Landa vs. Fundrise: A Head-to-Head Comparison for 2022

Published on
 
October 18, 2022
landa vs fundrise

If you're looking to invest in real estate but don't know where to start, you're not alone. The process can seem daunting, especially if you have little experience. But don't worry - plenty of great resources are available to help you get started.

One thing you might want to consider is using a real estate investing app like Landa or a crowdfunding platform like Fundrise. These companies make it easy to start investing, offering some great features that can help you grow your portfolio.

So which one should you choose? Let's take a closer look at Landa and Fundrise side-by-side to see how they compare. We'll also discuss the benefits of investing with Concreit to help you make the best investment decision possible.

Landa Overview

Landa is a mobile app investment platform used to invest in shares of single-family and small multi-family residential rental properties for as little as $5. The platform aims to be a one-stop-shop that handles all of the functions of property ownership so that you don't have to, including vetting potential rental home investments, leasing, maintenance, and property management.

As a company, Landa plans on owning and managing its rentals over the long term. However, the app includes a trading platform where you can buy or sell shares once all of the initial offering shares of a property are sold.

How does Landa work?

Landa establishes a separate series LLC to own each property. This entity retains the property title, and the mortgage is also under its name. By investing in the series, you won’t have any direct ownership of the property, and your name will not appear on any of the property’s documents.

Landa offers 10,000 shares for single-family homes and 100,000 shares for multi-family properties. Shareholders will receive any associated monthly dividend payments, be updated about the property, and receive annual tax documents summarizing any investment returns for the shares they own. If dividend distributions are available, they will be paid on or around the first day of each month based on the rent received and expenses paid from the prior month.

When all the initial shares for a property have been sold, they can be traded on the Landa platform. You can offer your shares to other investors at any price you want, but that doesn't mean someone will always buy them. Trading shares is based on supply and demand, so there's no guarantee that trading will always be available, affecting your liquidity.

Selling properties is not something that Landa plans to do as part of its strategy. The company plans to buy and hold for the long term, although investors are allowed to sell their shares through the app if they so choose. If Landa does sell a property, the proceeds from the sale (after mortgage payoff and other expenses) will be distributed to the property investors. The company does not take any fees or profits from the sale.

The Landa Residents app is designed for tenants in Landa-owned and operated rentals. Residents can perform tasks like signing the lease agreement, reporting a maintenance issue, and paying rent from their phone. The company's local property management team maintains properties, allowing renters to enjoy peace of mind and a stress-free experience.

Pricing

Landa doesn't charge its investors for deposits or withdrawals or collect asset management or membership fees. However, there are two fees to be aware of that affect the purchase price of a property and the recurring revenue stream:

  • Acquisition fee: Up to 6% of the property purchase price. Used to cover operational and administrative costs, including locating available properties, researching, underwriting, closing, and reporting.
  • Property management fee: A management fee of up to 8% of the monthly rent is only charged when a tenant is living in the property. This fee covers the day-to-day tasks associated with managing rental properties, such as searching and screening potential occupants and maintaining or renovating the house so it stays in good condition.

Features

  • You don't have to be an accredited investor
  • Low minimum investment starting at $5
  • Invest in equity used to purchase residential single-family and multi-family rental homes
  • Once all shares of an initial offering have been sold, investors may buy and sell their shares via the Landa app
  • Can pick and choose among available properties
  • Investors pay no fees for deposits or withdrawals
  • Landa uses short-term interest-only loans to help increase investor returns (which may also be a negative, as discussed below)

Pros of Landa

  • Anyone U.S. resident 18 years or older can invest
  • Minimum investment as low as $5
  • No fees to invest
  • Invest in residential rental property equity
  • Diversify across different rental homes and real estate markets
  • Available distributions are paid monthly

Cons of Landa

  • Landa charges an acquisition fee of up to 6%, which may increase the cost of the home you are purchasing shares of, and a property management fee of up to 8%, reducing your distribution amount.
  • Equity investments in residential rental property may result in a loss if home prices decline.
  • Landa has only begun seeing significant growth in 2022 and has a limited track record and no year-over-year historical performance.
  • Shares are illiquid if an initial offering is not fully sold or there are no buyers for shares listed on the Landa app platform.
  • Interest-only loans are structured as adjustable-rate mortgages (ARM), and the ability to make interest-only payments can last up to 5-10 years. Purchasing properties with short-term interest-only loans may mean refinancing at higher interest rates. Higher interest rate expenses may decrease returns to investors.
  • While the mortgages on the properties are non-recourse and secured by the property, in the case of default, the lender can seize the property. If this occurs, any investment will be lost.

Who can invest with Landa?

All U.S. residents 18 years are older and who meet the minimum requirements can invest with Landa. Landa is open to non-accredited investors, and shares can be purchased for as low as $5.

Fundrise Overview

You can invest in a low-cost, diverse portfolio of institutional quality real estate with Fundrise. With cutting-edge technology and experienced professionals reducing fees, they help you make the most of your return potential.

There are many different ways that you can invest in commercial property through Fundrise. You can invest in office buildings or multifamily projects, or you could choose to invest in the debt side of the capital stack by providing mortgages for real estate investors. Fundrise also offers eREIT (electronic real estate investment trust) and eFund investment opportunities, which are pooled funds that are used to purchase land or develop buildings, operate them, and eventually sell them.

How does Fundrise work?

Fundrise believes its software makes numerous expensive but required processes much cheaper at scale. According to the company's website, their portfolios are built to withstand prolonged periods of economic distress, although nothing can be guaranteed. In other words, the software allows for increased efficiency and economy in times of need.

Fundrise's investment strategy focuses on acquiring assets below their estimated intrinsic or replacement value. They then add value to the property through active management and partnerships with local operators while keeping expenses low. This growth in asset value over time is what they refer to as "value investing."

Investors can choose from a variety of portfolios, including eREITs and eFunds. Depending on how much you invest, you can pick from various portfolio options. Setting up an account is quick, and you can select your investment strategy. Your money will be spread across a number of funds that are aligned with that strategy.

Pricing

Starter

$10 investment minimum to start creating a well-diversified investment starter portfolio. Investing features include investing, reinvesting dividends automatically, and access to registered products.

Basic

$1,000 minimum investment. When you upgrade to a Basic account, you'll get more features, including the ability to invest through an IRA and to participate in the Fundrise IPO.

Core

$5,000 investment at a minimum, with access to more customized portfolio strategies. There are three types of portfolios to choose from that will match your investment goals: a balanced portfolio, growth portfolio, or supplemental income portfolio.

Advanced

$10,000 investment at a minimum. Similar to the Core plan, but with the Advanced plan, you also have access to specialized funds, such as the eFund, that focuses on last-mile distribution facilities.

Premium

$100,000 minimum initial investment. The Premium plan offers the same things as the other plans but with extra benefits like priority access to the investor relations team and periodic access to accredited private equity fund offerings.

Features

  • You don't have to be an accredited investor
  • Minimum investments range from $10 - $100,000
  • Investment lengths generally average 5 years
  • Annualized returns of 4% - 12%, depending on your goals and appetite for risk
  • Annual returns for all clients are 5.52% as of the first half of 2022
  • Annual fees are up to 1.0% of assets under management per year

Pros of Fundrise

  • Anyone can invest
  • Low investment minimums
  • High potential returns based on investing strategy
  • Redemption program that allows you to sell your shares back early for a 1% fee

Cons of Fundrise

  • Risk of making less than you thought if the project doesn't perform as projected
  • Investments are illiquid, which makes it hard to redeem your shares quickly if you need cash in a hurry
  • You'll pay a 1% fee if you redeem your funds before the end of the holding period

Who can invest with Fundrise?

You can invest with Fundrise as long as you meet the minimum requirements. All you need is $10 to get started.

Landa or Fundrise: Which One is Best For You?

Landa and Fundrise are both online platforms that allow investors to purchase small stakes in real estate projects. Landa offers shares of residential rental property, while Fundrise focuses on investment-grade commercial real estate through eREITs and eFunds.

Both Landa and Fundrise have their advantages and disadvantages. It is important for investors to carefully consider their options before choosing one. In this section of our article, we will compare Landa and Fundrise in terms of asset management fees, repayment terms, and risk.

Landa does not charge investors any fees for deposits or withdrawals. However, the company does collect an acquisition fee of up to 6% for property purchased and then re-sold to investors and a monthly property management fee of up to 8% of the rental income collected.

Landa buys property using short-term, adjustable-rate mortgages. The mortgages must be refinanced every 5-10 years. This can increase distributions to investors, but there is also the risk that the mortgage interest rate will be higher when it is refinanced. Landa also has a limited track record and no year-over-year historical performance. Investors might want to accept a higher level of risk if they are interested in investing in Landa.

Fundrise charges an annual fee of up to 1% of the value of the assets under management. This fee can reduce your returns, but it also reflects the fact that Fundrise offers a wider variety of investment options than Landa.

In addition, Fundrise investments typically last for several years, which may be a better option for investors looking for a longer-term investment. However, because they last for several years, they may also be more susceptible to changes in market conditions.

How Does Concreit Compare to Landa and Fundrise?

Concreit is a platform that allows investors to participate in fixed-income first-lien mortgages through SEC-qualified Regulation A+ Tier 2 offerings. Concreit offers a more liquid alternative to investing in mortgage notes directly. So, why would an investor choose Concreit over other platforms for alternative investing, like Landa or Fundrise?

  • You can cash out your Concreit investment at any time, with no minimum length of time required. If you withdraw your money from Fundrise before 5 years, you will have to pay a 1% fee. With Landa, you can only sell your shares on the app's platform once an offering has been fully funded. If initial shares remain unsold or there are no buyers on the platform, your investment is illiquid.
  • Dividends with Concreit are paid weekly, and the average annual return has been 5.5% over the last year.
  • Concreit offers a more diversified portfolio of debt investing opportunities than Fundrise, while Landa offers only equity investments. Concreit invests in hundreds of high-yielding income-focused first-lien mortgages across the United States, which helps to minimize risk.
  • Managed by a team of experts who carefully select each investment for the portfolio. This means that investors can be confident that their money is in good hands.

Overall, Concreit offers a number of advantages over other platforms when it comes to investing in real estate debt. Concreit is more liquid, offers a more diversified portfolio, and is managed by a team of experts. You don't have to be accredited to invest with Concreit.

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Disclaimer

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security which can only be made through official documents such as a private placement memorandum or a prospectus. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Neither Concreit nor any of its affiliates provides tax advice or investment recommendations and do not represent in any manner that the outcomes described herein or on the Site will result in any particular investment or tax consequence.Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Concreit does not guarantee its accuracy.

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