DiversyFund Review – Invest in Real Estate
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A real estate investment trust offered by DiversyFund requires a minimum investment of $500, though your money will be tied up for five years until the property in the REIT is sold.
8.5/10
Cost
8/10
Features
8/10
Ease of use
8.5/10
Services
9/10
If you’ve got $500 burning a hole in your pocket and three to five years to let it ride in an investment, you could join the wealthy and become a real estate investor. Or at least that’s the claim of DiversyFund.
After all, if the 1% allocate 30% of their assets to private market real estate, while the 99% invest 70% in stocks, then the wealthiest investors must be doing something right. Or they wouldn’t be in the 1%. Our DiversyFund Review will help you decide whether it is for you.
In this article
What is DiversyFund?
DiversyFund is a real estate investment trust, or REIT, that allows regular, everyday investors to move away from the stock market's volatility and find diversification from stocks and bonds. Its real estate investments, the company says, earn a return on investment through dividends and appreciation that has beaten the stock market.
The minimum investment is $500, and there are no management fees. All distributions are reinvested into properties until they’re sold, which is three to five years.
Craig Cecilio and Alan Lewis started the company in 2016 and is based in San Diego. Cecilio worked for over 20 years, raising and managing over $500 million in assets. Lewis spent nearly a decade as a corporate lawyer and investment banker on Wall Street before moving into real estate development in 2014.
Related: Best Crowdfunding Investment Apps.
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How much does DiversyFund cost?
DiversyFund charges no developer fees or annual fees. But you'll be on the hook for a 2% asset management fee per year.
The company owns all the purchased real estate assets, thus cutting out the middleman and middleman fees. Other real estate crowdfunding platforms raise funds for third-party projects, often requiring fees. DiversyFund profits alongside its investors when a project is completed and sold.
DiversyFund features
Nonaccredited investors allowed
Accredited investors aren’t the only new investors allowed in this long-term investment. Some real estate crowdfunding platforms only allow accredited investors.
They’re defined by the SEC as having a net worth of more than $1 million, excluding their home’s value, or annual income in each of the last two years of at least $200,000 for individuals or $300,000 for a couple.
DiversyFund is open to all U.S. residents, meaning they can be nonaccredited investors.
Accredited investors are legally allowed to buy securities that aren’t registered with the SEC, which can save exempt companies a lot of money. Such offerings can put accredited investors at many risks, and authorities want to ensure they’re financially stable and realize the risk they’re taking.
Low minimum investment
The minimum investment in DiversyFund is $500. The initial investment was $2,500, but in May 2019, the Securities and Exchange Commission, or the SEC, approved DiversyFund’s request to lower the minimum investment.
5-year timeline
This is an important feature to understand about DiversyFund. The minimum investment of $500 is great, but prospective investors should realize that any money they invest is long-term.
The DiversyFund Growth REIT has a five-year projected term, meaning you can’t pull out your money before then. The company aims to invest in projects that can be liquidated or sold within about five years. Revenue is also generated from rental income.
Properties are sold when market conditions allow a profit when investors receive their principal and returns. Again, this is expected to be five years. To compensate those who have been in the fund the longest, a prorated adjustment on the annual return is made based on how long someone has been in the fund.
Some assets are sold after year four of the investment term. If profits are made from these sales, investors receive dividends.
DiversyFund’s REIT isn’t open-ended, meaning it won’t go on indefinitely. It goes through a five-year cycle of acquiring properties, renovating, raising rent, and selling assets. DiversyFund is qualified by the SEC to raise $50 million when it closes the REIT and opens a new one.
After investors get their payout in five years, they can either reinvest in DiversyFund’s next fund or take a full payout.
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Who is DiversyFund best for?
Nonaccredited investors seeking diversification
If you're a nonaccredited investor wanting diversification in your portfolio, the real estate investing platform might be for you. It makes it easy to invest in real estate by being crowdfunded.
Investors who don’t need money back soon
It can also be a good choice for investors who don’t need the cash or dividends from their investments in the short term.
People with only $500 to invest
Investors with only $500 to invest may also benefit from using DiversyFund.
Who shouldn’t use DiversyFund?
People who want liquidity
You can’t sell your investment in DiversyFund until the company decides to sell its investment properties. The plan will happen in three to five years, most likely in five. Any dividends earned are automatically reinvested for renovations.
People who don’t like limited investment choices
DiversyFund offers only one private REIT, called the DiversyFund Growth REIT. And you’ll have to own it for five years before you can cash out. This choice may be fine for some new investors, but others may want more investment opportunities.
Another option is a publicly traded REIT that’s traded on an exchange. These liquid investments can more easily be bought and sold. REIT mutual funds can also easily diversify real estate investment portfolios for everyday investors.
Pros and cons
Pros
- Inexpensive entry: $500 minimum investment required.
- Diversify portfolio: Access to commercial real estate deals, as opposed to stocks and bonds most people invest in.
- Don’t have to be accredited investors: Nonaccredited investors can join, which means they don’t have to have a high income.
Cons
- Long timeline: Five-year investment until paid out.
- Illiquid investments: Investors can’t take their money out before the properties are sold in five years.
- Limited choices: Only one REIT is available through DiversyFund.
DiversyFund vs. competitors
Platform | Management fees | Minimum investment |
DiversyFund | 2% | $500 |
Fundrise | 1% | $10 |
Realty Mogul | 1% to 1.25% | $5,000 |
Fundrise
Fundrise also sells REITs, with investment money funding real estate deals from small businesses to multifamily apartments.
Its platform fees are relatively low, with Fundrise comparing its fees to higher ones at Vanguard and Schwab in selling REITs. Like DiversyFund, Fundrise works to cut out the middleman and could charge an unspecified “development fee and liquidation fee” that it says is rarely charged but is an industry standard.
RealtyMogul
RealtyMogul sells REITs and other investments, such as individual properties. The company is open to accredited and nonaccredited investors, but at $5,000, the barrier to entry is a bit higher compared with DiversyFund.
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- Joy Wallet Reader Deal: The Motley Fool is offering 50% off its top stock-picking service for new members (Limited Time)
FAQs
How is the investment taxed?
Like many other investments, dividends from the DiversyFund REIT are taxed. The dividends are generated each month and automatically reinvested, and are taxed as ordinary income. Investors will receive a 1099-DIV form to file with their taxes every year. It will reflect all appropriate deductions from depreciation. When the REIT is liquidated at the end of the investment term, it will be treated as capital gains.
What exactly is my investment in?
The REIT offered by DiversyFund owns several multifamily properties. You’re not investing in one property but across the assets owned by the REIT. As more money is raised and more property is bought, investors become more diversified. DiversyFund buys apartment complexes throughout the U.S. The buildings are about 150-200 units or there are apartment buildings in areas with strong job growth, population growth, and vacancy rates below the national average. The company says it focuses on multifamily properties because they tend to perform very well in the long term, especially during an economic downturn or recession when people are downsizing or moving from their large single-family homes and luxury apartments into multifamily assets.
Where is the property?
The REIT mostly invests in apartment real estate in California, Texas and North Carolina.
Can I cash out early?
No. It’s a non-traded REIT that isn’t liquid. Once the investment is processed, funds are used to buy properties. DiversyFund doesn’t offer early withdrawals, so investors should be comfortable with the five-year term before deciding to invest.
How do I process my first investment?
As we mentioned earlier, the online process of creating an account and funding it is easy. The website walks you through the process. You provide your name, email address, zip code, phone number and create a password. Once an account is created, you can invest in the REIT. This is a six-step process that users are guided through. To properly report your earnings, the SEC requires investors to provide their full legal name, street address, and Social Security Number or Tax-ID number. You then set up the form of ownership, such as joint ownership with a spouse. Your bank account is connected so that the amount of money you want to invest, and possibly add to each month with more money, is moved to the account. The money is held in escrow for five to eight days. Proof of certain documentation, such as a driver’s license or passport, may be required to verify the owner of the investment.
Does DiversyFund have customer support?
Its customer service agents are available to help via phone, email or live chat on weekdays from noon to 8 p.m. Eastern time.
Is DiversyFund legit?
Diversification is always a good thing to have in your investment portfolio. Stocks and bonds are just the beginning, however. To be a legit investor in the ranks of the wealthy, you can follow their lead and invest in commercial real estate.
A real estate investment trust, or REIT, offered by DiversyFund is one of a few real estate crowdfunding platforms that can expand your investment options. It requires a minimum investment of $500, though your money will be tied up for five years until the property in the REIT is sold.
That may be a risk you want to take if you don’t need your investment money back within five years. Mutual funds, ETFs, and other long-term investments may suit you better if you think you will.
But for returns that could put you in the same investing circles as the top 1%, a REIT at DiversyFund is worth looking at closely.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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