Fundrise vs Rental Property: Which is Better? (2022 Guide)

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By Forrest | Last Updated: March 22, 2022

There's no shortage of options when it comes to real estate investing. Two of the most common methods, crowdfunded real estate and owning rental properties, are often debated.

If you have some money to invest – you're probably wondering where you can get the largest returns while minimizing risk.

In this post, I'll explore Fundrise vs rental property investing, which option is better for beginner investors, how much money you can make with each, and much more. Let's get started.

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What is Fundrise?

Fundrise is a real estate investment platform that allows people to invest in real estate projects across the United States with as little as $10.

It has been around since 2010 and has raised over $500 million from investors making it a trusted way to grow your money.

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Fundrise vs Rental Property

Fundrise vs Rental Property: Which is Better?

So which is the better option, Fundrise or owning a rental property? Below I'll explain some considerations to compare your options.

Returns

One of the biggest questions you like have when comparing real estate investments like Fundrise and rental properties is how much money you can make.

When it comes to returns, investing in rental properties is likely more profitable than crowdfunded real estate platforms like Fundrise.

Owning a rental property can earn a cash on cash return of greater than 20% in some cases depending on the property and its location.

With Fundrise, it's more common to make anywhere from 9% to 18% for most investments.

When it comes to real estate investing, no returns are guaranteed so it's important to do your due diligence before investing.

Rental properties can make money through several ways. For example, you can generate rental income, appreciation on your property, mortgage pay down, and rental appreciation.

Capital Required to Start

With real estate investments of any kind, you'll need a certain amount of capital or funds to get started.

When comparing a rental property and Fundrise, the minimum investment is far lower with Fundrise at just $10 currently.

With rental properties, you'll need at least 20% for a down payment for a property, which can amount to over $20,000 in many cases.

If you don't have a fortune to invest, Fundrise is the obvious choice to start real estate investing.

Ease of Investing

If you're just looking to get started investing in real estate, using Fundrise is the option for you.

The platform is extremely easy to use and you won't have to spend time searching the MLS for potential properties or driving for dollars.

The app allows the average investor to browse listings that you can start investing in to make a passive investment.

When it comes to managing a rental property, this can require a significant amount of time and work to be successful.

You'll need to find and vet tenants, fulfill maintenance requests, and collect rent payments.

Another option is to hire a property manager but this will eat into your profits and can make real estate crowdfunding platforms more attractive.

Tax Advantages

Taxes are one thing thats a certainty in life. When comparing Fundrise vs a rental property when it comes to taxes, owning a rental property is the stronger choice.

There are many tax benefits to owning a rental property, including the ability to deduct mortgage interest, depreciation, and other expenses.

There are no tax benefits to investing in crowdfunded real estate like Fundrise.

Level of Experience

If you're new to real estate investing, it's a good idea to start with a platform like Fundrise that offers a lower barrier of entry.

This is because rental properties can require more time and effort to manage, particularly if you don't live near the property.

Additionally, if you're not experienced in real estate investing, it can be easy to make mistakes that can cost you a lot of money when buying and managing rental properties.

If you've invested in other asset classes like the stock market or digital real estate but you've never invested in physical real estate, using Fundrise is a smart way to grow your money and make passive income.

Liquidity & Control

Most investors want some sort of control as to what happens with their money.

By using crowdfunded real estate or a real estate investment trust – you won't have nearly as much control over your money than you would with a rental property.

Fundrise investments are made by pooling money from many different investors in order to fund larger deals. This means that you'll own a small part of the deal so you won't have as much control.

Other Real Estate Investing Options

Besides Fundrise and rental properties, there are other ways to get involved in real estate investing.

Real Estate Investment Trusts

A real estate investment trust is a publicly traded company that owns, operates, or finances income-producing real estate.

You can buy shares of a REIT just like you would a stock, and they can be a good way to invest in real estate without having to actually own any property.

This stock market investment makes it easy to build your investment portfolio with real estate.

You can use an investing app like Acorns to get started and the minimum investment is just $5. As a bonus, you'll get $10 completely free when you create an account with the link below!

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Crowdstreet

Crowdstreet is another way to invest in crowdfunded commercial real estate. The company offers a marketplace for accredited investors to invest in pre-vetted properties to grow their money.

You can invest in single properties or a portfolio of properties, and you can choose how long you want to invest for.

CrowdStreet is an one of my favorite real estate investing platforms. There are many options available for every type of investor and you can get started today for free. Sign up below! Open my Account
Disclosure: This link is an affiliate link, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

Syndicated Real Estate Investments

Syndicated real estate investments are another option for those looking to invest in commercial real estate.

This is where you partner with a group of investors to invest in a property or project.

The advantage of syndicated real estate is that it allows you to invest in larger projects that you couldn't do on your own.

These deals are often private and only accessible to accredited investors.

Final Thoughts on Rental Property vs Fundrise

Ultimately, the real estate investment that's right for you will depend on your individual circumstance.

For those looking for the highest returns no matter how much work is required, owning a rental property is likely the better option.

If you're searching for a way to make passive income without having to work a significant amount, investing in Fundrise is for you.

Forrest is a personal finance, entrepreneurship, and investing enthusiast dedicated to helping others obtain life long wealth. He owns several different blogs and is also passionate about health and fitness.
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