So, you're wondering if you should invest in DiversyFund or Fundise to add real estate to your portfolio.
Both crowdfunding platforms are known for their low minimum investment requirements and strong historical returns. But while they seem similar on the surface, there are significant differences in available investments, liquidity, fees, and how these companies work.
That's why our DiversyFund vs. Fundrise breakdown is covering everything you need to know about each crowdfunding company and how they compare against one another.
The Short Version
- Both platforms let beginners invest in commercial real estate through REITs
- Fundrise has far more REIT selection
- Fundrise lets you cash out dividends or reinvest, while DiversyFund locks you in
- DiversyFund fees are higher than Fundrise fees
What Is DiversyFund?
DiversyFund is a real estate investment platform that aims to make this asset class more accessible to everyday investors.
The company offers one growth REIT, and it's one of the newest players in the busy real estate crowdfunding market. Both of its funds use a similar “value-add” approach. This means DiversyFund identifies undervalued real estate holdings like multifamily homes and apartment complexes and invests into upgrades. This leads to an increase in property value, higher rental income, and more appreciation over time.
The company began in 2014, and according to its website, has 30,000+ investors.
What Is Fundrise?
Fundrise is one of the most popular real estate crowdfunding companies. It began in 2012 and has over 300,000 investors according to its website, making it roughly 10 times larger than DiversyFund.
One major difference between DiversyFund and Fundrise is that Fundrise offers numerous eReits and funds. It currently offers 12 different eReits and funds, with goals like growth or growth and income giving you more control over the types of real estate properties you invest in.
Unique Features of DiversyFund & Fundrise
- Low Investing Minimum: Start investing with just $500.
- Five-Year Target: Lock-in your investment for a five-year target period.
- Value-Add Approach: DiversyFund looks to generate returns through rental income and also renovating properties to charge higher rent amounts and increase overall property value.
- Low Investing Minimum: Start investing with just $10.
- Broad Selection of REITs: Invest in different assets depending on your goals.
- Quarterly Dividends: Cash out your dividends or reinvest in more shares.
- Secondary Marketplace: Sell shares early for a small penalty or without fees after five years.
DiversyFund vs. Fundrise – Main Differences
Now that you know a bit about each company's background and features, let's dive into how these two real estate investing companies compare head-to-head.
Currently, DiversyFund offers two public non-traded REITs that target multifamily real estate developments with at least 100 units. It takes a value-add approach that is approximately five years. The target internal rate of return is between 10% to 20% for each property.
DiversyFund's Growth REIT I is currently closed for investing, so there's really just one REIT left. These are still high-quality commercial real estate offerings, but you don't have much selection.
In contrast, Fundrise invests in a range of commercial and residential real estate with a mix of equity, debt, and preferred equity. This includes opportunistic, value-add investing strategies like DiversyFund but also strategies that aim for lower volatility and stable cash flow.
Winner: Fundrise offers far more investing selection and asset types than DiversyFund.
Minimum Investment Requirement
DiversyFund has a $500 minimum investment requirement and is open to accredited and non-accredited investors alike. In contrast, Fundrise only requires $10 to start investing, making it our favorite way to invest in real estate with little money. You don't need to be an accredited investor either.
However, Fundrise requires investing at least $5,000 to fall under its Core plan.
|Potential iPO Access||No||Yes||Yes||Yes||Yes|
|Direct Investment Into Open Funds||No||No||Yes||Yes||Yes|
Core customers and higher can create customized portfolio strategies and choose the funds they invest in, but Fundrise is far less flexible for smaller accounts.
Winner: Fundrise has a lower investing minimum than DiversyFund.
DiversyFund currently supports four account types:
- Personal investment accounts
- Joint accounts
- Certain entity accounts
Fundrise also supports these accounts but also lets you invest with your IRA. This is a significant advantage over DiversyFund if you want to leverage potential tax benefits while investing for retirement.
Winner: Fundrise takes the edge because it supports IRAs unlike DiversyFund.
Fees are another area where DiversyFund and Fundrise differ substantially.
DiversyFund charges fees at the fund level, so it might look like it's fee-free on paper. But for its REIT II, it charges a 2% annual asset management fee. There are also several sponsor fees that are paid to the REITs real estate sponsor affiliates, including:
- Acquisition Fee: 1-4% of total cost.
- Finance Fee: 1% of any loan amount used to acquire property.
- Disposition Fee: 1% of the total sale price of a property.
- Construction Management Fee: 7.5%.
- Guaranty Fees: 0.5%.
- Other Fees: A potential 2% property management fee.
DiversyFund also states that when it sells REIT assets that have increased in value, it's paid a portion of any profits over the preferred rate of return of 7% to investors.
In short, you don't notice fees with DiversyFund, but they're there. And there's an ongoing 2% annual management fee.
As for Fundrise, it charges 0.15% in annual account fees and 0.85% in annual management fees for 1% in fees per year. This is simple, transparent, and lower than DiversyFund.
Winner: Fundrise charges lower fees than DiversyFund.
One advantage of investing in real estate is that you can create a new income stream of dividends for yourself, assuming cash flow stays steady.
However, DiversyFund and Fundrise once again differ dramatically here.
DiversyFund collects rental income every month and this is paid back as a dividend. However, dividends automatically reinvest into the fund to keep funding renovations. When the REIT period ends, it enters a liquidation phase, and investors are paid out their returns.
The REIT II has a target investment term of five years. During this time, DiversyFund will go through its cycle of acquiring, renovating, increasing rent, and selling off assets. It has SEC-permission to raise up to $50 million, at which point the REIT is closed for new investments. Once the REIT is fully funded, the five-year term starts.
So, in short, DiversyFund investors have to wait at least five years to get their money back plus potential returns. This means you're not getting regular dividend payments, but rather a single (and hopefully large) lump-sum payment at the end of the investing term.
With Fundrise, it pays out quarterly dividends. This is income from the real estate investments, and you can choose to reinvest in more shares or keep the cash.
Furthermore, Fundrise has different portfolio goals, so you can aim for more dividends, or less, depending on what's most important to you.
Fundrise still recommends taking a 5+ year view since real estate is generally a long-term investing strategy. But the fact you get regular dividend payments is enticing if you want to create a new income stream.
Winner: Fundrise has a more flexible dividend payout structure.
If you want to withdraw your cash early with DiversyFund, you're out of luck. The platform doesn't let you cash out early since this can harm development progress and other investors. So, if you invest with DiversyFund, you must be comfortable with around a five-year timeframe.
As for Fundrise, you can redeem shares without paying penalties if you've held them for at least five years. There's also a secondary marketplace where you can sell shares earlier, but you pay a 1% fee.
However, Fundrise reserves the right to suspend its early redemption option during tough or volatile market times to protect the broader interest of investors. So, it has better liquidity on paper than DiversyFund, but it can still restrict selling.
Winner: Fundrise has a secondary marketplace so it has better liquidity, but it still reserves the right to freeze selling shares.
One of the main factors to consider when picking between Fundrise or DiversyFund is the historical performance for each company.
This is where DiversyFund's limited history is a slight downside. The company saw strong returns with 18% average annualized returns in 2017 and 17.3% in 2018. But the platform saw no returns in 2019 since it was fundraising for its new REIT. At the time of writing, information about 2020 and 2021 isn't available.
In comparison, Fundrise has historical performance data from 2017 onwards:
|Fundrise||Public U.S. REITs||S&P 500|
Not accounting for Q1 2022, Fundrise has seen an average annual rate of return of 11.78% according to its data.
This is lower than DiversyFund's two years, but there's more data and stable years of returns.
Winner: DiversyFund has had higher returns but Fundrise has a longer track record, so take that into consideration.
You can reach DiversyFund customer support by emailing firstname.lastname@example.org or by calling 858-430-8528.
For Fundrise, you use an email contact form on its website. It doesn't list a customer support phone number on its website.
Winner: DiversyFund has more customer support options than Fundrise.
Pros & Cons of DiversyFund
- Strong historical returns in the past
- A $500 investing minimum is very beginner-friendly
- Doesn't support IRAs
- Fewer asset classes than Fundrise
- Higher management fees and other fees than Fundrise
- Only one REIT is currently available
- No early withdrawals or secondary marketplace to sell shares
- You must reinvest dividends
Pros & Cons of Fundrise
- Only requires $10 to start investing
- Variety of REITs to choose from
- You can cash out quarterly dividend payments or reinvest
- Secondary marketplace to sell shares
- More historical performance data than DiversyFund
- No customer support phone number
- You pay a 1% fee on selling shares sooner than five years
- You need to invest at least $5,000 to have more control over the REITs you invest in
Should You Invest In DiversyFund or Fundrise?
We prefer Fundrise to DiversyFund for almost every metric. It has a lower investing minimum, significantly more REIT selection, and invests in more types of assets. Plus, you have control over dividend payments and aren't quite as locked-in to a five year period like you are with DiversyFund.
DiversyFund is still exciting because of the strong returns it had in 2017 and 2018. But the current lack of investing options and strict five-year holding period is a tough sell.
Keep an eye on DiversyFund for future developments. But for now, we suggest Fundrise for beginner real estate investing.
Also know that you have plenty of other real estate crowdfunding options. And if you're an accredited investor or want more access to direct deals, these alternatives might be better.
|Account Fees||1-1.25%/year asset management fee||2% annual management fee|
We also like Streitwise for dividend investing since the platform has historically paid out over 8% annually in dividends.
So, who wins in the Fundrise vs. DiversyFund debate?
In our opinion, Fundrise wins as it currently stands. It has a longer track record, more investing options, and is incredibly beginner-friendly. If you're new to real estate investing, it's where we suggest starting.
DiversyFund is a promising company and also has shown strong returns. But time will tell if it can expand its REIT offerings and keep generating returns.