DiversyFund is a commercial real estate investment company that makes investing in its projects open to the public. The attraction of this service is that it offers a very affordable way to invest a portion of your portfolio in commercial real estate. However, DiversyFund is best suited for long-term investors, since there is a roughly five-year lock-up period after you invest.
DiversyFund was founded in 2016 by Craig Cecilio and Alan Lewis, both of whom have a background in investing in commercial real estate and managing real estate projects. The company launched its real estate investment trust (REIT) in 2019 and is currently developing five multifamily and student housing projects in California, Texas, and North Carolina.
How DiversyFund Works
DiversyFund is essentially an REIT with a twist. The company both offers an REIT for public investors and develops and manages the properties contained within the REIT. That means that DiversyFund controls everything from choosing which projects to develop, how to develop them, and how to manage all of the money flowing through its REIT. DiversyFund is one of the only real estate investing platforms available to non-accredited investors that is vertically integrated in this way.
The upside of this structure is that DiversyFund doesn’t take a management fee out of your investment. The only fees you are charged are for project development, which are standard in any REIT. Importantly, much of DiversyFund’s anticipated profits come from the sale of its investment properties at the end of the development period. So, the company has just as much at stake in the success of its investments as individual investors do.
So, what’s inside the DiversyFund REIT? As of summer 2020, the company is developing five projects – four multifamily apartment complexes and one student housing facility, spread across California, Texas, and North Carolina. The company plans to improve these properties and sell each of them in a period of about five years.
Notably, DiversyFund funnels all income from these properties during this five-year period back into the properties or into new real estate projects. That means that investors won’t see any distributions until a property is sold several years from now.
DiversyFund Account Requirements
One of the things that makes DiversyFund different is that it has an extremely low bar to entry. Any US resident can invest in the company’s REIT. The minimum investment is just $500, down from $2,500 when the company first launched in 2019.
DiversyFund Fees And Pricing
DiversyFund doesn’t charge any fees to sign up for the platform or invest your money. That said, you can expect roughly 2-8% of your investment to go towards DiversyFund’s fees at the project development level. This fee is in line with what most other REITs charge.
DiversyFund Platform And Tools
DiversyFund’s platform is relatively minimal, as there is little to see until properties are sold and profits are distributed. The platform revolves around a graph of projected returns, but you should take these graphs with a grain of salt. You can also access tax documents and quarterly investment reports through the DiversyFund platform.
Since DiversyFund just launched in 2019 and has not liquidated any properties yet, it is impossible to evaluate the company’s performance. According to the investment prospectus, the internal rate of return for the properties currently under development ranges from 15-21%.
Importantly, your return will depend on the actual rate of return when a property is sold. Investors receive their principle and a profit of up to 7% (if a 7% or greater profit was made) before DiversyFund receives any profits. After the first 7% profit, investors receive 65% of additional profits up to a 12% annual return and 50% of additional profits beyond that level.
Comparison To Alternative Investments
If you’re interested in investing in REITs, you’re probably wondering how DiversyFund compares to other alternatives. DiversyFund is most comparable to other REITs and crowdfunded real estate investments. Compared to either of these, DiversyFund stands out for offering an extremely low minimum investment and accepting non-accredited investors.
That said, DiversyFund has a much smaller portfolio of properties than most other REITs. You also don’t have the option to invest in specific projects as opposed to the DiversyFund REIT. Since the company is relatively new and all properties are still in the early stages of development, you likely won’t see a return for three to five years and cannot pull out of your position during that time.
DiversyFund Key Differentiators
DiversyFund offers a low-cost way to invest in commercial real estate, and specifically multifamily apartment complexes. The minimum initial investment is just $500 and the company doesn’t take the same 1% or greater management fees that most REITs and real estate investing platforms do.
The other important difference that sets DiversyFund apart is that the company is designed to make most of its money from its property investments. That’s an encouraging sign for investors, since it means that DiversyFund is just as invested in the success of its properties.
DiversyFund is a new company and real estate investment and management is complex. So, it’s worth approaching the company’s REIT with some caution. On the bright side, the company has as much skin in the game as its individual REIT investors and its founders have spent several decades working on commercial real estate investments.
Importantly, DiversyFund is SEC-qualified. This means that the company is required to disclose financial and management information and undergo annual audits.
Who Is DiversyFund Best For?
DiversyFund is a good choice for investors who want to add commercial real estate development projects to their portfolios. The company promises attractive returns, although it has not yet realized any profits, and doesn’t require much in the way of an initial investment or management fees. However, keep in mind that DiversyFund is only suitable for long-term investors since your investment will be locked up for several years or longer.
- Invest in commercial real estate with just a $500 investment
- DiversyFund’s profits are tied to the success of your investment
- No management fees
- Attractive profit-sharing structure
- DiversyFund is SEC-qualified
- The long lock-up period for your investment
- New company with no performance history
- Only a single REIT to invest in
Final Thoughts: DiversyFund
If you’re looking to add a commercial real estate investment to your portfolio, DiversyFund offers just that. Just remember that this commercial real estate investment company is best suited for long-term investors, as you will most likely encounter a roughly five-year lock-up period on your investment.
If investing in real estate is something that has piqued your interest, you may also enjoy our guide on how to invest in rental properties.