Is $500 on Fundrise the same thing as being in a crowdfunded deal?

Question

I've been looking at land and holding patterns mostly, and crowdfunding came up as a way to park capital while I wait. What I can't sort out is that some platforms take $10 or $500 and give you what looks like a fund holding lots of properties, and others want $25,000 and put you in one specific apartment building with a named sponsor.

Somebody on another forum said only the second kind is actually crowdfunding and the first is just a REIT with an app. Is that right? And if I put $500 into the fund version, am I diversified already or do I still need to spread across deals?

Rena Guide · Accepted Answer

Both are real, and the difference matters more than the label.

The single-deal version is what people usually mean by crowdfunding. You put money into one specific property with one specific sponsor, you can read that property's numbers, and you decide yes or no on that deal. Minimums are higher, often $10,000 to $25,000, and many of these are open only to accredited investors, which is a legal category based on income or net worth that a professional can confirm you meet.

The fund version pools your money and the platform decides which properties it buys. Some of these are structured as non-traded REITs, which is where your other forum got its comment. You're buying a slice of a portfolio rather than picking deals. Minimums can be very low, sometimes under $100.

On diversification: $500 in a fund holding many properties does spread your property risk, and you have not spread your sponsor and platform risk, because one manager is making every decision and one platform holds the relationship. That's a real concentration even though the underlying real estate looks diversified.

The thing to check before either one is liquidity. Both types tie money up. Funds often have redemption programs, which means you can request your money back on a schedule, and those programs can be suspended when a lot of people ask at once. Single deals typically have no exit at all until the property sells, commonly two to seven years out. If you're parking capital between land purchases, read the redemption terms carefully, because "park" and "locked for four years" are not compatible.

chriswalton8 · Answer

The accredited line is the part that surprised me when I started reading. It isn't the platform being picky, it's which exemption the offering was sold under, and it changes what the sponsor is allowed to show you and who they can take money from. Same platform can have both kinds of deal side by side.

marcus_hale41 · Answer

@arbor on the redemption point, read the actual gate language rather than the marketing page. The programs I've read cap total quarterly redemptions at a small percentage of net asset value, which is fine until a lot of holders want out simultaneously, and that's exactly when you'd want out too. Also the price you redeem at is the manager's own valuation of the portfolio, not a market price.

wendy_park48 · Answer

Fee stacking is where the fund version gets you. There's a management fee at the fund level and then the fund pays fees at the property or joint venture level, and only one of those shows up in the headline number. Same with the single deals, where an acquisition fee to the sponsor comes off the top before a dollar of your capital does any work. Both structures are legitimate, I just want to see the total drag written down before I compare an 8 to a 12.

kevin_lombard · Answer

So the low minimum buys diversification across buildings but not across the person choosing the buildings. That framing helps.

tylerbrooks9 · Answer

For what it's worth, if the goal is holding capital between land deals, I'd want something I can get out of in a week, and neither of these is that. A four year lockup on money you might need in eighteen months is the problem, regardless of which version you pick.

Is $500 on Fundrise the same thing as being in a crowdfunded deal?

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