Does anyone remember this article by David Drake from about a year ago? In it, he named the top 80 real estate crowdfunding platforms in the US and listed Fundrise, RealtyMogul, and iFunding as “The Big 3” to look out for. I can agree with RealtyMogul, without a doubt; iFunding, I don’t really hear much about, but the one I disagree with is Fundrise.
Fundrise, while often considered an online, real estate crowdfunding portal, is really more of an REIT; they even advertise as “Fundrise Income eREIT”. Now, I see where the idea of crowdfunding is coming in; they do pick up properties through Regulation A+. However, as a recent article on newsworks pointed out, they’re really only “sort of” crowdfunding. In reality, they live up to the idea of being an eREIT.
For those of you who aren’t quite sure what the difference between an eREIT and an online real estate crowdfunding portal are it essentially is thus: the later offers you opportunities to invest in specific projects (usually local is the user preference), whereas the former wants you to invest in their real estate trust that has properties scattered around the US. Note the key words, “Projects” vs “Properties” and the length of commitment both imply. So what’s really going on here is that Fundrise is legally “crowdfunding” properties but allowing investors to invest in a REIT, creating this hybrid that they have marketed as an eREIT. Not only that but the way they are functioning now more or less removes the local aspect to crowdfunding, which used to be a large selling point for real estate crowdfunding.
It’s to the point where one can begin to question just how different Fundrise is from the real estate vanguard of old and what it means when the disruptive force begins to morph into what it was disrupting. Is it true that, in the words of DC supervillain, Harvey “Two-Face” Dent,
“You either die a hero or you live long enough to see yourself become the villain”?