Unveiling the Secrets: A Comparative Insight into Fundrise and VNQ
Want to tap into the real estate market but feeling overwhelmed by the thought of managing properties? You’re not alone. Fortunately, investing in real estate doesn’t mean you have to own and rent out properties. Platforms like Fundrise and VNQ are opening up new possibilities for small investors. Let’s dive into an easy-to-understand comparison between them.
Fundrise, available since 2012, has shaken up the real estate investment scene. Dealing primarily with crowdfunded real estate projects like condos and office spaces, the platform attracted 150,000 investors and raised over $1 billion. Their primary offering? eREITs (Electronic Real Estate Investment Trusts), with the average investment of $5,000 generating yearly returns between 10 and 14%. You can kickstart your investment journey here with as little as $10!
On the other hand, VNQ is a Vanguard-offered real estate index fund. Traceable back to 1975, Vanguard is known for low-cost investing. VNQ fits well into their long-term investment philosophy and is built with the mindset of serving the buy-and-hold investor. A standout feature: Vanguard is owned by its shareholders, keeping external interests at bay.
Some key differences separate Fundrise’s eREITs from VNQ’s publicly traded REIT. Right off the bat, Fundrise offers a new approach with eREITs that are not traded on stock exchanges, while VNQ is a market favorite traded on the exchange. The latter offers flexibility with buy and sell options, although it typically comes with higher fees. eREITs by Fundrise, though less liquid, are directly offered to investors who can sell only back to the company.
Fundrise categorizes its users into five tiers – Starter, Basic, Core, Advanced, and Premium – each of which comes with different perks and requires different minimum amounts for investment. For example, to invest through an IRA, you need to upgrade to at least the Basic tier.
Vanguard, on the other hand, operates on a more traditional structure, giving high priority to educating investors and helping them set financial goals. While they require an initial investment of $1,000 or more for certain plans, you can buy minimum of one VNQ share via a trading platform.
Both Fundrise and VNQ offer potential to make money, with average annualized returns from 2015 to 2021 at 11.64% and 10.64% respectively. Fundrise, though, charges an annual fee for advisory services and management fee for its real estate funds. VNQ, however, charges no fees for buying or selling its shares.
Bottom line? Choosing between Fundrise and VNQ depends on your investment goals and strategies. If you’re a small investor looking for a cost-effective entry into real estate, Fundrise might be up your alley. Yet, for those eyeing dividend income and long-term growth, VNQ could be the better choice. Just remember, investing is not without risk and all decisions should be thoughtfully considered.
