure the highest chances that deals will provide positive returns.
  • Easy Process: The RealtyMogul investment platform allows potential investors to thoroughly analyze deals with provided research. You can view videos, and pictures and even ask questions before you make an investment.
  • Reasonable Minimum Investment: While it isn’t as low as Fundrise, you can still invest in RealtyMogul REITs from only $10,000.
  • Great Focus: When you’re investing in a publicly-traded REIT, there may be hundreds of properties in the portfolio. This makes it harder to invest in a specific area. However, RealtyMogul allows you to take a more precise approach to your real estate investing.

Fees

Of course, before deciding which platform is the best option for you, you need to be aware of the potential fees that will impact your returns.

The Fundrise platform offers two primary ways to make money: asset appreciation through the increase in property value and dividends. The dividends are a portion of the rents and interest which is shared between the investors.

While this does offer a decent return potential, there is a flat 1% annual fee for using the Fundrise platform. This breaks down as 0.15% as investment portfolio management and 0.85% for asset management, which covers managing the properties held in your portfolio.

Fundrise also imposes an asset origination fee. This one time fee is 0% to 2% of the initial investment. This fee is to establish real estate partnerships and the negotiation of the underlying assets.

As we mentioned above, Fundrise does offer the possibility of early redemption, but this does incur fees. If you want to redeem your shares before the standard five-year term, there’s an early redemption fee. This is essentially a discount to the share price of the investment. However, the fee is reduced for each year you hold your investment. So, if you need to cash out after one year, you’ll pay a higher fee compared to cashing out early in year four.

RealtyMogul bases its fees on the type of investment you choose. Generally, you can expect a 1% annual asset management fee on the platform. However, there are also REIT management fees that are 0.50% to 0.60% annually.

Additionally, certain RealtyMogul investments may incur legal fees. These are investment type specific and are usually a one-time fee for initial investment origination.

Fundrise Account & Investment Options

Fundrise provides the option to invest at various levels. Each level offers new features and portfolios.

  • Starter: This is the beginner Fundrise account that offers basic features and investment options. There is an incredibly low minimum investment for this account tier of just $10. This level is open to accredited and non-accredited investors.
  • Basic: This adds the facility to invest in the Starter Portfolio with the added capabilities of investing in an IRA. The minimum investment at this tier is $1,000, but it provides the option to create and manage according to your personal investment goals. This level is open to accredited and non-accredited investors.
  • Core: Fundrise Core adds the opportunity to invest across various portfolios such as supplemental income, long-term growth or balanced investing. There is a minimum investment of $5,000 at this tier. This level is open to accredited and non-accredited investors.
  • Advanced: The Fundrise Advanced level provides all the features of Core, but you can also access Fundrise Plus plans. These investments are beyond the typical offerings in the standard Fundrise portfolios. Plus plans are more strategic and changed based according to market opportunities. At this level, there is a minimum $10,000 investment required. This level is open to accredited and non-accredited investors.
  • Premium: Premium adds the facility for users to invest in projects that only occasionally become available. These are illiquid projects that typically have longer-term time horizons. The investment for Premium accounts is $100,000 plus. This level is open only to accredited investors.

Fundrise also has several portfolio options. There are more than a dozen real estate portfolios that you can choose according to your investment goals and risk tolerance. Some of the portfolios aim to offer cash flow, while others have greater focus on asset growth.

You can access the starter portfolio at the starter level and the basic tier offers access to retirement investing. However, to access the remaining portfolio types, you will need at least a Core account. So, if you’re looking to create a more customized investment experience with portfolios for balanced investments, long-term growth, and supplemental income, you’ll need the Core level or above.

RealtyMogul Account & Investment Options

RealtyMogul offers non publicly-traded REITs for accredited and non-accredited investors. There are also private placements, but these are exclusively for accredited investors.

Mogul Income REIT

The Mogul Income REIT is a non-traded, public REIT that provides debt and equity investments in different types of commercial properties in a variety of locations. The primary focus of this REIT is to provide a monthly income and diversification for investors looking at numerous investment opportunities. The RealtyMogul Income REIT allow investors to spread funds across several properties to create higher levels of diversification.

The minimum investment for this investment option is $5,000 and it offers dividend payments each month with an annualized distribution rate of 6%.

Mogul Growth REIT

The Mogul Growth REIT is a non traded, public REIT for residential properties, primarily apartment buildings. It’s designed for appreciation and income through equity investments in multifamily apartment buildings. Like the Mogul Income REIT, there is a minimum $5,000 investment required.

While RealtyMogul has paid a 4.5% annualized distribution in Mogul Growth REIT, this investment has a focus on long-term capital appreciation. This occurs from the renovation, upgrading, and repositioning of the properties to increase their net worth.

The projects in this REIT have included apartment complexes in Chicago, Brooklyn and Texas, but more are continually added.

Private Placements

RealtyMogul also offers various private placement investments, which are only available for accredited investors. Generally, all the private placement deals are slightly different. Some have higher minimum investments and there may also be lock-up periods for initial investments.

Essentially, private placements are investments directly in a single property or a small collection of properties. Since it is not diversified, there’s a higher risk, hence the need for accredited status.

There’s also a 1031 Exchange service for RealtyMogul high net worth investors.

Unique Platform Features

While Fundrise and RealtyMogul may appear similar, each platform has some unique features that may help you to determine which is the better option for you.

Fundrise is available across all 50 states and you can invest in a mixture of commercial real estate and residential properties. You can choose a fund for capital appreciation and another for steady income to diversify.

As with Fundrise, RealtyMogul offers REITs, but there are also private placement investments in individual properties. However, you need to be an accredited investor to invest in private placement deals. As with Fundrise, if you’re not an accredited investor, you’ll still have access to crowdfunded real estate investments in commercial properties and apartment buildings.

Platform Security

As with any investing platform, you need to feel confident that your financial information is secure. Fundrise has two-factor authentication which you can activate as an optional security measure. The platform has bank-level security using AES bit symmetric keys to encrypt investor information. All platform connections are encrypted with transport layer security or TLS.

RealtyMogul has impressive platform security. There’s encryption and firewalls to protect data transmission and storage. There is also multistate product and feature operation testing before RealtyMogul makes them available to its users. The RealtyMogul team also has ongoing system infrastructure monitoring to detect potential intrusions and weaknesses. There are internal and external reviews of the site and services.

Pros and Cons

As with any financial platform, there are both positives and potential negatives associated with both Fundrise and RealtyMogul. You should consider these before making a final decision about which platform is best for you.

Fundrise Pros

  • Very Low Minimum Investments: Depending on the account tier you choose, you can start investing with Fundrise from just $10.
  • Low Management Fees: Fundrise’s management fee is a very reasonable 1% per year.
  • Transparent Fee Structure: Fundrise is very transparent about its fees, so you can have a clear picture of the costs before you make an investment.
  • Potential to Earn Compound Interest: Fundrise investments allow investors to earn compound interest. You can also take advantage of the Dividend Reinvestment Plan which automatically reinvests your quarterly dividends.
  • Supports Retirement Accounts: Depending on your account tier, Fundrise supports investors self-directed retirement accounts.
  • Option for Early Redemption: There are quarterly redemption periods, which allow you to release your investment early if needed. However, you will incur early redemption fees.

Fundrise Cons

  • No Liquidity Guarantees: Fundrise makes no guarantees about investment liquidity. During an economic downturn, liquidity may not be available, as there may be limited buyers to meet the financial needs of investors rushing to sell.
  • No Guarantee of Dividends: Just like with the stock market, there are no guarantees of receiving dividends.
  • Taxation Issues: Any dividends you receive from Fundrise will be taxed as ordinary income rather than as capital gains, which could create taxation issues for you.

RealtyMogul Pros

  • Provides Access to Large Scale Investments: RealtyMogul provides regular investors with access to large-scale real estate investment deals.
  • Quarterly or Monthly Dividends: Depending on the investment, you can enjoy quarterly or monthly dividends.
  • Easy-to-Understand Platform: The RealtyMogul platform is clear and easy to understand, making it straightforward to find the best investment options for your financial goals.
  • Impressive Consistency: The RealtyMogul dashboard has frequent project updates and its team of experts monitor the projects to encourage consistency.
  • Options for All Investors: There are investment options for both non-accredited and accredited investors. You can invest in both equity and loan investment projects.
  • High Net Worth Options: RealtyMogul also has options for high net worth investors including 1031 Exchanges and Private Placements.

RealtyMogul Cons

  • Limited Liquidity: The RealtyMogul non traded REITs do not have a liquid nature, so cashing out before the long-term timeframe is not possible.
  • Not All Investments Available for Everyone: Some investments are only available to accredited investors.
  • Higher Minimum Investment: Unlike Fundrise, which has lower entry points, you’ll need at least $5,000 to invest with RealtyMogul.
  • Complicated Fee Structure: The RealtyMogul fees can vary significantly according to the specific investment, which can make understanding the charges a little confusing.

Fundrise vs. RealtyMogul: Final Thoughts

As we’ve demonstrated both Fundrise and RealtyMogul are well-established real estate crowdfunding platforms with solid reputations. However, there are differences between the two platforms that will determine whether one is a better choice for you.

Fundrise is a great option if you’re looking to create a balanced mixture of growth and income real estate investment. The income products are well suited to those looking to create immediate cash flow. However, it’s still a long-term investment and you shouldn’t move forward unless you plan to hold it for at least five years.

RealtyMogul is a better real estate crowdfunding platform for those who have an appetite for high risk, high reward real estate investing. You’ll need to be ready to invest your funds for the medium to long term before you see a return on your initial investment and any profits. Additionally, there’s no liquidation window, if you find you need to cash out early. However, even if you’re not an accredited investor and cannot access some of the investments, RealtyMogul still has plenty to offer.

So, to determine which is the better option in the Fundrise vs RealtyMogul comparison, you will need to think carefully about your investment goals, risk aversion and timeline.

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