DiversyFund Review [2022]: Just $500 to Invest in Real Estate

May 11, 2022
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Written By Adam

DiversyFund

PROS

Open to non-accredited investors

$500 minimum investment

CONS

Limited Investment Options

No Liquidity Options

Complicated Fee Structure

Overall Rating: 2.8

Investment Options

Fees

User Experience

At A Glance:

  • Minimum Investment: $500
  • Targeted IRR: 10 -20%
  • Fees: 2% Asset Management Fee + other fees
  • Investment Type: Multi-family real estate Public Non-Traded REIT
  • Open To: Accredited and non-accredited investors
  • Investment Strategy: Value-add through renovations and natural appreciation
  • Liquidity Options: None. You cannot sell your shares back early
  • Investment Length: 5-year lock-up
  • Types of Accounts: Individual, Joint, Trust, Entity

Who Should Invest With DiversyFund?

DiversyFund is a good option if…

You are Interested in capital appreciation and are comfortable locking up your money for 5 years.

DiversyFund is not a good option if…

You are looking for passive income. Dividends are automatically reinvested. All profits are made when the investment property is sold.

What is DiversyFund?

DiversyFund is a real estate crowdfunding platform that invests in multi-family real estate through a Non-Traded REIT (Real Estate Investment Trust).

DiversyFund’s goal is to make real estate investing available to all investors, not just the ultra-wealthy. DiversyFund is open to non-accredited investors with a minimum investment of $500.

After successful careers in other real estate ventures, Craig Cecilio and Alan Lewis launched the Diversy platform in 2019.

The DiversyFund platform has over 30,000 investors and is headquartered in beautiful San Diego, California.

Investment Options Explained

Overview: Diversy Growth REIT II is the company’s only investment option. This REIT invests in multifamily apartments and creates value through a value-add strategy method.

After properties are acquired, renovations are performed to increase value, which, in turn, allows for increased rents.

Offering: Growth REIT II: Public Non-Traded REIT (Real Estate Investment Trust)

IRR: Targeting between 10% and 20% return rate for each property

Minimum Investment: $500

Investment Strategy: Value-add

Investment Timeline: 5 Years

Early Withdraws: No

Dividends: Monthly, but they are reinvested automatically to fund renovations

Investment Target Details:

  • Type: multifamily real estate (apartment buildings only)
  • Size: 100+ units
  • Markets: across the US
How the 1% invest

What Kind of Returns Can I Expect?

DiversyFund targets an Internal Rate of Return of 10% – 20%. Investors make money from dividends and asset appreciation.

Dividends:

Investors receive a dividend every month from the rent collected. The dividend is automatically reinvested in order to fund the renovation of the properties.

Reinvesting is part of the fund’s growth strategy as it also allows investors to take advantage of compounding interest.

Asset Appreciation:

Assets appreciate in value as they are renovated because the properties provide additional value-add to tenants in the form of enhanced amenities. Real estate also naturally appreciates over time.

Appreciation represents a far more substantial portion of the investor’s return compared to dividends from rents. The appreciation is realized upon the sale of the assets when the fund reaches its term.

Investors receive any profits from the sale when the assets are sold.

Performance

Returns come from both dividends and appreciation realized at the time of sale.

  • 2017: Average annualized returns of 18%.
  • 2018: Average annualized returns of 17.3%
  • In 2019, REIT investors saw a 5% dividend yield and DiversyFund expects this to increase as they finalize the renovation process and increase rents.

I don’t see anything on their website about 2020 – 2022 performance, which is a bit odd.

Past performance does not guarantee future results.

Investing Strategy Explained

The DiversyFund Growth REIT II is a non-traded REIT designed to build wealth by investing in multifamily real estate using a 4 stage process.

The REIT acquires properties in areas with strong job and population growth, and vacancy rates below the national average.  

This strategy is designed to build wealth over approximately 5 years using a value-add appreciation strategy.

  • Acquisition Stage: The REIT uses the capital raised to acquire multifamily properties with approximately 150+ apartments.
  • Renovation Stage:  Individual units and common areas are renovated. Cash flow from the properties to fund the renovations over a period of time.
  • Stabilize & Hold Stage: When the renovations are completed, the value-added means increased rents and stabilization for the property. The assets are held for several years allowing the property to naturally appreciate.
  • Liquidation/Disposition Stage: The properties are appreciated naturally and through the value-added via the renovations. Properties are sold and all assets are liquidated and the investor receives their profits.

How Do I Open An Account?

There is a 3-step account opening process with DiversyFund. It takes about 5-8 days for your account to fully open.

1. Creating an Account

Create a free account by clicking here. You’ll need to provide your name, email address, zip code, and phone number, and create a password.

2. Processing an Investment

Once you create your account, you can invest in the REIT. 

You’ll need to provide your full legal name, a street address, and your SSN or Tax-ID number. As an investor, the Securities and Exchange Commission (SEC) requires that Diversyfund collects this information

 Account Ownership

In Step 2 of the investment process, you can select the Form of Ownership. There are four options.

  • Individual: Select this option if you are the sole investor.
  • Joint: Select this option if this is a joint investment with your spouse or other.
  • Entity: Select this option when investing via a company such as an LLC
  • Trust: Select this option when investing via a trust 

3. Escrow Period

When investing, the funds are held in escrow for approximately 5–8 business days to ensure Know-Your-Customer (KYC) and Anti Money Laundering (AML) compliance on all transactions. This is required to comply with US Regulations.

Their escrow service will occasionally request certain documentation such as proof of address, driver’s license, passport, or other to verify the owner of the investment.

Fees Explained

Most real estate crowdfunding platforms bury their fees in their offering circular, so I can appreciate DiversyFund laying them out clearly.

Platform Costs and Fund Fees

  • Fund Asset Management Fee. 2% of the investment amount
  • Offering and Organization Expense Reimbursement. These expenses are capped at 10% of equity dollars.

Real Estate Sponsor Fees

When the REIT II acquires property for its investors, fees are charged at the property level:

  • Acquisition Fee – 1-4% of the total cost of a real estate asset
  • Finance Fee – 1% of any loan amount used to acquire a property
  • Disposition Fee – 1% of the total sales price of any property
  • Construction Management Fee – 7.5% of construction costs for property renovations
  • Guaranty Fees – 0.5% of any property loan amount payable to any affiliate required to guaranty the loan.

Who can use DiversyFund?

DiversyFund is open to investments from non-accredited and accredited investors who reside in the U.S. and are at least 18 years old.

Is DiversyFund Legit?

Yes. DiversyFund is legit.

  • Annual audit by a 3rd party CPA firm
  • SEC qualified in November 2018

Alternatives To DiversyFund

Features DiversyFund Groundfloor Fundrise
Minimum Investment$500$10$10
Fees2%None1%
Property TypesMulti-familyResidentialVaries
Open To All Investors?
Retirement Account Investing?
Current PromotionsNoneNoneNone

Is DiversyFund Worth It?

There are better real estate crowdfunding platforms available. The fact that there have not been returns posted for the past 2 years on its website, coupled with the fact that there is only one investment option with no liquidity features makes DiversyFund a hard sell.

However, the fund does have a minimum investment of only $500, which is considerably lower than other real estate investing platforms like RealtyMogul.

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