Fundrise vs. Realty Mogul: Which Real Estate Investing Platform is Better?
Here’s an old saying you’ve certainly heard before:
“Two’s company, but three’s a crowd.”
While there’s certainly more than two crowdsourced real estate investment platforms out there today, few (if any) can manage to keep respectable company with Fundrise and Realty Mogul. These two digital platforms have both risen to the top of their specialized investment class based upon their respective merits, as well as their mutual ability to simplify how modern investors tap into the lucrative private real estate market.
Today’s investment market is trending towards diversification in its many forms. In this domain, Fundrise and Realty Mogul can both serve you well as you work to include more than stocks and bonds alone in your personal portfolio. In the same vein, both Fundrise and Realty Mogul can help you maximize your ROIs through the use of tax minimization and “no capital calls” policies, respectively.
But of course, the question always comes back to which of these two platforms is superior to the other. In many ways, that determination is up to you because the “best” private real estate investment platform is the one that works efficiently to meet your investment goals and your budget.
Before choosing to invest with either Fundrise or Realty Mogul, take some time to learn about what each has to offer in terms of features. Once you’ve contrasted these features with each platforms’ fees, you’ll be ready to take a firm step forward towards your financial future by placing your first real estate investment with Fundrise or Realty Mogul.
When you say “crowdsourced real estate investment platform” in a room full of knowledgeable specialist, they’ll almost all shoot back with a quip or two about Fundrise. That’s because this platform was one of the pioneers in its class when it launched in 2010. Today, it continues to outpace the competition when it comes to providing innovative tools to prospective real estate investors.
For example, Fundrise leans very heavily on emphasizing its proprietary eDirect system, which leverages modern technological systems in order to empower investors to make informed, on-demand decisions relating to their investments. Fundrise also talks a big game about its project vetting system, which uses multiple tiers of user-optimized criteria in order to isolate only those real estate projects that are certifiably on the path towards success.
Fundrise’s relationship with fees is a bit…opaque, to be frank. The platform hasn’t mastered the art of informing its users when to expect specialized fees to drop in because they tend to be more numerous than most average users can track. But despite this, Fundrise continues to be an extremely lucrative investment platform, as seen in its approximately $660.3 million in both equity and debt investments made through the platform by the end of 2018.
Of note, also, Fundrise has several indications that it intends to stay on the cutting edge within its class. The company’s appearance on the Forbes Fintech 50 list in 2015, 2016, 2017, and 2019 speaks to this commitment, as does its recent acquisition of nearly 30 properties in Washington DC area. These properties are expected to explode in value once the new Amazon satellite headquarters moves into the area, thus providing Fundrise’s users with an opportunity to get in at the ground floor of a competitive geographic market.
All this to say, Fundrise became synonymous with the crowdsourced real estate investment market for a reason. Should you choose to invest with Fundrise, you’ll immediately feel what sets this platform apart from the competition.
Realty Mogul Overview
Within its class, Realty Mogul is remains one of the sleekest interfaces that has a way of sticking in its user’s memory. Such a memorable has been to its advantage given its continuous ability to draw in new prospective real estate investors since its founding in 2012. Of course, more current and former users will likely remember Realty Mogul for its ability to provide access to a wider-than-average array of institutional-quality real estate options.
Case in point: you can invest in residential and commercial real estate projects through Realty Mogul. Few other platforms serve both categories, allowing users more flexibility with where and to what extent their financial assets are distributed. Realty Mogul has also recently started providing users with the ability to invest in multifamily homes and 1031 exchanges, both of which are at peak value in the current real estate market.
Realty Mogul is also memorable based upon what you do and don’t need to join into one of their reliable REITs (named Mogul REIT I and Mogul REIT II). While you will need to make a hefty $1,000 initial investment in order to get in the front door, you won’t need prior accreditation in order to maintain your standing. As such, individuals who have newly gained wealth that they are looking to invest will be able to do so without needing a special title to qualify their financial trustworthiness.
Realty Mogul’s current business structure and investment methodology appear to be working wonders for its over 180,000 users, who have gained over $120 million in wealth since its founding only 7 years ago. Taken together with its present array of features and fairly modest fee structure, this passive real estate investment platform is well-positioned to remain an industry leader in the coming years.
Fundrise Key Features
eDirect Leverages Technology for Enhanced Efficiency
Fundrise’s eDirect technology lies at the heart of their digital operations and has been a point of pride for the company since day one. As its underlying technologies have evolved over the past decade, Fundrise has managed to take full advantage of each individual component to enhance their users’ on-platform experience.
For example, Fundrise’s eDirect makes use of cloud-based software in order to facilitate an automated investment system that is accessible through multiple device types. This use of full-stack financial integration allows users to efficiently make and manage their investments in accordance with their own schedule, rather than requiring a scheduled meet up with a traditional investment advisor.
eDirect’s technology also lies at the heart of Fundrise’s capital formation scheme. Using an innovative online direct-to-investor distribution model (online crowdsourcing), Fundrise is able to provide each user with as much buying power and negotiating leverage as the large institutions that once ruled the roost in the private real estate market. Taken together, this digital distribution model allows Fundrise to jump on lucrative opportunities that other less coordinated platforms might have to pass on.
Detailed Real Estate Investment Vetting Process
Though nearly every digital real estate investment platform can claim to undergo some type of pre-selection vetting process for their projects, few others can claim to be as thorough at every step as Fundrise. This detailed approach starts from the moment a developer proposes a particular real estate project to Fundrise, at which point the developer and their assets undergo intense screenings to ensure that they live up to Fundrise’s strict investment criteria.
From there, Fundrise initiates an underwriting process that involves sending one of their in-house specialists to continue the asset review on-site. If this successive review returns positive marks, then Fundrise’s investment committee is likely to give the project final acquisition approval. At that point, steps are taken to make the project available to users for investment, through either equity or debt (depending on the project’s present status).
Altogether, this multi-step process is a boon to Fundrise’s users because it ensures that each project and its developers have their ducks in a row before ever allowing a cent to fall in their direction. This protects investors and their financial assets from loss caused by weaknesses on the project’s part, in turn.
Useful Knowledge Base
Fundrise’s digital knowledge base is also a major asset for the platform, given its broad and accessible nature. New users or new real estate investors in particular will find this feature to their liking given its ability to help them self-onboard with this unique investment class and platform. In particular, this archives’ “Investing 101” section will be particularly useful to that audience.
If you happen to encounter an unfamiliar domain-specific term along the way, Fundrise’s knowledge base still has your back. Their digital investing glossary makes it quick and easy to ascertain the meaning of this industry’s lingo, both directly and in context.
Those looking to go above and beyond a basic understanding of online real estate investment will also be able to do so from this knowledge base by making use of Fundrise’s “Advanced Investing” section. There, an inquisitive user will find a bevy of in-depth articles describing everything from RIET tax efficiency to modern portfolio theory.
No Cost Opportunities to Upgrade or Move On
When it comes to maximizing one’s return on investment, it is essential to save money whenever possible within a platform’s core operations. Fundrise has found one way for frugal users to feel good about choosing to join the platform (if only temporarily). That’s because Fundrise has set up a system through which its “beginner profile” users are able to leave the platform after 90 days or upgrade to a regular Core plan – both at no added cost to the user.
With this 90-day money back guarantee, users who aren’t fully satisfied will be able to place a customer service request and receive the full value of their initial investment back. This is accomplished through an internal buy back process that is not likely to incur any added fees. Meanwhile, Fundrise’s free upgrade offer kicks in after a user has invested $1,000 (a low bar, to be sure). At that point, the user gains the opportunity to step up to more opportunities to choose their portfolio composition based upon their goals – all for free.
Realty Mogul Key Features
Opportunities to Invest in Multifamily Real Estate and 1031 Exchanges
Realty Mogul presents its users with even more ways to diversify their portfolios. These options both tap into current private real estate trends that show every indication of blooming into valuable commodities down the line. These include multifamily real estate projects and so-called “1031 exchanges”, both of which are rarely (if ever) offered by Realty Mogul’s competitors.
Real Capital Analytics estimated that nearly $150 billion worth of multifamily properties were sold in 2017, which is why Realty Mogul has begun to make these lucrative projects more and more available to users. Should they want to follow this investment route, Realty Mogul users will have a variety of options to meet their goals, such as individual investments and investments through a REIT.
Meanwhile, 1031 exchanges represent a prime opportunity for a committed investor to grow their wealth while minimizing their investment-based tax burden. This is accomplished by reinvesting a key portion of a user’s proceeds from a property sale into another investment, thus deferring the user’s capital gains tax burden related to the sale. In effect, this option provides an opportunity for diversification and ROI optimization all in one.
Fully Passive Investing
Realty Mogul’s fully passive investing platform is another point of pride for this company and its users, who relish the ability to take part in the lucrative investment class without needing to commit their full career to it. The days of owning rental properties, running inspections, fielding tenants, and more are a thing of the past for these users, who are still able to turn earn periodic disbursements beyond their initial investment.
Also, a portion of Realty Mogul’s passivity derives from its insistence on due diligence performances from all of its partnered groups. This results in far fewer short-term fluctuations in each investments value, which in turn leaves more room for positive growth over the lifespan of the investment in question.
Two Separate REITs to Choose From
Following in the example of their predecessors, Realty Mogul provides a modern investing experience by including a REIT within their catalog of investment options. However, Realty Mogul has managed to effectively compete with the likes of Fundrise (among others) by providing two separate REITs for their users to choose from. Both are open to non-accredited users, making them ideal for new investors with minimal up-front financial assets.
Realty Mogul’s first REIT, called MogulREIT I, has been around since the company’s founding in 2012 and continues to keep its entry feels affordable, at $1,000 for an initial investment with a capped 3% annual fee. Within that framework, investors will get opportunities to invest in properties across the spectrum, including office, industrial, multi-family, self-storage, retail, and hospitality.
Meanwhile, Realty Mogul’s second REIT offering, appropriately named MogulREIT II, rolled out in 2017 with a singular focus on multifamily apartment properties. By opting into this investment option, users have an opportunity to financially benefit from rising rent prices and property values within this real estate subcategory.
No Capital Calls
For most investors, budgeting is serious business. That’s why successive capital calls can put a damper on many investor’s ability to solidify a quality ROI. Realty Mogul avoids this headache-inducing practice almost altogether, thus allowing users to only invest further financial resources when they feel properly prepared to do so.
To make up for this, Realty Mogul will seamlessly dilute a given investment in a situation where a capital call might have preserved its initial value. While this may be a negative for those looking to squeeze every cent out of their investment, passive users will truly appreciate the ability to “set it and forget it” within Realty Mogul’s investment structure.
Fundrise’s fee structure remains a major sore spot for the longtime player in the online real estate investment industry. Specifically, a wide number of current and former users are quick to note the generally opacity of the platform’s overall cost after taking numerous fees into account. While platform’s $500 investment minimum is admirable, the numerous fees that will be tacked onto this and future investments are…less so.
Though it’s standard practice in the industry, Fundrise users will routinely be levied a “quarterly asset management fee” of around 0.85% of the held asset’s value. However, Fundrise’s documentation indicates that this could be increased to 1% at any time, which represents a fee for an investment of any size. Fundrise’s “origination fees” fit this bill as well, as they charge an exorbitant amount to simply satisfy their demands of the platform’s many partnered entities.
These are only a couple of example fees, though. Fundrise users can learn all about the full extent of the platform’s many fees, but only if they have the time (and focus) to read through their volumes’ worth of circulars. So, in effect, Fundrise’s present shortcomings when it comes to fee disclosure makes it just a little harder to fully appreciate its core capabilities.
Realty Mogul Fees
All things considered, Realty Mogul’s fees are fairly straightforward and modest in value. First off, joining Realty Mogul doesn’t cost a dime – it’s free, in other words. Once a user chooses to invest, then they’ll be subject to an assortment of fees based upon the precise nature of the investment (specifically, whether the investment is in the project’s debt or equity). One such fee is the annual account fee, which has been kept at an affordable 0.30% – 0.50% in recent years.
As for transparency, Realty Mogul has really upped the ante in this category. Realty Mogul openly states that they are focused on transparency when it comes to fees reporting and they have taken actions to back up their words. As such, those who are looking to scope out prospective fees and their associated values are often able to do so on their website, on each type of investment’s subpage.
Fundrise Pros & Cons
Front and center, one of Fundrise’s most noteworthy positives remains its commitment to integrated technology into its digital investing platform. Recent improvements to its cloud-based software point to this company’s willingness to remain on the cutting edge when it comes to empowering its users to invest on their own terms. Fundrise’s expansive knowledge base and use of a criteria-based vetting process also speak to this overall commitment to excellence.
On the flip side, though, Fundrise’s opacity regarding its fees remains a serious sticking point that prospective users should fully appreciate before finalizing their first investment on the platform. While these fees may be easy enough to schluff off once your investment grows in value, new investors may find that these fees cut into their ROI early on when they hold few financial assets.
Realty Mogul Pros & Cons
Realty Mogul’s multiple opportunities to invest in REITs, multifamily real estate, and 1031 exchanges certainly shows that they intend to keep a competitive edge as the market heats up in the coming years. With that in mind, Realty Mogul users can certainly expect to benefit from its fully passive operation structure, especially if they are looking to pick up supplementary income without investing all of their time into managing their investments.
On the negative side, Realty Mogul’s $1,000 initial investment medium represents a steep price for entry, especially compared to its immediate competitor, Fundrise, who charges half as much. This makes Realty Mogul’s no-cost sign up offer feel a little less valuable, in retrospect.
Which Real Estate Investment Platform is Better?
After comparing these two industry-leading real estate investment platforms, you’re probably wondering which deserves your undivided attention and financial investments. In truth, both platforms hold their own feature-based merits, making both a viable option for those looking to break into this unique investment class at their own convenience.
If you’re looking to minimize the number of and value of fees you are charged for using a digital investment platform, then Realty Mogul will likely be your best bet. However, if you will only settle for a REIT that is well-vetted and backed up by cutting edge digital systems, then you’ll certainly find Fundrise to your liking.
Whichever platform you choose, be sure to fully account for the risks of investing before placing your first dollar on the table. With these risks taken into account, you’ll be ready to grow your wealth and diversify your existing portfolio by investing on either Fundrise or Realty Mogul.