DiversyFund Review 2023: Pros, Cons and How It Compares
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The bottom line:
Pros & Cons
Accepts nonaccredited investors.
$500 minimum to begin investing.
Highly illiquid investments.
Limited investment choices.
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In the field of crowdfunded real estate investments, DiversyFund is unusual: The company owns and manages properties directly, rather than acting as a broker that pairs investors with specific projects.
A big plus for less well-heeled investors, the minimum investment in DiversyFund is only $500 and is open to nonaccredited investors. One downside: All dividends are reinvested, so investors won't be able to realize income from the investment until the properties are sold.
Investors buy shares in DiversyFund’s DF Growth REIT, a public nonlisted real estate investment trust. These types of REITs are required to register and submit an annual audit with the Securities and Exchange Commission, which gives an added level of transparency investors may not find with a private REIT or other real estate investments. However, because the REIT isn’t sold on a public exchange, shares are highly illiquid and their value can be difficult to assess until the properties are sold. (Confused? Learn more about investing with REITs.)
DiversyFund is best for
Nonaccredited investors looking to diversify their portfolio.
Investors who don’t need their cash back for years.
Investors looking for a low-cost entry into real estate investing.
DiversyFund at a glance
None. Investments are open to nonaccredited investors.
No redemption program.
2% asset management fee per year; other fees may also apply.
This is our judgement of how easy it is to find critical information on the DiversyFund website, including platform fees, account minimum and redemption options (if offered).
This is our judgement of how easy it is to find critical information about investment offerings, including investment fees, risks, risk mitigation efforts, the process for vetting investments and how investment returns are distributed to investors.
Customer support options
Phone, email and live chat support Monday-Friday, 9 a.m - 5 p.m. Pacific time.
DiversyFund features you should know
Low minimum investment: In May 2019, the SEC approved DiversyFund’s bid to drop its minimum investment to $500 from $2,500. The lower minimum benefits small-dollar real estate investors.
Management fees: San Diego-based DiversyFund charges a 2% asset management fee yearly. So, that means you pay 2% for every dollar you invest. Each project, however, may carry developer fees of between 2% to 4% for finding, acquiring and managing each holding.
Available to nonaccredited investors: Some online real estate platforms are available only to accredited investors — which the SEC defines as having a net worth of more than $1 million (not including the value of a primary residence) 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. resident investors.
Owns and runs investment properties: As noted above, DiversyFund is different in that it owns and runs all its investment properties. The DF Growth REIT includes multifamily properties across the country. The company buys the properties with an eye toward improvements and resale within five years. Investors may appreciate that DiversyFund managers have real skin in the game.
They also have a premium offering for accredited investors who are seeking potentially bigger returns. The premium offering gives said investors access to complexes that may net them high returns. However, the minimum investment for this offering is $50,000.
How the returns work: According to DiversyFund, after properties are sold (at purchase price or for a profit) investors get their principal back and a 7% preferred return before the company receives any profits. If assets are liquidated at a profit above 7%, subsequent profits are shared — 65% to investors, 35% to the company — until investors make a return that averages 12% per year. Any remaining profits are split 50/50 between investors and the company.
The company pays out once the properties are sold. So don’t plan on seeing a return on your investment — assuming there is one — until at least five years. You can read DiversyFund’s past SEC offering circulars to understand more about the investment and potential risks.
» Compare before investing: Best real estate crowdfunding platforms
Is DiversyFund right for you?
DiversyFund sets itself apart from other real estate investment sites in some important ways: It accepts nonaccredited investors and has a low initial investment. The company also directly manages properties under the DF Growth REIT.
Still, the illiquidity of the investments and lack of dividend income until the properties are sold may not be advisable to investors who need the cash back in the next three to five years. Also, the limited investment choices — and the lack of the ability to pick and choose among real estate deals — may be a turnoff to some investors.
» Read other ways to invest in real estate
If you’re looking for a less risky way to expand your portfolio into real estate investing, you can always turn toward publicly traded REITs. As they are traded on an exchange, these REITs are a liquid investment that can be valued, bought and sold more easily than nontraded REITs. Alternatively, purchasing shares in a REIT mutual fund can be a one-stop shop for a diversified real estate investment.
» Ready to start investing? Best Online Brokers for Stock Trading
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