Using a Self Directed IRA to Invest in Real Estate: Is Fundrise the Answer?

Joseph Meyer
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What is a Self-Directed IRA?

A self-directed Individual Retirement Account is an IRS-sanctioned retirement account in which your retirement funds are kept completely separate from the retirement funds of your employer. Some examples of retirement plans covered by a self-directed IRA include a Roth, Traditional, SEP, and SIMPLE IRA.

Even though self-directed IRAs are often referred to as IRA Investing, the term investing is a bit of a misnomer. The purpose of a self-directed IRA is to provide a way for you to save for your retirement, but it is not meant to be an investment account for which you can expect principal growth. The money you put into a self-directed IRA is not intended to be reinvested in the account. Rather you are meant to take the money out at a later date when you’re ready to retire.

Why Invest in Real Estate through an IRA?

Another Way to Invest in Real Estate: Fundrise

Amidst all the other investment vehicles available to retirement investors, it can be tough to stay on top of the latest developments in the field.

For example, I wasn’t aware of Fundrise until a real estate investment professional mentioned it to me at a real estate finance conference this past month.

I dug into the site to learn more about Fundrise and whether it might help people interested in using a self directed ira to invest in real estate sidestep some of the concerns I have about these types of investments.

But first, what exactly is Fundrise?

What is Fundrise?

In its own words,— Fundrise is “the next generation of asset-backed commercial real estate investment opportunities.” Fundrise is a type of REIT (real estate investment trust) that invests in real estate projects and properties and offers shares in those projects for sale to investors. OWNERSHIP OF REAL ESTATE. Real estate investment is a powerful strategy. If done right, it can generate tremendous returns.

However, over the years, it has proven to be a difficult strategy to implement for investors. There are simply too many ways to make a mistake, and one small mistake can, and often does, make the entire investment worthless or significantly reduce the value of your investment.

Advantages of Investing with Fundrise

Investing with a self-directed IRA can be the perfect solution to diversify your portfolio. Most investors are more familiar with Fundrise by name. It is a highly successful investment platform that allows investors to invest for retirement. It helps investors save for the future while also earning a significant profit.

Fundrise is an online investment platform that allows investors to access direct investments in private real estate companies. It simplifies the process of researching and investing in real estate. Fundrise charges investors an annual fee for accessing private real estate assets. Together with their professional wealth advisors, investors get the best value for their money.

Fundrise brings the diversification benefits of private real estate to your traditional retirement account. With a self-directed IRA, you have the ability to diversify beyond stocks and bonds. You can invest in new private real estate deals before they are opened to the public.

Disadvantages of Investing in Fundrise

While Fundrise is definitely a unique way to invest your retirement funds, there are a few disadvantages worth considering.

Is Investing in Fundrise For You?

Now, for the answer to the question: “Is investing in a real estate crowdfunded business for you?”

If this is your first time attempting to invest in real estate (which, by the way, it is for most people) then it will be quite an experience. There are many things you’ll learn along the way and it may take you a few tries to get it right.

With that in mind, the Fundrise team has done a great job of keeping everything easy and straightforward. Their company ideology is to not charge exorbitant fees so that even the smallest investor can profit.

The Fundrise team will walk you through the entire process from building your account to funding your account to tracking payments received to reinvesting profits to paying out dividends. None of it is difficult and the whole process is simple.

If you’re new to investing in real estate or you’re looking for another avenue to invest in real estate, why not give Fundrise a try. With their experienced team and easy-to-use platform, you’re sure to have a great experience.

You should consider investing your self-directed IRA funds through Fundrise if…

When your portfolio starts to grow, your current broker may not be able to help you as much as he’d like to. That’s when many investors look to an alternative choice for their investments. [fundslide id=1363]

Instead of using a third party like a broker, you choose to invest your self-directed IRA money through platforms such as Fundrise.

You shouldn’t consider investing in Fundrise if…

You’re searching for a higher rate of return. You should be aware that Fundrise is not a get rich quick scheme. It is a platform that invests in real estate. This could include non-income-producing properties that have depreciation tax benefits or properties that are designed to provide long-term income.

You won’t commit to the tiered investing structure. For most people in this economy, a dollar will go further in the hands of Fundrise, because as an investor you can customize frequency and amount of investment. If you need income from your investment, Fundrise can work for you.

You don’t trust technology. Fundrise is a sophisticated online investing platform. It’s simple and intuitive to use, but it is technology driven, so if you’re not a fan of technology, this may not be for you.

You’re not in it for the long run. There are no instant riches with Fundrise. It is a long-term strategy.

You want to actively manage your investment on a day-to-day basis. You’ll want to adopt a long-term perspective and let their investment professionals do the work for you.

The Bottom Line

Overall I really liked the idea of an easy-to-use investment platform that specifically matches you with real estate developers. You can see exactly where your money is going, and if you don’t like where it’s going, you can easily withdraw your money.

I love the idea of a platform that helps the layperson invest in raw land without having to slog through all the local lenders, investors, and brokers to get an answer on an easy confidence question like, “Can I actually make money from this?” But I’m not convinced that this platform is yet designed for the returns that I’m looking for.

If the number one use case for Fundrise is to help you make your money grow a little more than the S&P 500 does, then I think the platform makes a lot of sense.

If instead the use case is to help people find the next Google that will make you thousands of percent, then this platform makes less sense. The reason is that the commissions in the online broker world are just too steep. If you’re looking to make a killing by buying a piece of the next Google or Apple, then the fees are so high that Fundrise will only make it harder to do it.