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This post is sponsored by DiversyFund. All opinions are my own.
Real estate is widely considered to be one of the best alternative investments for growing wealth. The traditional route of owning rental properties doesn’t appeal to everyone because of all that is involved in owning and managing property and tenants. But over the past few years, the options for investing in real estate have increased significantly with the growth in popularity of crowdfunding.
One of the platforms that has been getting a lot of publicity recently is DiversyFund. This review will cover all of the most important details of the company, what they have to offer to investors, and what investors should consider.
What is DiversyFund?
A lot of different companies and platforms fall under the umbrella of “real estate crowdfunding”, but there can be significant differences from one company to the next. Some will specialize in commercial real estate, while others focus on residential properties. Some allow you to invest in individual properties or projects, while others involve investing in a portfolio of properties. Some are open only to accredited investors, and others are open to all investors.
To qualify as an accredited investor, you must have a net worth of at least $1 million (not including your primary residence), or have an annual income over $200,000 (for single filers) or over $300,000) for joint filers.
DiversyFund is open to all investors, you do NOT need to be an accredited investor. They offer an SEC-qualified Growth REIT that invests in cash-flowing apartment buildings. The description on their website states, “Our focus is on long-term capital appreciation from the renovation and repositioning of these multifamily properties.”
DiversyFund positions its Growth REIT as an alternative to investing in the stock market. They aim to provide a viable option for increasing diversification by investing in their portfolio of properties.
The Growth REIT from DiversyFund allows you to invest in a portfolio of properties, as opposed to crowdfunding platforms where you will be investing in a single property. Their website shows properties in California and Texas, although I was told that they are actively evaluating opportunities throughout the U.S.
This approach of investing in a portfolio of properties, rather than selecting a specific property, can be a great option for those who are new to real estate investing and don’t have experience vetting properties, or don’t have the time to dedicate to it. Individuals can simply invest in the Growth REIT and have a completely passive investment that requires no time or effort.
One way that DiversyFund differs from many crowdfunding platforms is that there are no middlemen. DiversyFund does not exist to match up investors with real estate developers or flippers. They are an investment partner with “skin in the game”. They purchase the real estate, develop it, manage it, collect the cash flow, and divide up the profits for investors. There are no management or platform fees for investing in the Growth REIT. Your investment will be managed by DiversyFund. DiversyFund is able to eliminate all platform and management fees because they are vertically integrated and handle each step of the process in-house. They make money from acquisition/developer fees and therefore don’t need to collect fees from their investors.
The minimum investment is just $500, which is lower than many real estate crowdfunding platforms and makes it a viable option for most people. The minimum investment had been higher, but they recently received SEC qualification to lower further to $500 to make it accessible to more investors.
Although DiversyFund is a relatively young company and does not have a long track record (the company’s founders have decades of experience), the historical returns that are available are quite impressive. The DiversyFund website lists an average annualized return of 18% for 2017 and 17.3% for 2018.
Of course, like any investment, the Growth REIT from DiversyFund comes with risk. There is no guarantee of growth or return of your capital, but DiversyFund aims to provide double-digit returns to investors.
Issues with the California Bureau of Real Estate
Although DiversyFund is relatively new, the company’s co-founder Craig Cecilio previously ran a company named Coastal California Funding Group Inc. If you do any research on the company, you may come across a notification on the Better Business Burea page for DiversyFund about government action against CCFG and Mr. Cecilio. (Although Mr. Cecilio was involved with CCFG, DiversyFund and CCFG are separate entities. CCFG originated loans and was not a crowdfunding platform.)
The California Bureau of Real Estate (BRE) issued multiple complaints against CCFG and Mr. Cecilio as a result of an audit. You can read full details here. However, the citations were dropped except “failure to supervise”, which brought a fine of $3,000 and a 30-day suspension of Mr. Cecilio’s BRE license.
Some of the language in the BRE accusation is pretty strong, and after reading it, I spoke with DiversyFund about my concerns. DiversyFund provided a document that details the specifics of the accusations and context. According to the document, two CCFG employees that were responsible for bookkeeping were planning to start their own competing company and essentially dropped the ball in regards to their bookkeeping responsibility with CCFG. When the issue was discovered, CCFG hired third-party consultants to address and remedy the problem.
As is the case with any investment, you should perform your own due diligence. I’d encourage you to read the BRE complaints as well as the explanation and background information provided by DiversyFund (read it here).
The primary benefits of investing in the DiversyFund Growth REIT include:
An Alternative Investment – If you’re looking to get some diversification in your portfolio instead of only investing in the stock market, real estate is an excellent choice.
Potential for Strong Returns – DiversyFund’s average annualized return of 18% from 2018 and 17.3% from 2018 is very appealing to investors. Of course, there is no guarantee that future investments will provide the same return, but it’s clear that there is potential to earn a significant return by investing with DiversyFund.
Diversity Through a Portfolio of Properties – The Growth REIT will give you more diversification than you would get by investing in a single property through another real estate crowdfunding platform. If one property doesn’t perform as expected, there are other properties in the portfolio that can help to reduce your risk.
Easy to Get Started – Creating an investment account is quick and easy. You can sign up on the DiversyFund website and fund your account. Since you don’t have to select a property that you want to invest in, you won’t need to spend hours researching and vetting properties.
Open to All Investors – You don’t need to be an accredited investor in order to invest with DiversyFund. Anyone can get started with as little as $500 to invest.
To learn more, please visit the DiversyFund website.