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Commercial real estate investments have become a big game changer and everyone wants to invest in it. It is considered one of the most reliable investment methods to secure a comfortable financial future. No doubt, the real estate market is steady, but it is always subjected to changes. This poses a risk to investors and makes them reluctant to invest in the real estate market.
But thanks to real estate crowdfunding platforms, chances of risk can be minimized. Platforms like Groundfloor and Fundrise allow you to invest your hard-earned money in different types of commercial properties while reducing the risk associated with investing all your money in a single project.
But the question arises, Groundfloor vs Fundrise: which real estate investing company is better for you? This blog post is a comprehensive answer to this question as it discusses the features, prices, pros, cons, and much more about each company.
Real Estate Crowdfunding Platform Groundfloor vs Fundrise Comparison
Fundrise is a real estate investing platform that offers investments in commercial projects all across the US. These include multifamily projects and office buildings. You can invest your hard-earned money in a diverse portfolio of low-cost projects.
You have tremendous potential to make the most out of your money with Fundrise’s experienced professionals and cutting-edge technology. Investors can access this platform through both mobile and desktop. They can check and get updates about project alerts, market trends, and growth.
Investors might face one limitation while working with Fundrise. It offers real estate investments with a minimum period of five years. If you want a shorter-term investment with a fast return on investment, this platform is not for you.
How Does Fundrise Work With Real Estate Investors?
Fundrise uses cutting-edge technology to make expensive processes much cheaper and affordable. Although nothing is guaranteed in the dynamic world of real estate, Fundrise helps investors build investment portfolios that can withstand prolonged times of economic distress.
Fundrise offers various portfolios to investors on investment platforms. These range from starter portfolios to premium plans, which you can choose depending on the amount you want to invest. You simply need to visit their website or mobile application and sign up. Once done, pick an investment strategy. Be careful as your funds will be distributed according to the strategy you choose.
I have been investing in Fundrise for years and have shared my Fundrise Returns publicly, check them out to see a real testimonial on Fundrise returns!
Fundrise offers five investment plans:
Starter Plan: A starter portfolio requires a minimum of 10$ investment. The features you get with this plan include auto-invest and access to registered products.
Basic Plan: This portfolio requires a minimum $1,000 investment and provides advanced features. With this plan, you can participate in the Fundrise IPO and make investments via RIA.
Core Plan: It requires a minimum $5,000 investment and delivers more customized features. Considering your investment goals, you have to choose one portfolio:
Supplemental income portfolio
Advanced Plan: It requires you to invest a minimum of $10,000. It provides all the features of the Core plan plus access to eFund.
Premium Plan: It requires a $100,000 investment and offers access to all the features provided by other plans plus access to private equity fund investment offerings.
No need to be an accredited investor.
Investment ranges from $10 to $100,000.
Investment length averages 5 years.
4-12% annual returns depending on your capability to take risks.
High-performance and low-cost technology.
Pros of Fundrise
Everyone can invest in real estate.
Low investment minimums.
High potential net returns based on investment strategy.
Redemption programs let you sell back your shares early at a 1% fee.
Real-time oversight and reporting.
After five years, a 58.8% cumulative net return.
If you hold your investments longer, the average net return increases.
Cons of Fundrise
Risk of low leverage than anticipated if a project does not perform as intended.
Redeeming funds before the project term ends will make investors pay a 1% fee.
Fundrise investments are illiquid. That means if you immediately need money, it is difficult to redeem your shares.
Fundrise investing lacks liquidity. Its portfolios lock your funds for at least five years.
Short-term investment is not offered.
How to Invest in Real Estate With Fundrise?
Fundrise lets real estate investors define their financial destiny with long-term investments. It offers five investment plans through which you can join Fundrise and assign your money to be distributed across funds. Remember, your funds are backed by resilient and high-quality investments in real estate assets that aim to drive your returns.
Investors have a large spectrum to invest their money ranging from private residential to commercial, debt to equity, and more. If you are interested in investing with Fundrise, just sign up on their application page and select the investment plan you want. Your funds will be locked for five years. If you want money before five years, you will be charged a 1% fee. However, there are zero charges after five years.
Groundfloor is a crowdfunded real estate platform that brings together individual investors and borrowers. It provides investors with the opportunity to invest in hard money loans and fix and flip properties. People looking for a loan borrow this money to build a home and then sell it. While investors get a fixed interest rate from such projects.
If you want to invest your money in Groundfloor, you have two options. Either invest in individual renovation projects or choose Groundfloor’s automatic investment tools. These tools help you invest in specific projects that meet your preferences.
Groundfloor’s repayment schedule is also very convenient and consistent. Investments start repaying you every 4-12 months. After a four-month investment period, you will begin receiving monthly repayments starting from the following month. That means the company tries its best to secure your investment by backing it with real assets and ensuring good liquidity.
How Does Groundfloor Real Estate Investing Work?
Hard money loans are provided by Groundfloor to borrowers, who then sell their portions to prospective investors. Investors share whatever fate brings in for them, profit or loss. While the borrower is charged 2-4.5% of the loan’s amount. Moreover, he also pays an application fee and loan closing costs.
The process starts when a borrower applies for a loan. The company determines whether to accept the loan request or not. The business uses its loan-grading algorithm to determine the interest rate if the loan is approved. Companies will charge higher rates of interest for riskier loans. Then finally, the loan is funded to let the borrower buy or renovate a house and flip it.
Next, the company opens up individual investments to let investors share a part of this loan. It provides them with full information about the loan. The possible losses and possible gains in interest are discussed with the investor prior to the start of the contract.
Investors are free to invest as much as they want. They can even contribute $10 to a loan. Hence, they can easily diversify their investment portfolio between conservative and risky loans. Conservative loans have low interest rates while risky loans have high interest rates. Thus, Groundfloor allows you to invest your entire money in either one high-risk project or 50 different projects with mixed value.
If you are a Groundfloor investor, there is no fee for you. However, if you are a borrower, the company charges you a $3 fee:
2.75-4 % of the loan principal amount
$495 application fee
$1,250 closing cost
$10 low minimum investment required.
Open to non-accredited investors.
Actual returns to date are consistent at 10%.
Investments secured by real assets.
Diversified investments into risky and conservative loans to manage risks.
Real returns of investing for investor’s savings account.
Investor’s money is used to fund hard money loans and residential property fix-and-flips.
Rapidly growing income with recurring deposits and reinvesting.
Automatic investment tools to enable investors invest in projects that meet their criteria.
On average, an investment repays every 4-12 months.
Short-term loans generate a quick return provided they perform as expected.
The company rates its loans with risk rates on a rating of A-G.
No charges are due for investors’ access.
Automated features to help investors wisely invest.
Borrowers pay application management fees, closing costs, and loan interest.
Groundfloor Smart Platform features an online dashboard to enable investors to track their progress, and get updates about the renovation work and the loan money inv in real estate.
Two-term investment options to receive your income: Deferred payment term, wherein you u choose to receive both the principal amount and interest at the end of the project term. Or monthly payment term, wherein you receive monthly interest payments.
The company uses bank rate security to protect investors’ information. It uses AES-256-bit symmetric key to encrypt data.
Pros of Groundfloor
Everyone can invest.
No fees to invest.
No management fees.
The low minimum investment is just $10.
Opportunities to invest in debt rather than preferred equity investments.
Monthly interest payments.
Tools to help you smartly create an investment portfolio.
Proprietary loan-grading algorithm.
Groundfloor Smart Platform to track the progress.
Cons of Groundfloor
Debt investments are funded only for residential renovation and fix-and-flips loans.
Compared to other real estate investment trusts, the risk of default is higher.
A borrower may be inexperienced in house flipping.
No doubt, shorter-term investments are beneficial. But they are not as liquid as other investments like stocks.
If a borrower files for bankruptcy, the loans funded for projects in judicial-only states may take longer to complete.
How to Do Real Estate Investments With Groundfloor?
Groundfloor is a real estate investing platform that provides high yields within a shorter-term period. To be a Groundfloor investor, you do not need to be a qualified accredited investor. New to real estate investment? No worries! Groundfloor lets you step in.
It not only provides you with the opportunity to step inside the process but also guides you throughout the process. It helps its investors make informed choices by providing every bit of information about loan risks and potential interest leverage.
Groundfloor vs. Fundrise: Which Is Right for You?
Crowdfunding sites like Groundfloor and Fundrise facilitate debt and real estate equity investments through a common pool of investors. Both provide ease to investors in their real estate journey. However, Groundfloor is a perfect choice for people looking for a shorter-term return on investments.
It takes 4-12 months to start receiving monthly payments after investing with Groundfloor. Meanwhile, if you are working with Fundrise, your funds get locked for 5 years. If you withdraw them before the project term ends, you are charged a 1% fee. But if you stay consistent and wait till the term completes, the company will give you a 58.8% return on investment. Hence, Fundrise is an ideal pick for long-term real estate investment options.
Groundfloor specializes in rehab and residential renovation loans. While Fundrise focuses on commercial projects and occasional real estate debt investments. If you are an average investor who is more comfortable with risky loans, then Groundfloor is an ideal option for you. In exchange for taking on more risks, you may get rewarded with a potentially bigger reward.
How to Sign Up for Groundfloor?
You can directly visit their site to sign up. Fill in the required information like:
Your personal information: name, email address, phone number, and zip code.
Answer how you came to know Groundfloor.
Confirm whether you are an accredited investor or not.
Create a unique and strong password and confirm it.
You are also supposed to connect your Groundfloor account to a bank account. This is to ensure easy and smooth funds transfer for investment and automatic transfer of interest and loan principal.
How to Sign Up for Fundrise?
Are you interested in Fundrise real estate investing? It will take you less than 5 minutes to join this platform and start your comfortable financial journey.
Either visit their website or open the mobile application.
Provide your personal information to sign up.
Confirm your status: accredited or non-accredited investor.
Select an investment plan according to your goals. It will decide where your portfolio lies (Balanced, Growth, or Income).
The time has passed when the real estate business was only for the elites. Thanks to crowdfunding platforms, Groundfloor and Fundrise, the real estate business is now accessible to everyone. Anyone with a minimum of $10 can invest in the market and generate profit.
However, with the potential risks, repayment terms, and interest rates in real estate, it is critical to know which company is a better fit for investment. Groundfloor is ideal for investors who prefer short-term and high-risk projects. While Fundrise is ideal for investors looking for long-term hands-off projects.