Best Real Estate Crowdfunding Platforms for Passive Income

What is an eREIT?

An eREIT is like a regular REIT except it’s only available on Fundrise’s platform. This makes it less affected by the market since it’s not available on the open market. This also means they’re less liquid because the market is smaller. With Fundrise, the eREITS are all in commercial real estate – including hotels, apartments, shopping centers, and office buildings. There aren’t single-family homes or other residential properties, these are commercial real estate properties that generate income.

The eREITs acquire commercial assets and loans, look to add value and then collect cash flow from the interest payments, rents, and other profits from the commercial assets.

For the eREIT, you have no transaction fees since you’re buying and selling directly on Fundrise. You pay a 0.85% annual asset management fee. (if you use the investment services and management system, that’s an extra 0.15% annual investment advisory fee).

Finally, the minimum investment in their eREIT is only $500. You don’t have to be an accredited investor, unlike the larger minimums on many other platforms, because it’s more like buying a mutual fund than a piece of a property.

Photo by Andrey Krasilnikov on Unsplash

What is an eFund?

The eFund is similar to an eREIT except it’s invested in residential real estate assets like single family homes, townhomes, and condominiums. It’s structured as a partnership, rather than a corporation so you avoid any double taxation. Like the eREIT, it’s only available directly from Fundrise itself so not subject to the whims of the stock market. The minimum on an eFund is $1,000 and you do not have to be an accredited investor to invest.

The way eFunds work is that they buy land for sale in various areas, develop it with residential homes, and then sell it for a profit.

As of November 2017, they were offering an Urban Housing Development eFund™ that would acquire properties in urban areas, develop and then sell them. The fund had a minimum investment of $1,000. The fees were the 0.85% annual asset management fee and you could expect both periodic distributions as well as distributions when assets were sold, with a time horizon of five years.

What is Goal-Based Investing?

Fundrise lets you, as an investor, pick one of three goals:

  • Supplemental Income – Earn additional passive income, have a moderate-term investment horizon, and may be planning for retirement shortly
  • Balanced Investing – Get general investing with max. diversification, have a moderate to long-term investment horizon and may be newer to investing outside the stock market
  • Long Term Growth – Want to maximize returns over the life of the investment, have a long-term investment horizon, and are comfortable with more potential variability year to year

(there is a questionnaire if you aren’t sure which type of investor you are)

For these plans, you simply pick one type, open an account, and deposit money. Fundrise handles the rest.

The Long-Term Growth Plan projects annual returns of 10.3-11.4% (about half as income, half as appreciation) and would put you in 38+ assets in a mixture of risk categories (they tell you exactly how much of your portfolio would be going where).

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