At Fundrise, our mission is to build a better financial system by empowering the individual. One of the main ways we do this is by using technology to vertically integrate and reduce costs.
As with the private real estate investment market, which inspired the creation of our eREITs (and now our Interval Funds), we believe that the market for short duration investment products such as high-yield savings accounts, money market funds, and CDs has become unnecessarily inefficient.
Institutional inefficiency
At its core, the role of a bank is to act as a facilitator of capital flow, accepting deposits and then using those deposits to make loans to borrowers.
However, as a depositor (effectively a short term investor), your bank is likely currently compensating you at an annual interest rate of 1% per year or less for the privilege of holding your liquid assets, and then turning around and lending those assets out to borrowers such as our real estate funds at an annual interest rate of anywhere between 3 - 5% (with the effective all-in rate being higher when factoring in loan origination fees, unused line fees, and other costs).
What happens to that spread of potentially 4%? It gets eaten up by the costs associated with managing and operating a large banking institution, including a healthy amount of fees and revenue paid to the bank's executives and shareholders.
The solution: Use technology to bypass the inefficiencies of the traditional financial system and go straight to you, the individual.
Meanwhile, for our portfolio, access to a flexible source of temporary borrowing is incredibly valuable. It allows us to better manage cash flow, to close on the best investment opportunities when they present themselves, and keep investors’ long-term capital efficiently deployed. For example, imagine a scenario in which we have identified a great investment opportunity which requires $100 million of capital, but we only have $80 million in cash on hand at the time — we would borrow the remaining $20 million from the line of credit, with the plan to pay it back as we raise additional equity, or from long-term borrowing at the asset level.
Our Short-Term Notes product gets rid of the need for a banking intermediary, allowing our community of investors to provide a short-term borrowing facility directly to our real estate funds. In doing so, we can offer you (as a short-term investor) a superior interest rate than what you could earn on a CD or money market account, while simultaneously offering you (as a long-term real estate investor) the potential for better returns as a function of access to a more flexible and attractively priced form of borrowing capital.
Ultimately, we aim to evolve this product over time to make it an even better place to put your short-term capital, and in doing so, create a true alternative financial ecosystem. We’re excited to take another step down this path together by extending you the opportunity to invest in another early round of our Short-Term note offering.
As a relatively new offering at Fundrise, it’s natural to have questions about exactly how this will work. We plan to send more information in the coming weeks and months, but in the meantime, below you’ll find some of the most frequently asked questions by investors like you. If you have any questions that weren’t answered here or just want to speak to someone on our team, please reach out to
investments@fundrise.com.
Frequently asked questions
What would I be investing in?
This offering is a promissory note issued by Fundrise SFR JV 1, LLC (the Company), a wholly controlled subsidiary of Rise Companies Corp, the parent company of Fundrise. The Company is a joint venture between two of our funds, the Flagship Fund and Growth eREIT VII. It is the primary vehicle through which we invest in our single-family rental strategy, and as of March 31, 2022, owns more than 2,500 homes representing more than $900 million in total real estate value. While the Company reserves the right to use the proceeds of the notes for any purpose that it deems appropriate for the continued operation and expansion of its business, it generally intends to use them as working capital to finance a forward pipeline of additional single-family home acquisitions.
How do I earn a return?
The principal of your investment accrues interest each day from the date of issuance until the maturity date. Accrued interest will be reflected in the total value of your Fundrise account in your investor dashboard. Upon maturity, you can expect to receive the principal plus accrued interest distributed to your primary bank account.
Are there any restrictions on which account types are eligible to invest?
At this time, we cannot accept investments from IRA accounts. Any other account type is eligible to invest.
Am I eligible to invest?
This opportunity is available exclusively to verified accredited investors at the Premium account level. By verifying your status, you’ll be ready to invest when the time comes, and we’ll make sure you’re one of the first to know about similar opportunities in the future.