Publicly Traded REITs
These are not technically real estate crowdfunding sites… but they may get you what you are looking for in those sites – diversified real estate investment. Non-accredited investors have always been allowed to buy REITs. The rules behind REITs, and what is required for them to maintain that status, is that they own and operate real estate and distributed 90%+ of their taxable income as dividends to shareholders.
However, owning a REIT may not be what you’re looking for when you are thinking about investing in real estate crowdfunding sites. Many of the publicly traded REITs invest heavily in commercial property. Very few are in the business of owning a large portfolio of single-family homes.
One of the best Vanguard funds is the Vanguard REIT ETF (VNQ). It has an expense ratio of just 0.12% and it holds a lot of property companies, like Simon Property Group (malls) and Public Storage (storage). Their number one holding is the Vanguard Real Estate II Index Fund, which is itself a mutual fund that holds a variety of REITs.
Two REITs I have held for many years now are O and OHI. O – Realty Income maintains a diversified real estate portfolio of over 6,400 commercial properties subject to long-term, net lease agreements. OHI – Omega Healthcare Investors maintains a portfolio of long-term healthcare facilities and mortgages on healthcare facilities located throughout the United States and the United Kingdom. REITs are an easy way to gain real estate exposure, but it doesn’t have the same amount of focus as eREITs and individual commercial real estate deals.
What are the Pros and Cons?
The Pros are pretty straightforward – you get involved in commercial real estate investing (with eREITs) without having to pitch in a large upfront investment (minimums as low as $500-1000), as well as not needing to be an accredited investor.
You have disbursement options, you can withdraw returns or automatically reinvest them.
Each platform discussed are easy to use and make it possible to see your investments at a quick glance, with the ability to check progress, amount invested, disbursements received, fees paid, and more.
What are some cons? It’s real estate investing so it’s going to force you into long-term investing (which is good for investing unless you face a financial pinch and need to access those assets) and redeeming your shares must follow a schedule. You have a 60-day waiting period after submitting your redemption request, then you get liquidity every month. It’s not like selling stock and getting the proceeds almost immediately.
Fundrise doesn’t offer specific real estate deals normally offered to accredited investors.
RealtyMogul’s fees are not straight forward and are different depending on what you invest in.
The true competitor to Fundrise is a low-cost REIT like what you’d get at Vanguard. The Vanguard REIT ETF (VNQ) has an expense ratio of 0.12% (this is on top of what the REITs charge). The difference is that Fundrise is looking to find opportunities that are too small for public-traded REITs (what VNQ invests in) but bigger than what individuals might be able to do regularly.