Quite a few of my friends have told me about real estate investment websites like Realty Mogul, Fundrise, and Roofstock. After hearing from them for so long, I finally decided to see for myself if they could help me diversify my investment portfolio.
I knew these companies were focused on real estate investing, but I didn’t know how each company worked in detail. If you are what I was before I investigated these companies, I’ve put together the information I found to help you decide whether real estate investing through these companies is a good idea for your situation.
What does real estate invest?
Real estate investing can take many forms depending on your goals, the way you want to invest in real estate, and the service you use. You can invest in real estate locally by buying and renting real estate, purchasing a REIT (Real Estate Investment Trust) investment through your brokerage firm, or using an online service to help you find properties to invest in can.
Investing in real estate online is a relatively new concept that is currently being explored by several companies. Some companies let you invest in portions of individual properties, while others focus on the formation of REITs and other investment vehicles that combine multiple properties that you can invest in.
Each of the following online real estate investment companies operate in very different ways. Here are some things to know before you think about investing.
As always, read all prospectuses for any investment before investing. If you need help understanding an investment better before investing, consult your financial advisor or other professional who can help.
What is real estate mogul?
Realty Mogul is a real estate investment website that focuses on commercial real estate and allows you to invest in two ways.
If you are an accredited investor, you can invest in individual real estate listings. If you are not an accredited investor (and I definitely am not) the only way to invest in Realty Mogul’s REIT options.
Joining Realty Mogul is free, but investing is not. The fees vary depending on the investment you choose. If you are an accredited investor investing in a specific property, the fees are detailed in the property information.
If you are not an accredited investor and wish to invest in a REIT, the fees are set out in the REIT’s prospectus.
MogulREIT I charges an asset management fee of 1%, a fee of up to 3% of the equity contributions paid from the sales proceeds of shares, sales fees, subsidized interest fees as well as service and special service fees.
MogulREIT II charges an asset management fee of 1.25%, a fee of up to 3% of the equity contributions paid from the sales proceeds of shares, and disposal fees of up to 2% of the contractual sales price of each property sold.
If all of these fees sound confusing, they definitely are for the average investor. You may have to pay some fees. If you don’t understand them, contact a financial advisor who can help you.
Realty Mogul is focused on choosing the right opportunities to invest in. Every potential investment is thoroughly checked by Realty Mogul before it is opened to investors.
Investments require the unanimous approval of their investment committee. Realty Mogul states that only one in approximately 1,000 transactions they consider meets the criteria of their underwriting process.
Advantages and disadvantages
These are some of the pros and cons of investing in Realty Mogul.
- You can invest in individual real estate listings if you are an accredited investor.
- Non-accredited investors will continue to have investment opportunities with Realty Mogul’s REIT offerings.
- Investments are checked by Realty Mogul before they are offered.
- REITs have a minimum investment of $ 5,000.
- Non-accredited investors cannot invest in individual properties.
- The fees charged can be higher than traditional low-cost mutual funds or ETF investment options.
Who is it best for?
Realty Mogul is for accredited investors or those looking to invest in one of their REITs and have at least $ 5,000 for the minimum initial investment.
As with most real estate investments, those investing should have a long-term time horizon.
What is Fundrise?
Fundrise is a real estate investment platform for every US citizen over the age of 18. You don’t have to be an accredited investor to invest with Fundrise, and the minimum asset investment is only $ 500!
At the FundriseYou invest in a diversified portfolio of real estate projects that Fundrise is acquiring. Fundrise acquires the real estate project and then manages it on your behalf. However, with this service you do not have the opportunity to invest in a specific real estate project.
Investing with Fundrise can be expensive compared to other types of investments. They charge an annual management fee of 0.85% for the management of their real estate funds, eREITS and eFunds. In addition, they charge an annual advisory fee of 0.15% for managing the account.
Fundrise may also impose other fees, which may include development fees or liquidation fees. These fees usually apply to work on specific projects. If you’d like an IRA to invest with Fundrise, the custodian (Millennium Trust Company) charges an annual asset fee of $ 125.
Fundrise may also charge a redemption fee of up to 3% if you repay your investment before the specified deadlines.
There are four account levels that you can have at Fundrise. They require a minimum investment as follows:
- Starter – $ 500.
- Core – $ 1,000.
- Advanced – $ 10,000.
- Premium – $ 100,000.
If you’d rather invest in a specific fund than Fundrise’s plan, you can invest in eREITS with a Core, Advanced or Premium account.
You currently have 16 eREITS to choose from. You can invest directly in your eFunds with an Extended Account or a Premium Account. They currently have three eFunds to invest in.
Advantages and disadvantages
As with every system, there are positive and negative aspects with Fundrise.
- You don’t have to be an accredited investor.
- The minimum investment is only $ 500.
- You have many eREITS to choose from if you have a core account or a higher account.
- The redemption fees can be up to 3% if you repay your investments before the specified deadlines.
- You must invest at least $ 1,000 before you can choose which eREIT to invest in.
- The fees may be higher than traditional low-cost ETFs or mutual funds.
For whom is that?
Fundrise is aimed at non-accredited investors over the age of 18 who would like to invest in real estate via eREITS or eFunds.
Because of the nature of your investment, you should only invest in Fundrise if you are willing to pay redemption fees or if you plan to hold onto your investments for at least five years.
What is the attic?
Roofstock’s main service is very different from RealtyMogul and Fundrise. Rather than selling you investments that are managed for you, Roofstock’s main business is selling you an entire rental property that you can make money on.
Roofstock has a service called Attic One. This service is only for accredited investors and allows you to buy parts of rental properties with 10% shares.
Roofstock manages and maintains the property, so owning 100% of a home and managing it yourself is a pretty passive investment.
Roofstock’s primary full-house service makes money in two ways. First, they charge sellers a 2.5% marketing fee. In addition, buyers end up paying Roofstock 0.5% of the contract price or $ 500, whichever is greater.
Roofstock One has a different fee structure. They charge a 10% property management fee based on gross rent and other income. They also charge an asset management fee of 0.5% of the home price or the interest price.
You may also need to pay debt servicing fees and some of the other costs of a rental property such as property taxes, insurance, and reserve payments. If necessary, other fees for the operation of the property may also apply.
The main feature of Roofstock is the ability to purchase a turnkey rental property that has been thoroughly vetted prior to listing.
R.oofstock has pictures, floor plans and 3D tours so you know what you are buying. They also offer a property inspection, valuation and title reports, as well as insurance quotes.
The properties are delivered with a current lease and tenant as well as information about the tenant and payment history so that you can feel comfortable with the current tenant. One of the main advantages of Roofstock is that you make money the instant you close your house!
Advantages and disadvantages
Because Roofstock works very differently, the pros and cons of using their service are more unique.
- Non-accredited investors can use Roofstock’s core service.
- The fees for buyers are relatively low and prepaid.
- Properties go through a review process and have tenants before they are sold.
- Roofstock One offers accredited investors the opportunity to passively own parts of multiple rental apartments.
- With a traditional attic, you have to buy an entire rental property instead of just investing in a passive investment.
- Only accredited investors can invest in Roofstock One’s more passive investment option.
- Roofstock Many fees can apply depending on the property you are investing in.
For whom is that?
Roofstock is intended for real estate investors who want to own rental properties directly. You should either have a property manager or be willing to manage the property yourself once the sale is complete.
Roofstock One is intended for accredited investors who want to be more passive about owning rental properties. You can diversify your holdings by owning only 10% of the shares in each rental property.
Comparison of Realty Mogul, Fundrise and Roofstock
|Real estate mogul||Fundrise||Attic|
|Investments offered||Commercial real estate through individual investments or REITs||eREITs or eFunds||Individual rental properties or 10% of the shares in individual properties|
|Must be accredited?||Yes for individual investments; No for REITs||No||No for Roofstock; Yes for Roofstock One|
|Minimum investment||Based on investments for individual investments; $ 5,000 for REITs||$ 500||Depends on the property in question|
|fees||Single investment and REIT fees vary depending on the investment||1% together plus other fees||0.5% buyer’s fee for individual properties; Numerous fees for investing in Roofstock One|
After looking at these three real estate investment firms, I found that they did not fit my personal investment goals.
If you change your mind, you can invest in these companies relatively quickly. The first step is to open an account with Realty Mogul, Fundrise or Roofstock. Then invest when you’re ready!